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 Donald E. Anderson and
Rebecca E. Anderson, Trustees of the
Anderson 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 Fry Guy,
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.
<PAGE>
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.
<PAGE>
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/ John A. Carlson
------------------------------------
John A. Carlson, Chief
Financial Officer
"Borrower 2":
Arraid, Inc., an Arizona corporation
By: /s/ John A. Carlson
------------------------------------
John A. Carlson, Chief
Financial Officer
"Borrower 3":
Excel/Meridian Data, an Arizona
corporation
By: /s/ John A. Carlson
------------------------------------
John A. Carlson, Chief
Financial Officer
"Borrower 6":
Technology Systems International, Inc., an
Arizona corporation
(formerly, TSI Acquisition Corporation)
By: /s/ John A. Carlson
------------------------------------
John A. Carlson, Chief
Financial Officer
"Borrower 7":
Fry Guy, Inc., a Nevada corporation
By: /s/ John A. Carlson
------------------------------------
John A. Carlson, Chief
Financial Officer
Borrower Address for Notices:
15575 North 83rd Way,
Suite 3, Scottsdale,
Arizona. 85260
LENDER:
/s/ Donald E. Anderson
---------------------------------------
DONALD E. ANDERSON
/s/ Rebecca E. Anderson
---------------------------------------
REBECCA E. ANDERSON
Trustees of the Anderson Family Trust,
UTA
dated December 20, 1993
Lender Address for Notices:
11804 N. Sundown
Drive, Scottsdale, Arizona 85260
<PAGE>
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 DONALD E. ANDERSON AND REBECCA E. ANDERSON,
TRUSTEES OF THE ANDERSON 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 agen
