Exhibit 99.1
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Third Amendment")
is entered into this 22nd day of March, 2005, between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustees of the ▇▇▇▇▇▇▇▇ Family Trust, UTA dated December
20, 1993 ("Lender") as secured party, and Alanco Technologies, Inc. ("ATI"), an
Arizona corporation ("Borrower 1"); Arraid, Inc. ("Al"), an Arizona corporation
("Borrower 2"); Excel/Meridian Data, Inc. ("EMD"), an Arizona corporation
("Borrower 3"); Technology Systems International, Inc. ("TSI"), an Arizona
corporation (formerly, TSI Acquisition Corporation, ("Borrower 6"); and ▇▇▇ ▇▇▇,
Inc., a Nevada corporation ("Borrower 7"). Borrower 1, Borrower 2, Borrower 3,
Borrower 6, and Borrower 7, jointly and severally, individually and
collectively, the "Borrower". (Borrowers 5 and 6 were corporate subsidiaries of
ATI that are no longer in operation.)
RECITALS:
The parties entered into that Loan and Security Agreement, dated June
19, 2002, pursuant to which Lender agreed to provide certain funds to Borrower
upon the terms and conditions set forth therein (the "Agreement"). The parties
amended the Agreement pursuant to the Amendment to Loan ad Security Agreement,
dated April 15, 2003 (the "First Amendment") and the Second Amendment to Loan
and Security Agreement, dated November 1, 2003 (the "Second Amendment"), and now
wish to modify the Agreement, as preciously amended in certain respects as set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Definitions. The subparagraphs of Section 1 of the Agreement corresponding to
the subparagraph numbers set forth below shall be amended by substituting the
definitions set forth below for the corresponding terms identified:
1.9 "Credit Limit" shall mean One Million Three Hundred Thousand
Dollars ($1,300,000.00).
1.19 "Maturity Date" shall mean July 1, 2007.
2. Section 3.1 of the Agreement shall be amended to read as follows:
3.1 This Agreement shall remain in full force and effect until July
1, 2007 (the "Maturity Date").
3. Section 6A (added by the First Amendment) shall be amended to read as
follows:
6A. COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Lender under this
Agreement in an amount equal to or greater than $750,000, upon written
notice from Lender to Borrower prior to the start of any calender
quarter, revenues reported from the business operations of TSI shall
equal or exceed $3,500,000 per calender quarter, commencing with the
quarter following such written notice.
Any failure to meet the requirements of Section 6A as it previously existed are
hereby waived.
4. The Borrowing Base Certificate and Compliance Certificate requird by Section
6.16(c) of the Agreement shall only be required when the indebtedness
outstanding to Lender under this Agreement equals or exceeds $750,000, and then
only following the written request of Lender to Borrower. Any previous failure
to meet the requirements of Section 6.16(c) are hereby waived.
5. No further conversion rights under Section 6B of the Agreement remain. The
minimum amount to be drawn under the Loan shall remain $500,000 in accordance
with Section 2.1 of the Agreement.
6. In consideration of Lender agreeing to the modifications to the Agreement set
forth herein, ATI shall grant to Lender a Warrant to purchase up to 75,000
shares of ATI's Class A Common Stock at a purchase price of $0.90 per share for
a five (5) year period following the date hereof. Such rights shall be
memorialized in a Warrant Agreement to be executed and delivered to Lender upon
the execution hereof in the form attached hereto as Exhibit "A".
7. Borrower agrees that (a) except as expressly provided herein to the contrary,
this Third Amendment shall not modify the Agreement as previously amended, (b)
all of the collateral described in the Agreement shall remain in all respects
subject to the lien or charge of the security interest set forth in the
Agreement, and (c) nothing contained herein and nothing done pursuant hereto,
shall effect or be construed as affecting the lien or charge of said security
interest, or the priority thereof over other liens or charges, or as releasing
or affecting the liability of any party or parties who may now or hereafter be
liable under or on account of the Agreement. The provisions of this Third
Amendment are modifications only and except as provided herein all of the terms
and conditions of the Agreement as previously amended remain in full force and
effect and the parties hereto ratify and confirm the security, priority and
enforceability of the Agreement, as expressly modified by this Third Amendment.
8. This Third Amendment shall bind and inure to the benefit of the respective
successors and assigns of each of the parties. This Third Amendment may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be
executed as of the date first above written.
BORROWERS:
"Borrower l":
Alanco Technologies, Inc., an Arizona Corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
"Borrower 2":
Arraid, Inc., an Arizona corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
"Borrower 3":
Excel/Meridian Data, an Arizona corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
"Borrower 6":
Technology Systems International, Inc., an Arizona corporation
(formerly, TSI Acquisition Corporation)
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
"Borrower 7":
▇▇▇ ▇▇▇, Inc., a Nevada corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
Borrower Address for Notices:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇. ▇▇▇▇▇
LENDER:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Trustees of the ▇▇▇▇▇▇▇▇ Family Trust, UTA
dated December 20, 1993
Lender Address for Notices:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT "A"
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS
(i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SUBSCRIBERS
MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED.
Warrant to Purchase
75,000 shares
WARRANT TO PURCHASE COMMON STOCK
OF
ALANCO TECHNOLOGIES, INC.
THIS CERTIFIES that ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
TRUSTEES OF THE ▇▇▇▇▇▇▇▇ FAMILY TRUST, UTA DATED DECEMBER 20, 1993 or any
subsequent holder hereof in accordance with Section 9 ("Holder"), has the right
to purchase from ALANCO TECHNOLOGIES, INC., an Arizona corporation (the
"Company"), up to 75,000 fully paid and nonassessable shares of the Company's
Class A common stock ("Common Stock"), subject to adjustment as provided herein,
at a price equal to the Exercise Price as defined in Section 3 below, at any
time beginning on the Date of Issuance (as defined below) and ending at 5:00
p.m., Phoenix, Arizona time, on March 22,2010 (the "Exercise Period").
Holder agrees with the Company that this Warrant to Purchase Common
Stock of Alanco Technologies, Inc. (this "Warrant") is issued and all rights
hereunder shall be held subject to all of the conditions, limitations and
provisions set forth herein.
1. Date of Issuance.
This Warrant shall be deemed to be issued on March 22, 2005
("Date of Issuance").
2. Exercise.
(a) Manner of Exercise. During the Exercise Period, this
Warrant may be exercised as to all or any lesser number of full shares of Common
Stock covered hereby upon surrender of this Warrant, with the Exercise Form
attached hereto as Exhibit A (the "Exercise Form") duly completed and executed,
together with the full Exercise Price (as defined below) for each share of
Common Stock as to which this Warrant is exercised, at the office of the Company
or at such other office or agency as the Company may designate in writing, (such
surrender and payment of the Exercise Price hereinafter called the "Exercise of
this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant
shall be defined as the date on which this Warrant is received by the Company,
together with the full Exercise Price, in accordance with Section 2(a) above.
(c) Cancellation of Warrant. This Warrant shall be canceled
upon the Exercise of this Warrant, and, as soon as practicable after the Date of
Exercise, Holder shall be entitled to receive Common Stock for the number of
shares purchased upon such Exercise of this Warrant, and if this Warrant is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant) representing any unexercised portion of this
Warrant in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant
for shares of Common Stock is issued shall, for all purposes, be deemed to be
the Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of the Common Stock purchased upon the
Exercise of this Warrant. Nothing in this Warrant shall be construed as
conferring upon Holder any rights as a stockholder of the Company.
3. Payment of Warrant Exercise Price.
The Exercise Price shall equal $0.90 per share of Common Stock
("Exercise Price"), subject to adjustment in accordance with Section 5 hereof.
Payment of the Exercise Price shall be made by cash, cashiers check or wire
transfer.
4. Transfer.
Subject to the provisions of Section 8 of this Warrant, this
Warrant may be transferred on the books of the Company, in whole or in part, in
person or by attorney, upon surrender of this Warrant properly completed and
endorsed. This Warrant shall be canceled upon such surrender and, as soon as
practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant
transferred, and Holder shall be entitled to receive a new Warrant as to the
portion hereof retained.
5. Adjustments to Exercise Price.
(a) Adjustment to Exercise Price Due to Stock Split, Stock
Dividend, Etc. If, prior to the exercise in full of this Warrant the number of
outstanding shares of Common Stock is increased by a stock split, stock
dividend, or other similar event, the Exercise Price shall be proportionately
reduced, or if the number of outstanding shares of Common Stock is decreased by
a combination or reclassification of shares, or other similar event, the
Exercise Price shall be proportionately increased.
(b) Adjustment Due to Merger, Consolidation, Etc. If, prior to
the exercise in full of this Warrant, there shall be any merger, consolidation,
exchange of shares, recapitalization, reorganization, or other similar event, as
a result of which shares of Common Stock of the Company shall be changed into
the same or a different number of shares of the same or another class or classes
of stock or securities of the Company or another entity, then the Holders of
this Warrant shall thereafter have the right to receive upon exercise of this
Warrant, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore issuable upon
exercise, such stock, securities or other assets which the Holder would have
been entitled to receive in such transaction had the Warrant been exercised
immediately prior to such transaction, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the Holder
to the end that the provisions hereof (including, without limitation, provisions
for the adjustment of the Exercise Price) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities thereafter
deliverable upon the exercise hereof.
(c) No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the exercise rights of the Holder.
(d) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 5, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with these terms and furnish to the Holder a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of the Holder, furnish or cause to be furnished a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Exercise Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the exercise of this Warrant.
(e) Notices of Record Date. In the event of (i) any taking by
the Company of a record date of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, or (ii) any capital reorganization of
the Company, any reclassification or recapitalization of the capital stock of
the Company, any merger or consolidation of the Company, and any transfer of all
or substantially all of the assets of the Company to any other Company, or any
other entity or person, or any voluntary or involuntary dissolution, liquidation
or winding up of the Company, the Company shall mail to the Holder at least 10
days prior to the record date specified therein, a notice specifying (A) the
date on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (C) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange their shares
of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.
6. Fractional Interests.
No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, Holder may purchase only a whole number of shares of Common Stock. If,
on Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares issuable upon
shall be the next higher number of shares.
7. Reservation of Shares.
The Company shall at all times reserve for issuance such
number of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for the
Exercise of this Warrant and payment of the Exercise Price. The Company
covenants and agrees that upon the Exercise of this Warrant, all shares of
Common Stock issuable upon such exercise shall be duly and validly issued, fully
paid, nonassessable and not subject to preemptive rights, rights of first
refusal or similar rights of any person or entity.
8. Restrictions on Transfer.
(a) Registration or Exemption Required. This Warrant has been
issued in a transaction exempt from the registration requirements of the
Securities Act and from state registration under applicable state laws. The
Warrant and the Common Stock issuable upon the Exercise of this Warrant may not
be pledged, transferred, sold or assigned except pursuant to an effective
registration statement or an exemption to the registration requirements of the
Securities Act and applicable state laws.
(b) Assignment. If Holder can provide the Company with
reasonably satisfactory evidence that the conditions of (a) above regarding
registration or exemption have been satisfied, Holder may sell, transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part. Holder
shall deliver a written notice to the Company, substantially in the form of the
Assignment attached hereto as Exhibit B, indicating the person or persons to
whom the Warrant shall be assigned and the respective number of warrants to be
assigned to each assignee. The Company shall effect the assignment within ten
days and shall deliver to the assignee(s) designated by Holder, a Warrant or
Warrants of like tenor and terms for the appropriate number of shares.
9. Benefit of this Warrant.
Nothing in this Warrant shall be construed to confer upon any
person other than the Company and Holder any legal or equitable right, remedy or
claim under this Warrant, and this Warrant shall be for the sole and exclusive
benefit of the Company and Holder.
10. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the State of Arizona,
without giving effect to the conflict of law provisions thereof.
11. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date.
12. Notices or Demands.
All notices or other communications required or permitted
pursuant to this Warrant shall be in writing and shall be deemed given to a
party when (a) delivered by hand or by nationally recognized overnight courier
service (costs prepaid); or (b) received or rejected by the addressee, if sent
by certified mail, return receipt requested. Such notice or other communication
shall be sent to the Company, Attention: Chief Financial Officer, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ or to the Holder at the address set
forth in the Company's records (or to such other address as either party may
designate by notice to the other party).
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
31st day of March 22, 2005.
ALANCO TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, CEO
EXHIBIT A
EXERCISE FORM
The undersigned hereby irrevocably exercises the right to purchase
----------- shares of common stock, no par value (the "Common Stock") of
Alanco Technologies, Inc., an Arizona corporation (the "Company"), evidenced by
the attached warrant (the "Warrant") and herewith makes payment of the exercise
price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of the Common Stock obtained on exercise of the Warrant, except in
accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, if appropriate, and a warrant representing any
unexercised portion hereof be issued, pursuant to the Warrant in the name of the
undersigned and delivered to the undersigned at the address set forth below:
Dated:
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Signature
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Print Name
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Address
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NOTICE: The signature to the foregoing Exercise Form must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
EXHIBIT B
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons below
named the right to purchase ------------- shares of the Common Stock of
Alanco Technologies, Inc., evidenced by the attached Warrant and does hereby
irrevocably constitute and appoint ------------------ as attorney-in-fact
to transfer the said Warrant on the books of the Company, with full power of
substitution in the premises.
Dated:
-------------- Signature
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Fill in for new registration of Warrant:
Name
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Address
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Please print name and address of assignee (including zip code) above.
NOTICE: The signature to the foregoing Exercise Form must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.