STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered
into as
of the 27th day of September, 2006, by and between ALANCO
TECHNOLOGIES, INC., an
Arizona corporation ("Alanco"), and DONALD E. ANDERSON and REBECCA
E. ANDERSON,
Trustees of the Anderson Family Trust, UTA dated December 20, 1993
("Anderson").
RECITALS:
The parties have concluded that it is to their respective
mutual
advantage and benefit to effect a transaction whereby Alanco sells
and transfers
all of the outstanding capital stock of Arraid, Inc., an Arizona
corporation and
wholly owned subsidiary of Alanco ("Arraid") to Anderson upon the
terms and
conditions contained herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements and
subject
to the terms and conditions set forth in this Agreement, the
parties agree as
follows:
1.0 Purchase and Sale of Stock. Alanco agrees to sell and
Anderson
agrees to purchase 1,000 shares of common stock of Arraid (the
"Shares"), which
Shares are all of the outstanding shares of capital stock of
Arraid.
2.0 Consideration For the Shares. In consideration of and in
exchange
for the transfer, assignment and conveyance of the Shares, Anderson
shall pay
$456,422 to Alanco (the "Purchase Price"), comprised of the
following:
2.1 $25,000,
plus
2.2 The Net
Shareholder's Equity as shown on the Balance
Sheet of Arraid as of August 31, 2006 in the amount of
$431,422.
2.3 The entire Purchase Price shall be paid by Anderson
crediting said amount against the amount owed by Alanco to Anderson
under the
existing credit facility extended by Anderson to Alanco.
3.0 Representations and Warranties of Alanco. Alanco represents
and
warrants to Anderson as follows, and acknowledges and confirms that
Anderson is
relying upon such representations and warranties in connection with
the
execution, delivery and performance of this Agreement,
notwithstanding any
investigation made by Anderson or on their behalf:
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3.1 Free and Clear Title to the Shares. Alanco is the record
and beneficial owner of the Shares, and holds the Shares free and
clear of any
lien, encumbrance, pledge, charge or claim, limitation, agreement
or restriction
whatsoever, except for the security interest held by Anderson under
the existing
credit facility, with the full and absolute right and power to
assign, exchange,
transfer and deliver the Shares as herein provided; and (ii) none
of the Shares
shall be subject to any voting trust or voting agreement, nor will
any valid
proxy be in existence with respect to the Shares. Upon the transfer
of the
Shares to Anderson as contemplated hereby, good, valid, marketable
and
indefeasible title to the Shares will be vested in Anderson free
and clear of
any lien, claim, charge, pledge, demand, encumbrance, limitation,
agreement or
restriction except for those attributable to the actions or
inactions of
Anderson. The Shares to be transferred to Anderson by Alanco
hereunder represent
all of the capital stock of Arraid that will be outstanding at the
Closing and
Anderson, upon acquiring the Shares, will own all of Arraid. Upon
Closing, no
other person will have any right or option to acquire any interest
in Arraid.
3.2 Organization and Standing. Arraid is a corporation, duly
organized, validly existing and in good standing under the laws of
the State of
Arizona, has all of the requisite power and authority and has all
of the
licenses, permits, authorities and consents that are necessary to
own, operate
and lease its properties and to carry on its business as now being
conducted.
Arraid is not a party to or subject to any agreement, consent
decree or order,
or other understanding or arrangement with, or any directive of,
any
governmental authority or other person which imposes any
restriction or
otherwise affects in any material way the conduct of its business
in any
jurisdiction or location.
3.3 Capitalization. The authorized capital of Arraid consists
solely of one million shares of common stock, 1,000 of which have
been validly
issued , are now outstanding and owned by Alanco.
3.4 Subsidiaries. Arraid has no subsidiaries and does not
otherwise presently own or control, directly or indirectly, any
other
corporation, association, or other business entity.
3.5 Authorization. Alanco has all the requisite legal power
and authority to execute and deliver this Agreement and to
consummate the
transactions contemplated hereby to be accomplished by it. All
action on the
part of Alanco necessary for the authorization, execution,
delivery, and
performance of all obligations of each under this Agreement has
been taken. This
Agreement, when executed and delivered, shall constitute a legal,
valid and
binding obligation of Alanco enforceable in accordance with its
terms.
3.6
Governmental Consents. No consent, approval, order, or
authorization of, or registration, qualification, designation,
declaration or
filing with, any federal, state or local governmental authority is
required on
the part of Alanco or Arraid in connection with the execution,
delivery or
performance of this Agreement or consummation of the transactions
contemplated
hereby.
3.7 Compliance with Other Instruments. Neither Alanco nor
Arraid will be, as a result of the execution, delivery or
performance of this
Agreement, in violation of or default under any provision of any
instrument,
contract or lease to which it is a party, or of any provision of
any federal or
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state judgment, writ, decree, order, statute, rule, or governmental
regulation
applicable to them.
3.8 Financial Statements. The unaudited balance sheet and
income statement of Arraid as of and for the fiscal year ending
June 30, 2006,
and preliminary projected unaudited balance sheets and income
statements of
Arraid as of and for the months ending July 31, 2006 and August 31,
2006
(collectively, the "Arraid Financials"), are attached hereto as
Schedule 3.8.
The Arraid Financials have been prepared by management, are true
and
correct and fairly present the financial position of Arraid as of
their
respective dates and the results of its operations for the periods
then ended
and contain all adjustments (consisting of normal recurring
accruals) considered
necessary for a fair presentation. Except to the extent reflected
or reserved
against or disclosed in the Arraid Financials, as of their
respective dates,
Arraid has not incurred any reasonably material liabilities or
obligations of
any kind, whether accrued, absolute, contingent or otherwise, which
should have
been so reflected or reserved against or disclosed, other than the
lawsuit
involving Arraid Properties, LLC, for which Alanco is indemnifying
the Anderson
against in accordance with section 9.1 below.
3.9 Undisclosed Liabilities. Arraid has no liabilities or
obligations, either absolute, accrued, contingent or otherwise,
which
individually or in the aggregate are reasonably materially adverse
to the
financial condition and business of Arraid, which (i) have not been
reflected in
the Arraid Financials, (ii) have not been described in this
Agreement or in any
of the Schedules hereto, or (iii) have not been incurred in the
ordinary course
of business since August 31, 2006, consistent with past
practices.
3.10 No Prebillings. Arraid has not pre-billed or received
payment from any of its accounts for goods to be delivered or for
services to be
rendered or for expenses to be incurred by Arraid subsequent to
August 31, 2006.
3.11 Inventory. The inventory of Arraid, as reflected in the
Arraid Financials, is stored and/or located at premises owned or
leased by
Arraid or at Arraid's suppliers. The value at which Arraid's
inventory is
reflected in the Arraid Financials is the cost thereof on a
first-in, first-out
basis and reflects write-offs or write-downs for damaged or
obsolete items in
accordance with the historical inventory policy and practices of
Arraid. Arraid
has not transferred inventory on consignment or granted return
privileges to any
purchaser of its goods, other than in the ordinary course of
business.
3.12 Accounts Receivable. No amount included in the accounts
receivable of Arraid as stated in the Arraid Financials has been
released for an
amount less than the value at which it was included or is or will
be regarded as
unrecoverable in whole or in part except to the extent there shall
have been an
appropriate bad debt reserve therefor. Such receivables are not, to
the best
knowledge of Arraid, subject to any counterclaim, refusal to pay or
setoff not
reflected in the reserves set forth on the Arraid Financials.
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3.13 Title to Assets; Liens, etc. The assets of Arraid, both
real, personal and mixed, tangible and intangible, necessary or
useful to the
operation of the business of Arraid are in good condition and
repair, ordinary
wear and tear excepted, and suitable for the uses intended. Arraid
has good and
marketable title to its assets, free and clear of all liens and
encumbrances,
other than the lien for current taxes not yet due and payable and
the security
interest previously granted to Anderson. No default or event of
default on the
part of Arraid, as lessee, exists with respect to any lease with
respect to real
property.
3.14 Outstanding Indebtedness. Arraid has no indebtedness for
borrowed money (including deferred compensation) which Arraid has
directly or
indirectly created, incurred, assumed or guaranteed, or with
respect to which
Arraid has otherwise become directly or indirectly liable, other
than as
disclosed in the Arraid Financials.
3.15 Employees. Arraid has no employment contracts with any of
its employees which are not terminable at will or any consulting or
independent
contractor agreements with any individual or entity, and it does
not have any
collective bargaining agreements covering any of its employees.
There are no
employee or labor disagreements or union organization activities
pending or
threatened between Arraid and its employees, and Arraid is not a
party to any
union or collective bargaining agreement. Arraid complied with all
applicable
federal and state equal employment opportunity laws and other laws
related to
employment.
3.16
Employee Benefit Plans.
(a)
Definitions:
(i) "Welfare Plans" means all "employee welfare
benefit plans," as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any
other employee benefit arrangements or payroll practices,
including, without
limitation, sick leave, vacation pay, salary continuation for
disability,
severance hospitalization, medical insurance, and life insurance
programs
maintained by Arraid or each trade or business under common control
with Arraid
(as determined under Section 4001(b)(1) of ERISA, an "ERISA
Affiliate") or to
which Arraid or any ERISA Affiliate has made contributions during
the preceding
five (5) years; and
(ii) "Pension Plans" means all "employee pension
benefit plans," as defined in Section 3(2) of ERISA,
maintained by Arraid or any ERISA Affiliate or to which Arraid or
any ERISA
Affiliate has made contributions during the preceding five (5)
years thereunder,
including, without limitation, retirement, pension, savings, profit
sharing,
severance and stock purchase programs. The Welfare Plans and
Pension Plans are
hereinafter collectively referred to as the "Employee Benefit
Plans."
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(b) No Arr
