AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made and
entered into as of the 25th day of June, 2006, by and between ALANCO
TECHNOLOGIES, INC., an Arizona corporation ("Alanco"), ST ACQUISITION
CORPORATION, an Arizona corporation ("STAC"), XXXXXXX X. XXXXXXX ("Xxxxxxx"),
XXXXXX X. XXXXXXXX ("Xxxxxxxx"), TENIX HOLDING INC., a Delaware corporation
("Tenix"), and STARTRAK SYSTEMS, LLC, a Delaware limited liability company
("StarTrak"). Tenix, Xxxxxxx and Xxxxxxxx are sometimes collectively referred to
herein as the "StarTrak Primary Members."
RECITALS:
The respective governing boards of Alanco, STAC and StarTrak, as well
as the StarTrak Primary Members, have concluded that it is to their respective
mutual advantage and benefit to effect a reorganization whereby STAC, which is a
wholly owned subsidiary of Alanco newly formed to merge with StarTrak as
described herein, will be merged into StarTrak, pursuant to this Agreement and
in accordance with the applicable statutes of the States of Delaware and
Arizona, intending the merger to qualify as a "reorganization" within the
meaning of Section 368(a) of the 1986 Internal Revenue Code ("Code"). Although
organized as a limited liability company under the laws of Delaware, StarTrak is
taxed as a corporation under the Code.
..
In addition to the StarTrak Primary Members, some employees of StarTrak
also own membership Units in StarTrak (the "StarTrak Employee Members"). The
StarTrak Primary Members and the StarTrak Employee Members are collectively
referred to herein as the "StarTrak Members." As of the date hereof (and at
Closing as hereinafter defined), the StarTrak Members own membership Units in
StarTrak as follows, which aggregately constitute all of the issued and
outstanding membership Units in StarTrak (the "Units"):
StarTrak Total
Member Class A Units Class B Units Class C Units Units
--------- ------------- ------------- ------------- -------
Tenix 85,752 0 0 85,752
Xxxxxxx 0 294,431 0 294,431
Xxxxxxxx 0 196,288 0 196,288
StarTrak
Employee
Members 0 0 70,340 70,340
------------- ------------- -------------- -------
Totals 85,752 490,719 70,340 646,811
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Alanco desires to acquire StarTrak, so that following the transaction
all of StarTrak's outstanding Units will have been converted into shares of
Alanco Class A Common Stock ("Alanco Common Stock"), and STAC's outstanding
stock will have been converted into one membership Unit of StarTrak, so that the
StarTrak Members own Alanco Common Stock and Alanco owns all of outstanding
membership interests in StarTrak, all 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 The Merger. Upon the Effective Date (as defined in Section 10
hereof), STAC shall be merged with and into StarTrak (the "Merger"), the
separate corporate existence of STAC shall cease and StarTrak shall continue as
the surviving entity.
1.1 Transfer of Property and Liabilities. Upon the Effective
Date, the separate existence of STAC shall cease; all of the outstanding shares
of stock of STAC shall be exchanged for and converted into one Class B
membership Unit of StarTrak, and upon the filing of the Plan of Merger with the
Arizona Corporation Commission and a Certificate of Merger with the Secretary of
State of the State of Delaware, StarTrak shall possess all the rights,
privileges, immunities, powers, and purposes, and all the property, real and
personal, causes of action, and every other asset of STAC, a well as its own,
and shall assume and be liable for all the liabilities, obligations, and
penalties of STAC, as well as its own, in accordance with Section 10-1106 of the
Arizona Revised Statutes and Section 18-209 of Title 6 of the Delaware Limited
Liability Act.
1.2 Surviving Entity. Following the Merger, the existence of
StarTrak shall continue unaffected and unimpaired by the Merger as the surviving
entity, with all the rights, privileges, immunities, and powers, and subject to
all the duties and liabilities, of a limited liability company organized under
the laws of the State of Delaware. The Certificate of Formation of StarTrak, as
in effect immediately prior to the Effective Date, shall continue in full force
and effect, and shall not be changed in any manner by the Merger. The directors
of StarTrak immediately following the Effective Date shall consist of Xxxxxx X.
Xxxxxxxx, Xxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxx, and the officers of StarTrak
immediately prior to the Effective Date shall continue as the officers of
StarTrak following the Effective Date.
2.0 Conversion of Shares.
2.1 Conversion of STAC Common Stock. Upon the Effective Date,
all of the shares of STAC common stock that are issued and outstanding
immediately prior to the Effective Date shall be converted aggregately into one
validly issued, fully paid and nonassessable Class B Membership Unit of StarTrak
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and the Class B Membership Unit of StarTrak into which the shares of STAC common
stock are so converted shall be the only Membership Unit of StarTrak that is
issued and outstanding immediately after the Effective Date.
2.2 Conversion of StarTrak Class A Membership Units owned by
Tenix. Subject to the terms and conditions of this Agreement, upon the Effective
Date, the aggregate Class A Membership Units of StarTrak owned by Tenix
immediately prior to the Effective Date shall, by virtue of the Merger and
without the need for any further action on the part of Tenix (except as
expressly provided herein), be converted into and represent the right to receive
the following shares of Alanco Common Stock at the times indicated:
a. Initial Shares at Closing. Upon Closing, Alanco
shall issue to Tenix 875,000 shares of fully paid, non-assessable, shares of
Alanco's Class A Common Stock ("Alanco Common Stock").
b. Additional Shares following Shareholders Meeting.
Provided Alanco's shareholders approve the issuance of additional shares to the
StarTrak Members, within three (3) business days following Alanco's Annual
Shareholders Meeting to be held in November, 2006, Alanco shall issue to Tenix
an additional 875,000 fully paid, non-assessable, shares of Alanco Common Stock.
In the event that Alanco's shareholders do not approve the issuance of the
additional shares, Alanco shall pay to Tenix on or before January 31, 2007, cash
in lieu of said shares in the amount of the value of the Alanco Common Stock
that would have been issued with the value of each share for such purpose equal
to the average NASDAQ closing market price for Alanco Common Stock for the five
(5) trading days immediately preceding the date of Alanco's Annual Shareholders
Meeting.
2.3 Conversion of StarTrak Class B Membership Units owned by
Xxxxxxx and Xxxxxxxx. Subject to the terms and conditions of this Agreement,
upon the Effective Date, the aggregate Class B Membership Units of StarTrak
owned by Xxxxxxx and Xxxxxxxx immediately prior to the Effective Date shall, by
virtue of the Merger and without the need for any further action on the part of
Xxxxxxx or Xxxxxxxx (except as expressly provided herein), be converted into and
represent the right to receive the following shares of Alanco Common Stock at
the times indicated:
a. Initial Shares at Closing. Upon Closing, Alanco
shall issue to Xxxxxxx and Xxxxxxxx the following number of fully paid,
non-assessable, shares of Alanco Common Stock:
Shares of Alanco
Member Common Stock
------ ------------
Xxxxxxx 2,164,706
Xxxxxxxx 1,443,138
b. Additional Shares following Shareholders Meeting.
Provided Alanco's shareholders approve the issuance of additional shares to the
Xxxxxxx and Xxxxxxxx (3) business days following Alanco's Annual Shareholders
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Meeting to be held in November, 2006, Alanco shall issue to Xxxxxxx and Xxxxxxxx
the following number of fully paid, non-assessable, shares of Alanco Common
Stock:
Shares of Alanco
Member Common Stock
------ ------------
Xxxxxxx 3,843,994
Xxxxxxxx 2,562,662
In the event that Alanco's shareholders do not approve the issuance of the
additional shares, Alanco shall pay to Xxxxxxx and Xxxxxxxx on or before January
31, 2007, cash in lieu of said shares in the amount of the value of the Alanco
Common Stock that would have been issued with the value of each share for such
purpose equal to the average NASDAQ closing market price for Alanco Common Stock
for the five (5) trading days immediately preceding the date of Alanco's Annual
Shareholders Meeting.
c. First Earn-Out Payment Based Upon StarTrak
Performance in Fiscal Year 2007. Attached hereto as Exhibit "A" is a Projected
Income Statement for StarTrak for the fiscal years ending June 30, 2007 and June
30, 2008 (the "Projections"), which has been prepared by management of StarTrak
as their reasonable estimation of revenue and expense items reflected thereon
for the periods indicated. Alanco is willing to pay Xxxxxxx and Xxxxxxxx more
than the shares of stock to be paid at Closing and following Alanco's Annual
Shareholders Meeting as provided in sections 2.3a and 2.3b above if the StarTrak
business performs as projected. Therefore, Alanco shall issue and deliver to
Xxxxxxx and Xxxxxxxx their individual share (determined in proportion to the
relative ownership percentage of each of them in StarTrak upon the Closing Date)
of an earn-out payment equal to twice the Gross Profit of StarTrak in excess of
$6,000,000 for the twelve months ended June 30, 2007, but not more than the sum
of $4,000,000 (the "2007 Earn-Out Payment"). Provided the Alanco shareholders
have approved the issuance of the additional shares, the 2007 Earn-Out Payment
shall be paid in the form of Alanco Common Stock valued for such purpose at the
average NASDAQ closing market price for the twenty (20) trading days immediately
following the filing with the Securities Exchange Commission of Alanco's form
10-KSB for such 2007 fiscal year. In the event that the Alanco shareholders have
not approved of the issuance of such additional shares, the 2007 Earn-Out
Payment shall be paid in cash. The 2007 Earn-Out Payment shall be paid by Alanco
in the form required on or before December 31, 2007.
d. Second Earn-Out Payment Based Upon StarTrak
Performance in Fiscal Year 2008. In addition, Alanco shall issue and deliver to
Xxxxxxx and Xxxxxxxx their individual share (determined in relative proportion
to the ownership percentage of each of them in StarTrak upon the Closing Date)
of an earn-out payment equal to twice the Gross Profit of StarTrak in excess of
the greater of (i) $8,000,000 or (ii) the Gross Profit of StarTrak for the
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twelve months ended June 30, 2008, but not more than the sum of $4,000,000 (the
"2008 Earn-Out Payment"). Provided the Alanco shareholders have approved the
issuance of the additional shares, the 2008 Earn-Out Payment shall be paid in
the form of Alanco Common Stock valued for such purpose at the average NASDAQ
closing market price for the twenty (20) trading days immediately following the
filing with the Securities Exchange Commission of the Alanco's form 10-KSB for
such 2008 fiscal year. In the event that the Alanco shareholders have not
approved of the issuance of such additional shares, the 2008 Earn-Out Payment
shall be paid in cash. The 2008 Earn-Out Payment shall be paid by Alanco in the
form required on or before December 31, 2008.
e. Definition of "Gross Profit." For purposes of
sections 2.3c and 2.3d above, "Gross Profit" shall mean revenue received or to
be received from sales of systems, products and services from the StarTrak
business, less the cost of sales employed with respect to such sales, all as
determined in accordance with generally accepted accounting principles. Alanco
shall cause StarTrak to maintain accurate books and records consistent with
generally accepted accounting principals consistent with past practices of
StarTrak covering all transactions relating to Gross Profit which may be
reviewed by Xxxxxxx and Xxxxxxxx and their duly authorized representatives, upon
reasonable notice and at reasonable times, to audit such records. Xxxxxxx and
Xxxxxxxx acknowledge and agree that the Earn-Out Payment formulas are based upon
the Projections, including the selling, general and administrative ("SG&A")
expenses reflected in the Projections and if the SG&A expenses exceed the
projected amounts, then an appropriate adjustment to the Earn-Out Payment shall
be made as agreed by the parties, and if they are unable to agree, then as
determined by the arbitrator in accordance with section 2.3g below.
f. Rounding Up of Earn-Out Payment. If the Earn-Out
Payments are to be paid in
the form of Alanco Common Stock, then the number of shares determined as
provided in section 2.3c and 2.3d above shall be rounded up to the next 100
shares.. For example, if the number of shares to be issued computes to be
1,500,826, the actual number to be issued shall be 1,500,900.
g. Disputes Concerning Earn-Out Payments. Any and all
disputes among the parties with respect to the Earn-Out Payments, including, but
not limited to, disputes concerning the calculation of Gross Profit, disputes
concerning whether Alanco supplied commercially reasonable capital to finance
StarTrak's marketing or development programs, or disputes concerning management
direction of such programs, shall be resolved as follows:
A. Any claim not resolvable by the parties,
unless the parties mutually agree otherwise, shall be arbitrated in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
currently in effect. A party demanding arbitration shall file a demand for
arbitration in writing with the other party and with the American Arbitration
Association at its offices in Arizona or New Jersey. A demand for arbitration
shall be made within six (6) months following the time that the disputed
Earn-Out Payment is due or it shall be barred.
B. No arbitration shall include, by
consolidation or joinder or in any other manner, parties other than the parties
to this Agreement, or their successors and assigns, and other persons
substantially involved in a common question of fact or law whose presence is
required if complete relief is to be accorded in arbitration. No other person or
entity shall be included as an original third party or additional third party to
an arbitration whose interest or responsibility is insubstantial. Consent to
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arbitration involving an additional person or entity shall not constitute
consent to arbitration of a Claim not described herein or with a person or
entity not named or described therein. The foregoing agreement to arbitrate
shall be specifically enforceable under applicable law in any court having
jurisdiction thereof, including the Federal Arbitration Act.
C. The party filing a notice of demand for
arbitration must assert in the demand all arbitrable claims then known to that
party on which arbitration is permitted to be demanded.
D. The award rendered by the arbitrator or
arbitrators shall be final, and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof.
E. Alanco acknowledges and agrees that
StarTrak's ability to achieve the Earn-Outs described in Section 2.3c and 2.3d
is dependent upon Alanco's compliance with its obligations under this Agreement,
including, without limitation, its obligation to provide post-closing adequate
funding for StarTrak's operations.
2.4 Conversion of StarTrak Class C Membership Units owned by
StarTrak Employee Members. Subject to the terms and conditions of this
Agreement, upon the Effective Date, the aggregate Class C Membership Units of
StarTrak owned by the StarTrak Employee Members immediately prior to the
Effective Date shall, by virtue of the Merger and without the need for any
further action on the part of the StarTrak Employee Members (except as expressly
provided herein), be converted into and represent the right to receive the
following shares of Alanco Common Stock at the times indicated:
a. Initial Shares at Closing. Upon Closing, Alanco
shall issue to the StarTrak Employee Members 517,156 shares aggregately of fully
paid, non-assessable, shares of Alanco's Class A Common Stock ("Alanco Common
Stock"), to be issued to each individual StarTrak Employee Member in proportion
to the number of StarTrak Class C Units owned by each such Member compared to
the number of Class C Membership Units owned by all of the StarTrak Employee
Members. No fractional shares will be issued, rather the number of shares of
Alanco Common Stock to be received by each StarTrak Employee Member shall be
rounded up or down to the nearest whole share.
b. Additional Shares following Shareholders Meeting.
Provided Alanco's shareholders approve the issuance of additional shares to the
StarTrak Members, within three (3) business days following Alanco's Annual
Shareholders Meeting to be held in November, 2006, Alanco shall issue to the
StarTrak Employee Members an additional 918,344 fully paid, non-assessable,
shares of Alanco Common Stock , to be issued to each individual StarTrak
Employee Member in proportion to the number of StarTrak Class C Units owned by
each such Member compared to the number of Class C Membership Units owned by all
of the StarTrak Employee Members. No fractional shares will be issued, rather
the number of shares of Alanco Common Stock to be received by each StarTrak
Employee Member shall be rounded up or down to the nearest whole share. In the
event that Alanco's shareholders do not approve the issuance of the additional
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shares, Alanco shall pay to the StarTrak Employee Members on or before January
31, 2007, cash in lieu of said shares in the amount of the value of the Alanco
Common Stock that would have been issued with the value of each share for such
purpose equal to the average NASDAQ closing market price for Alanco Common Stock
for the five (5) trading days immediately preceding the date of Alanco's Annual
Shareholders Meeting.
2.5 Adjustments for Dilution.
a. Adjustment Due to Stock Split, Stock Dividend,
Etc. If, prior to the date that any shares are to be issued by Alanco to the
StarTrak Members under sections 2.2, 2.3 or 2.4, the number of outstanding
shares of Alanco Common Stock is increased by a stock split, stock dividend, or
other similar event, the number of shares to be issued shall be proportionately
increased, or if the number of outstanding shares of Alanco Common Stock is
decreased by a combination or reclassification of shares, reverse stock split,
or other similar event, the number of shares to be issued to the StarTrak
Members shall be proportionately reduced.
b. Adjustment Due to Merger, Consolidation, Etc. If,
prior to the issuance of all shares to be issued pursuant to this sections 2.2,
2.3 or 2.4, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Alanco Common Stock 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 Alanco or another entity, then the StarTrak Members shall thereafter have the
right to receive, upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of Alanco Common Stock immediately theretofore
to have been receivable, such stock, securities or other assets which the
StarTrak Members would have been entitled to receive in such transaction had the
shares been issued immediately prior to such transaction.
2.6 StarTrak Liabilities. Upon Closing, StarTrak will have
liabilities generally as reflected in the May 31, 2006 Balance Sheet of StarTrak
(except for the restructured obligation owed to Tenix in the amount of
$2,000,000). StarTrak and Tenix have executed and delivered an agreement
pursuant to which the certain obligations to Tenix have been reduced to a total
of $2,000,000, with $500,000 due upon the Closing Date and the remaining balance
due to Tenix, without interest, on December 31, 2007, which obligation to Tenix
is reflected in a promissory note of StarTrak in the form of Exhibit "B"
attached hereto (the "Tenix Note"). Tenix shall release any and all security in
the assets of StarTrak in connection with the Tenix Note upon Closing.
Approximately $2,000,000 of such liabilities (including $500,000 to be paid to
Tenix at Closing), are to be paid within 45 days of the Closing as shown on
Schedule 2.6 attached hereto (the "Short Term Liabilities"), and Alanco shall
provide sufficient capital to StarTrak within 45 days following the Closing as
required to retire the Short Term Liabilities. It is anticipated that Alanco
will loan $750,000 to StarTrak prior to Closing in accordance with section 6.3
below to retire some of the Short Term Liabilities.
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3.0 Representations and Warranties of StarTrak Primary Members. The
StarTrak Primary Members, severally and not jointly and severally, represent and
warrant to Alanco as follows, and acknowledge and confirm that Alanco is relying
upon such representations and warranties in connection with the execution,
delivery and performance of this Agreement, notwithstanding any investigation
made by Alanco or on its behalf:
3.1 Free and Clear Title to Units. Each of the StarTrak
Primary Members, with respect to their Units only, represent and warrant that
immediately prior to the transfer, assignment and delivery of their Units to
Alanco: (i) they shall be the record and beneficial owner of the Units, and
shall hold the Units free and clear of any lien, encumbrance, pledge, charge or
claim, limitation, agreement or restriction whatsoever, except as may appear in
the current version of the Operating Agreement for StarTrak, with the full and
absolute right and power to assign, exchange, transfer and deliver the Units as
herein provided; and (ii) none of the Units shall be subject to any voting trust
or voting agreement (other than as may exist between the StarTrak Primary
Members), nor will any valid proxy be in existence with respect to the Units
(other than as may exist between the StarTrak Primary Members). Upon Closing, no
other person will have any right or option to acquire any interest in StarTrak.
3.2 Organization and Standing. StarTrak is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the State of Delaware, 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, except where failure to have such license would not result in a
material adverse effect on StarTrak. StarTrak 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. True and accurate copies of
StarTrak's Certificate of Formation, as amended, and its Operating Agreement, as
presently in effect, are attached as Schedule 3.2 to this Agreement.
3.3 Capitalization. Presently and at the Closing Date, the
outstanding Units of StarTrak consists solely of: 85,752 Class A Units, all of
which are owned by Tenix; 490,719 Class B Units, all of which are owned by
Xxxxxxx and Xxxxxxxx; and 70,340 Class C Units, all of which are owned by the
StarTrak Employee Members.
3.4 Subsidiaries. StarTrak has no Subsidiary other than one
dormant Subsidiary that has no material assets or liabilities. "Subsidiary"
shall mean, with respect to the StarTrak, any entity of which StarTrak (either
alone or through or together with any other Subsidiary), owns, directly or
indirectly, stock or other equity interests constituting more than 50% of the
voting or economic interest in such entity, or the financial results of which
are or are required to be consolidated with the StarTrak under GAAP.
3.5 Authorization. StarTrak 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
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part of StarTrak necessary for the authorization, execution, delivery, and
performance of all obligations of StarTrak under this Agreement has been (or
will be) taken prior to the Closing. This Agreement, when executed and
delivered, shall constitute a legal, valid and binding obligation of the
StarTrak Primary Members and StarTrak 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 the StarTrak Primary Members or StarTrak 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 the nor
StarTrak will be, as a result of the execution, delivery or performance of this
Agreement, in violation of or default under any provision of any material
instrument, contract or lease to which it is a party, or of any provision of any
federal or state judgment, writ, decree, order, statute, rule, or governmental
regulation applicable to them.
3.8 Financial Statements. Draft audited financial statements
of StarTrak as of and for the fiscal years ending December 31, 2005 and 2004,
and an unaudited balance sheet and income statement of the Company as of and for
the period ending May 31, 2006 (collectively, the "StarTrak Financials"), are
attached hereto as Schedule 3.8.
The StarTrak Financials have been prepared by management, fairly
present the financial position of StarTrak 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 StarTrak Financials, as of their respective dates, StarTrak has not incurred
any material liabilities or obligations of any kind, whether accrued, absolute,
contingent or otherwise, which should have been so reflected or reserved against
or disclosed in the StarTrak Financials.
3.9 Undisclosed Liabilities. StarTrak has no material
liabilities or obligations, either absolute, accrued, contingent or otherwise,
which individually or in the aggregate are materially adverse to the financial
condition and business of StarTrak, which (i) have not been reflected in the
StarTrak Financials, (ii) have not been described in this Agreement or in
Schedule 3.9 attached hereto, or (iii) have not been incurred in the ordinary
course of business since May 31, 2006, consistent with past practices.
3.10. Changes. Except as set forth in Schedule 3.10, since May
31, 2006:
(a) StarTrak has not entered into any transaction which was
not in the ordinary course of its business;
(b) There has been no Material Adverse Change (as hereinafter
defined);
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(c) There has been no damage to, destruction of or
loss of physical property (whether or not covered by insurance) adverse to the
business or operations of StarTrak;
(d) There has been no labor dispute involving StarTrak or any
of its employees and none is pending or, to the best of the StarTrak Primary
Members's knowledge, threatened; and
(e) To the best of the StarTrak Primary Members' knowledge,
there has been no litigation or administrative agency charges or proceedings
commenced involving, relating to or affecting StarTrak.
For purposes of this Agreement, "Material Adverse Change" means, with respect to
either StarTrak or Alanco, as the case may be, a change, effect, event,
occurrence or circumstance that has had a materially adverse effect on (x) the
business, condition, operations, results of operations, assets and properties,
or liabilities of StarTrak or Alanco, or (y) the ability of StarTrak or Alanco
to consummate the transactions contemplated by this Agreement in a timely
manner; provided, however, that none of the following (individually or in
combination) shall be deemed to constitute, or shall be taken into account in
determining whether there has been, a Material Adverse Change: (A) any adverse
change, effect or circumstance resulting from conditions generally affecting the
United States economy as a whole or in any foreign economy; (B) any adverse
change, effect or circumstance resulting from changes in the industry or
industries in which StatTrak or Alanco competes; (C) any adverse change, effect
or circumstance resulting from war, acts of war, terrorism or acts of terrorism
(whether or not the foregoing are declared or undeclared and whether or not the
foregoing take place in the United States or outside the United States); (D) any
adverse change, effect or circumstance resulting from the taking of any action
specifically contemplated by this Agreement; (E) any adverse change, effect or
circumstance on or to a party to this Agreement resulting from any breach by the
other parties hereto of any provision of this Agreement; and (F) any adverse
change caused by the write down of Alanco assets in accordance with the
procedure set forth in footnote number 1 to Alanco's audited financial
statements as shown in Alanco's Form 10KSB previously filed.
3.11 Inventory. The inventory of StarTrak, as reflected in the
StarTrak Financials, consists of a quality and quantity usable and saleable in
the ordinary course of business, except for items of obsolete material or
materials of below standard quality, all of which have been completely reflected
on the StarTrak Financials. The inventory is stored and/or located at premises
owned or leased by StarTrak or at StarTrak's suppliers. The value at which
StarTrak's inventory is reflected in the StarTrak 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 StarTrak. StarTrak 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 StarTrak as stated in the StarTrak Financials has been released
for an amount less than the value at which it was included or is or, to the best
10
of the StarTrak Primary Members' knowledge, 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
StarTrak, subject to any counterclaim, refusal to pay or setoff not reflected in
the reserves set forth on the StarTrak Financials.
3.13 Title to Assets; Liens, etc. The assets of StarTrak, both
real, personal and mixed, tangible and intangible, necessary to the operation of
the business of StarTrak are in good condition and repair, ordinary wear and
tear excepted. StarTrak has good and marketable title to, or a valid reserved or
similar interest in, its assets, free and clear of all liens and encumbrances,
other than the lien for current taxes not yet due and payable and liens
reflected in the StarTrak Financials. StarTrak has received no notice that the
buildings and improvements owned or leased by StarTrak and the uses thereof
contravene any zoning or building law or ordinance or violate any restrictive
covenant. Each lease of real property creates a legal, valid and enforceable
leasehold interest in favor of StarTrak, free and clear of all liens. To the
best knowledge of StarTrak Primary Members no default or event of default on the
part of StarTrak, as lessee or mortgagor, as the case may be, exists with
respect to any lease or mortgage (and related loan documents) with respect to
such real property.
3.14 Patents and Other Intangible Intellectual Assets. Except
as shown on Schedule 3.14, StarTrak (i) has legal and equitable title to, or has
by license or other grant, the right to use, free and clear of all liens, all
proprietary technology or information, patents, both domestic and foreign, all
registered and unregistered trademarks, trade names, service marks,
certification marks, copyrights, and applications for any and all of the above
used in the conduct of its business as now conducted; (ii) does not, to the best
of the StarTrak Primary Members' or StarTrak's knowledge, infringe upon the
patent, trademark, trade name, service xxxx, copyright or proprietary
information rights of any third party in the conduct of its business as now
conducted; (iii) is not obligated to make any payments by way of royalties, fees
or otherwise to any owner of, licensor of, or other claimant to any patent,
trademark, trade name, service xxxx, certification xxxx, copyright or
proprietary technology or information with respect to the use thereof or in
connection with the conduct of its business or otherwise; (iv) has not licensed
or granted any rights to any third parties under its patents, trademarks, trade
names, service marks, certification marks, copyrights or proprietary technology
or information used in the conduct of its business; (v) has no notice, knowledge
or belief that any of StarTrak's patents, trademarks, trade names, service
marks, certification marks or copyrights are invalid, and all registrations,
where filed, are subsisting and are registered in the name of StarTrak; and (vi)
has no notice, knowledge or belief that any of the technology or information
used in the conduct of StarTrak's business was illegally obtained.
3.15 Catalogs and Promotional Literature. To the best of the
StarTrak Primary Members' knowledge, neither the use nor the distribution of any
advertising or promotional materials, including catalogs, violates, infringes or
conflicts with any statutory or common law copyright, trademark, or other
intellectual, proprietary, personal or other right of any person.
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3.16 Products; Warranty Provisions.
(a) Other than the standard warranties of StarTrak or product
manufacturer warranties, there are no product express warranties applicable to
StarTrak's business. There is adequate provision in the StarTrak Financials for
liabilities and obligations for damaged, defective or returned goods, or for
replacement of goods.
(b) StarTrak has no pattern of claims or actions based upon
allegations of the same or similar product defect for any of its products.
(c) Other than as reflected in the StarTrak Financials and the
notes thereto, there has not been any material product recall, rework or
retrofit relating to any line of product manufactured, shipped or sold by
StarTrak , nor, to the StarTrak Primary Members' or StarTrak's knowledge, is
there any basis for any such product recall, rework or retrofit.
3.17 Conflicts of Interest; Transactions with Principals. No
officer, director or member of StarTrak and no affiliate (as defined under the
Securities Act of 1933, as amended) of any such officer, director or member has,
either directly or indirectly, (a) an interest in any corporation, partnership,
proprietorship, association or other person or entity which furnishes or sells
services or products to StarTrak or which purchases services or products from
StarTrak or whose services or products are similar to those furnished or sold by
StarTrak, or (b) a beneficial interest in any contract, agreement or commitment
to which StarTrak may be bound.
3.18 Outstanding Indebtedness. StarTrak has no indebtedness
for borrowed money (including deferred compensation) which StarTrak has directly
or indirectly created, incurred, assumed or guaranteed, or with respect to which
StarTrak has otherwise become directly or indirectly liable, other than as
disclosed in the StarTrak Financials, or on Schedule 3.18.
3.19 Employees. Other than the employment contracts with
Xxxxxxx and Xxxxxxxx generally in the form previously given to Alanco, StarTrak
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, to the best knowledge of the StarTrak
Primary Members, threatened between StarTrak and its employees, and StarTrak is
not a party to any union or collective bargaining agreement. StarTrak complied
in all material respects with all applicable federal and state equal employment
opportunity laws and other laws related to employment. StarTrak is not aware
that any officer or key employee, or that any group of key employees, intends to
terminate their employment with StarTrak, whether as a result of the
transactions contemplated hereby or otherwise, nor does StarTrak have a present
intention to terminate the employment of any of the foregoing. To the StarTrak
Primary Members' and StarTrak's knowledge, no employee of StarTrak is in
material violation of any term of any employment contract, patent, proprietary
information disclosure agreement or any other contract or agreement relating to
the right of any such employee to be employed by StarTrak because of the nature
of the business conducted by StarTrak or for any other reason, and the continued
employment by StarTrak of its present employees will not result in any such
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violation.
3.20 Employee Benefit Plans.
(a) Schedule 3.20 sets forth:
(i) 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 StarTrak or each trade or business under common control
with StarTrak (as determined under Section 4001(b)(1) of ERISA, an "ERISA
Affiliate") or to which StarTrak or any ERISA Affiliate has made contributions
during the preceding five (5) years (the "Welfare Plans"); and
(ii) all "employee pension benefit plans," as defined in
Section 3(2) of ERISA, maintained by StarTrak or any ERISA Affiliate or to which
StarTrak 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 "Pension
Plans"). The Welfare Plans and Pension Plans are hereinafter collectively
referred to as the "Employee Benefit Plans."
(b) No StarTrak Employee Benefit Plan is required to be
qualified under ERISA or other applicable laws. There is no violation of ERISA
with respect to the filing of any applicable reports, documents and notices
regarding the Employee Benefit Plans with the Secretary of Labor and the
Secretary of the Treasury or the furnishing of such documents to the
participants or beneficiaries of the Employee Benefit Plans.
(c) StarTrak does not maintain retiree life or retiree health
insurance plans which provide for continuing benefits or coverage for any
participant or any beneficiary of a participant after termination of employment
except as may be required under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA").
(d) StarTrak is in compliance with the notice and continuation
requirements of COBRA and the regulations thereunder.
(e) StarTrak has no formal plan or commitment to create any
additional Employee Benefit Plans or arrangement or modify or change any
existing Employee Benefit Plan, which would affect any employee or former
employee of StarTrak.
(f) Neither the execution or delivery of this Agreement nor
the consummation of the transactions contemplated hereby will result in any
rights under any of the Employee Benefit Plans becoming exercisable by the
holders thereof or result in the creation or vesting of any rights in such
holder under any of the Employee Benefit Plans, or accelerate the time of
payment or vesting or increase the amount of compensation or benefits due to any
director, officer, employee or former employee of StarTrak.
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3.21 Taxes. To the best knowledge of the StarTrak Primary
Members, StarTrak has filed all federal, state, county, local and foreign tax
returns, reports and forms for income, excise, social security, property,
payroll, unemployment and other taxes which are required to be filed by it,
including all sales tax returns ("Tax Returns"). StarTrak has paid, or adequate
provision has been made on the StarTrak Financials for the payment of, all
federal, state, county, local and foreign taxes, assessments, levies or duties,
howsoever measured or imposed, and related interest and penalties, if any
(collectively, "Taxes"). No Taxes in addition to those so paid or provided for
shall be assessed or levied against or become due or payable by StarTrak on or
after the Closing Date in respect to the period prior to and including the
Closing Date. No unexpired waiver of the applicable statute of limitations with
respect to any taxable year has been executed by StarTrak. There are no tax
examinations or audits underway involving StarTrak.
3.22 No Sales or Conveyance Tax Due. No sales, use or other
transfer or conveyance taxes are or will become payable by any of the parties to
this Agreement as a consequence of the execution, delivery or performance of
this Agreement or any of the Additional Agreements (as hereinafter defined),
other than taxes based upon the net income of the parties.
3.23 Insurance. StarTrak has in place such fire, casualty,
product liability, environmental liability and other insurance policies listed
in Schedule 3.23. There are no material claims, actions, suits or proceedings
arising out of or based upon any of such policies of insurance, and, to the
knowledge of the StarTrak Primary Members and StarTrak, no basis for any such
material claim, action, suit or proceeding exists. There are no notices of any
pending or threatened terminations or substantial premium increases with respect
to any of such policies, and to the best of the StarTrak Primary Members'
knowledge StarTrak is in material compliance with all conditions contained
therein.
3.24 Disposal of Waste. Neither StarTrak, nor any of
StarTrak's employees, agents or contractors has disposed, spilled or deposited
at any time on any of the properties previously or currently owned or leased by
it, nor do the StarTrak Primary Members or StarTrak have any knowledge of such
disposal, spill or deposit on any of the properties currently owned or leased by
StarTrak, any "Hazardous Substance" in excess of the corresponding "Reportable
Quantity" (as those terms are defined in the Comprehensive Environmental
Response compensation and Liability Act, as amended ("CERCLA") or its state or
local equivalent), oil or petroleum in excess of 100 kilograms, or "Hazardous
Waste" in any quantity (as that term is defined in the Resource Conservation and
Recovery Act, as amended, or its state or local equivalent), or disposed,
spilled or deposited any Hazardous Substances, oil, petroleum, or Hazardous
Waste (collectively, "Materials"), the nature, amount, or concentration of which
would enable the United States Environmental Protection Agency or any state
regulatory agency to undertake or require the removal or remediation of such
Materials.
3.25 Other Environmental Matters. As to all operations
relating to the business of StarTrak: (a) StarTrak has complied with all
applicable federal, state and local laws, regulations, rulings and guidelines
(collectively referred to as "Environmental Laws") in all material respects
relating to any Materials used, generated, managed, handled, treated, stored or
disposed of at, or moved or transported from, the sites where its business is
14
conducted; (b) StarTrak has not received any written notices that it has been
designated as a "Potentially Responsible Party," a "Responsible Party," (as
those terms are defined, used or construed pursuant to CERCLA or its state or
local counterparts) or a defendant in any action, suit or proceeding pursuant to
any Environmental Law; (c)to the best of the StarTrak Primary Members' knowledge
no Materials have been delivered to any site listed by the United States
Environmental Protection Agency (i.e., CERCLA) or by any state as a site that
actually or potentially requires investigation or remedial action; (d) StarTrak
is not a party to, have received notice of, or, to the best of the StarTrak
Primary Members' knowledge is aware of any actual or threatened litigation or
administrative proceedings concerning environmental claims or liabilities; and
(e) there are no environmental studies or reports in the possession or control
of StarTrak.
3.26 Compliance With Laws.
(a) StarTrak is in material compliance with and operates its
business in accordance with all laws, rules and regulations applicable to or
affecting it or the conduct of its business and has secured all governmental
licenses, permits and approvals material to its business.
(b) Other than sales tax licensing and approvals to do
business, no government licenses, permits or appraisals are otherwise issued to
or relied upon by StarTrak to conduct its business.
3.27 Litigation. There is no action, suit, arbitration,
proceeding or investigation pending or, to the best of the StarTrak Primary
Members' knowledge threatened against StarTrak before any court or
administrative agency, nor do the StarTrak Primary Members or StarTrak know or
have any reason to know of any basis for any such action, proceeding or
investigation. StarTrak has not received any opinion or memorandum or legal
advice or notice from legal counsel to the effect that it is likely, from a
legal standpoint, that it will incur any liability which may be material to its
business.
3.28 Full Disclosure. The StarTrak Primary Members and
StarTrak have fully provided Alanco with all the information which Alanco has
requested for deciding whether to enter into this Agreement. Neither this
Agreement nor any certificate or Schedule or other information furnished by or
on behalf of the StarTrak Primary Members or StarTrak pursuant to this Agreement
contains any untrue statement of a material fact or, when this Agreement and
such certificates, Schedules and other information are taken in their entirety,
omits to state a material fact necessary to make the statements contained herein
or therein not misleading.
4.0 Private Placement Status; Representations and Warranties of
the StarTrak Primary Members.
4.1 Each of the the StarTrak Primary Members, each with
respect to himself or itself only, represent and warrant as follows and
acknowledge and confirm that Alanco is relying upon such representations and
15
warranties in connection with the execution, delivery and performance of this
Agreement, notwithstanding any investigation made by Alanco or on its behalf:
a. Each of the StarTrak Primary Members has such
knowledge and experience in financial and business matters, or has relied upon
advisors who are so qualified, that he is capable of evaluating the merits and
risks of the investment by him in Alanco as contemplated by this Agreement and
is able to bear the economic risk of such investment for an indefinite period of
time. Each of the StarTrak Primary Members has been furnished access to such
information and documents as he or it have requested and has been afforded an
opportunity to ask questions of and receive answers from representatives of
Alanco concerning the business and financial condition of Alanco and the terms
and conditions of this Agreement and the issuance of securities contemplated
hereby.
b. Each of the StarTrak Primary Members is acquiring
the Alanco Common Stock for investment for his or its own account and not with a
view to, or for resale in connection with, any distribution. Each understands
that the Alanco Common Stock to be issued to him or it hereunder has not been
registered under the Securities Act of 1933 ("Act") by reason of a specific
exemption from the registration provisions of the Act which depends upon, among
other things, the accuracy of his representations expressed herein.
c. Each of the StarTrak Primary Members acknowledges
that unless a registration statement becomes effective with respect to the
resale of the Alanco Common Stock, the Alanco Common Stock must be held until
qualified for resale under the rules of the Securities Exchange Commission and
may not be sold or offered for sale in the absence of an effective registration
statement as to such securities under said Act and any applicable state
securities laws or unless an exemption from such registration is available.
(d) Each of the StarTrak Primary Members has had an opportunity to
discuss the business, management and financial affairs of Alanco with its
management and an opportunity to review the facilities of Alanco. Each
understands that such discussions, as well as the written information provided
by Alanco, were intended to describe the aspects of Alanco's business and
prospects which it believes to be material but were not necessarily a thorough
or exhaustive description.
(e) Each of the StarTrak Primary Members is a sophisticated investor
with such knowledge and experience in financial and business matters so as to be
capable of evaluating the merits and risks of a prospective investment in the
Alanco Common Stock and capable of bearing the economic risks of such
investment.
(f) Each of the StarTrak Primary Members, both by himself and through
his agents, have been solely responsible for the analysis of the merits and
risks of an investment in the Alanco Common Stock; that in taking any action or
performing any role relative to the arranging of the investment, they have acted
16
solely in his interest, and that neither he nor any of his agents or employees
have acted as an agent of Alanco, or as an issuer, underwriter, broker, dealer
or investment advisor relative to the Alanco Common Stock.
4.2. Legend. Each certificate representing the Alanco Common Stock
shall be endorsed with the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY OTHER SECURITIES LAWS,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND OTHER APPLICABLE SECURITIES
LAWS COVERING SUCH SECURITIES, OR THE ISSUER RECEIVES EVIDENCE SATISFACTORY TO
IT THAT ANOTHER EXEMPTION FROM REGISTRATION IS AVAILABLE.
Alanco shall not register a transfer of the Alanco Common Stock unless the
conditions specified in the foregoing legend are satisfied. Alanco may instruct
its transfer agent not to register the transfer of any of such securities,
unless the conditions specified in the foregoing legend are satisfied.
5.0 Representations and Warranties of Alanco. Alanco represents and
warrants to the StarTrak Primary Members as follows, and acknowledges and
confirms that the StarTrak Primary Members are relying upon such representations
and warranties in connection with the execution, delivery and performance of
this Agreement, notwithstanding any investigation made by the StarTrak Primary
Members or on their behalf:
5.1. Organization and Standing. Alanco is a corporation duly organized,
validly existing and in good standing under the laws of the State of Arizona,
has all of the requisite corporate 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 and
as proposed to be conducted. Alanco is duly qualified to do business and is in
good standing as a foreign corporation in all jurisdictions in which the
property owned, leased or operated by Alanco or the nature of the business
conducted by Alanco makes such qualification necessary. Neither Alanco nor any
Subsidiary of Alanco is 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 their business in any
jurisdiction or location. "Subsidiary" shall mean, with respect to the Alanco,
any entity of which Alanco (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, stock or other equity interests
constituting more than 50% of the voting or economic interest in such entity, or
the financial results of which are or are required to be consolidated with the
Alanco under GAAP.
5.2. Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock, options and other securities of Alanco is
set forth in the SEC Reports (as hereinafter defined). All outstanding shares of
capital stock are duly authorized, validly issued, fully paid and nonassessable
17
and have been issued in compliance with all applicable securities laws. Except
as disclosed in the SEC Reports, there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any person any right to subscribe for
or acquire, any shares of Alanco Common Stock, or contracts, commitments,
understandings or arrangements by which Alanco is or may become bound to issue
additional shares of Alanco Common Stock, or securities or rights convertible or
exchangeable into shares of Alanco Common Stock.
5.3. Validity of Alanco Shares. The Alanco Shares, when issued, sold
and delivered to the StarTrak Primary Members in accordance with this Agreement
for the consideration expressed herein, will be validly issued, fully paid and
nonassessable and will be free and clear of all liens.
5.4 Authorization. Alanco has all the requisite legal and corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of Alanco and
its officers, directors and stockholders necessary for the authorization,
execution, delivery, and performance of all obligations of Alanco under this
Agreement and for the authorization, issuance and delivery of the Alanco Common
Stock to be issued under this Agreement by Alanco at Closing has been (or will
be) taken prior to the Closing. Subsequent issuance of Alanco Common Stock for
the issuance of stock following the Annual Shareholders Meeting in November or
the Earn-outs must be approved by the Alanco Shareholders in the future. This
Agreement, when executed and delivered, shall constitute a legal, valid and
binding obligation of Alanco, enforceable in accordance with its terms.
5.5 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 in connection with the execution, delivery or performance of
this Agreement or consummation of the transactions contemplated hereby other
than filing of a notice of issuance of the Alanco Shares with NASDAQ. Based in
part upon the accuracy of the Buyer's representations and warranties as set
forth in Section 4, the sale and issuance of the Alanco Shares by Alanco in
conformity with the terms of this Agreement is exempt from the registration
requirements of all applicable federal and state securities laws.
5.6 Compliance with Other Instruments. Neither Alanco nor any
Subsidiary will be, as a result of the execution, delivery or performance of
this Agreement, in violation of or default under any provision of its Articles
of Incorporation or By-laws, as amended and in effect on date hereof, or of any
provision of any instrument, contract or lease to which it is a party, or of any
provision of any federal or state judgment, writ, decree, order, statute, rule,
or governmental regulation applicable to Alanco or any Subsidiary.
5.7 SEC Reports; Financial Statements. Alanco has filed with the United
States Securities and Exchange Commission ("SEC") all reports, including
amendments thereto, required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof (the foregoing materials being collectively referred to herein as the
"SEC Reports") on a timely basis or has received a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
18
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the SEC promulgated thereunder, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of the Alanco
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved ("GAAP"),
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position of
Alanco and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
All material agreements which are required to be disclosed in the SEC Reports
have been disclosed in the SEC Reports.
5.8 Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports and any news release issued by Alanco, (i) there has been no
event, occurrence or development that, individually or in the aggregate, has had
or that could result in a Material Adverse Effect, (ii) Alanco has not incurred
any liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Alanco's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the SEC, (iii) Alanco has not altered its method of accounting or the
identity of its auditors, except as disclosed in its SEC Reports, (iv) Alanco
has not declared or made any dividend or distribution of cash or other property
to its stockholders, except dividend on Alanco's outstanding Preferred Stock, or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock, and (v) Alanco has not issued any equity securities to any
officer, director or affiliate, except pursuant to existing Alanco stock-based
plans.
5.9 Title to Properties and Assets; Liens, etc. The properties and
assets of Alanco and its Subsidiaries, both real, personal and mixed, tangible
and intangible, necessary or useful to the operation of their business are in
good condition and repair, ordinary wear and tear excepted. The properties and
assets are being maintained in a state of good repair, and, in all respects,
comply with and are operated in conformity with all applicable laws, ordinances,
regulations, orders, permits and other requirements relating thereto adopted or
currently in effect.
5.10 Taxes. Alanco and its Subsidiaries have filed all federal, state,
county, local and foreign tax returns, reports and forms for income, excise,
social security, property, payroll, unemployment and other taxes which are
required to be filed by them, including all sales tax returns with respect to
direct sales made by Alanco or its Subsidiaries ("Tax Returns"). Alanco and its
Subsidiaries have paid, or adequate provision has been made on the Alanco
Financials for the payment of, all federal, state, county, local and foreign
19
taxes, assessments, levies or duties, howsoever measured or imposed, and related
interest and penalties, if any (collectively, "Taxes"). No unexpired waiver of
the applicable statute of limitations with respect to any taxable year has been
executed by Alanco or its Subsidiaries. There are no tax examinations or audits
underway involving Alanco or any Subsidiary.
5.11 Compliance With Laws.
(a) Alanco and its Subsidiaries are in full compliance with all laws,
rules and regulations applicable to or affecting them or the conduct of their
business and have secured all governmental licenses, permits and approvals
necessary to their business.
(b) Other than sales tax licensing and corporate approvals to do
business, no government licenses, permits or appraisals are otherwise issued to
or relied upon by Alanco or its Subsidiaries to conduct their business.
5.12 Litigation. Except as stated in the SEC Reports, there is no
material action, suit, arbitration, proceeding or investigation pending or
threatened against Alanco or any Subsidiary before any court or administrative
agency, nor does Alanco know of any basis for any such action, proceeding or
investigation. Neither Alanco or its Subsidiaries have received any opinion or
memorandum or legal advice or notice from legal counsel to the effect that it is
likely, from a legal standpoint, that it will incur any liability or
disadvantage which may be material to their business.
6.0 Pre-Closing Covenants.
6.1 Access to Information.
(a) From the date hereof to the Closing Date, StarTrak will
(i) afford to representatives of Alanco, including its counsel and auditors,
during normal business hours, access to any and all of the assets and
information with respect to the business of the StarTrak so that Alanco may have
a reasonable opportunity to make such a full investigation of the assets and
business of the StarTrak in advance of the Closing Date as Alanco shall
reasonably desire, and (ii) will furnish to Alanco, either orally or by means of
such records, documents, and memoranda as are available or reasonably capable of
preparation, such information as Alanco may reasonably request.
(b) Alanco hereby acknowledges that the information to be
provided by StarTrak is confidential and proprietary to StarTrak (the
"Confidential Information"). Alanco hereby agrees that it will keep in
confidence all Confidential Information that has been or may be provided by
StarTrak, and that Alanco will use the same for the sole purpose of completing
its due diligence inquiry of StarTrak. Alanco hereby agrees not to use or
disclose the Confidential Information to any person except those of its
employees and advisors who have a reasonable need to know such information to
advise Alanco in connection with the transactions contemplated hereby. This
Section 6.1(b) shall be inoperative as to such portions of Confidential
Information which (i) are or become generally available to the public, other
than as a result of a disclosure by Alanco or its employees or advisors; (ii)
become available to Alanco on a non-confidential basis from a third party who
has the right to disclose the same; or (iii) were known to Alanco on a
non-confidential basis prior to its disclosure by StarTrak or one of StarTrak's
representatives. The obligations concerning confidentiality of information is
intended to supplement any Confidentiality and Non-Disclosure Agreement between
the parties, and not replace the same.
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6.2 Interim Operations of the Business. Except as provided in
Schedule 6.2, the StarTrak Primary Members and StarTrak hereby covenant and
agree that between the date hereof and the Closing Date, without the prior
written consent of Alanco:
(a) StarTrak shall conduct its business diligently and in the
ordinary course and in accordance with past practice, and use its best efforts
to (i) preserve its business organization intact, and (ii) keep available the
services of its present employees.
(b) StarTrak shall not mortgage or encumber any of its assets.
(c) Without the prior written consent of Alanco, StarTrak
shall not enter into any new material contracts or agreements, or cancel, amend,
modify adversely, waive any material rights under, assign, encumber or terminate
any of the existing contracts or agreements.
(d) Without the prior written consent of Alanco, StarTrak
shall not increase the compensation payable or to become payable to any
employee, officer or director of StarTrak.
(e) StarTrak will not issue, sell or deliver, or authorize the
issuance, sale or delivery of, any Units of any class or any securities
convertible into or exercisable or exchangeable for any such Units, or any
warrants, calls, options, stock appreciation rights or other rights calling for
the issuance, sale or delivery of any such Units or convertible, exercisable or
exchangeable securities.
6.3 Alanco Loan to StarTrak. Alanco shall loan to StarTrak
$750,000 prior to the Closing upon the terms and conditions of a separate Loan
Agreement between the parties.
6.4 Public Disclosure. As a public company, Alanco must issue
timely press releases and make necessary SEC filings with respect to this
transaction. Such releases and filings may be reviewed by the StarTrak Primary
Members, but are not subject to the StarTrak Primary Members' prior approval.
7.0 Additional Agreements. At the Closing, the following
additional agreements (the "Additional Agreements") shall be executed and
delivered by the parties thereto as applicable:
7.1 Alanco Guaranty. Upon the Closing, Alanco shall
deliver to Tenix the Alanco Guaranty of the Tenix Note in the form of Exhibit
"C" attached hereto.
7.2 Employment Option Agreements. Upon the Closing, Alanco
shall grant to Xxxxxxx and Xxxxxxxx Employee Option Agreements to encourage
their continued employment with StarTrak having an exercise price equal to the
market price of Alanco Common Stock as of the Closing Date. The actual Employee
Stock Option Agreements specifying said exercise price will be delivered to
Xxxxxxx and Xxxxxxxx as soon as practicable following the Closing, but not later
than ten days thereafter.
7.3 Covenants Not to Compete. Xxxxxxx and Xxxxxxxx, each
individually, and Alanco shall enter into the Non-Competition and Non-Disclosure
Agreements attached hereto as Exhibits "D-1" and "D-2", respectively.
21
7.4 Cronus Fee. Cronus Partners LLC ("Cronus"), Xxxxxxx,
Xxxxxxxx and Alanco have executed an agreement with respect to a fee due to
Cronus in connection with the Merger (the "Cronus Agreement"). In accordance
with the Cronus Agreement, Alanco shall be responsible for an initial cash
payment of $150,000 as well as a subsequent payment of $214,000 to be
represented by Alanco's promissory note to be delivered to Cronus at Closing,
which note shall be payable as indicated therein, without interest, in cash, or
upon Alanco's option, in restricted shares of Alanco's Common Stock with each
share valued for such purpose at the average NASDAQ closing market price for
Alanco Common Stock for the five (5) trading days immediately preceding the
issuance date of such stock. An additional amount of $150,000 shall be paid by
Xxxxxxx and Xxxxxxxx to Cronus at Closing (which amount will be advanced to them
by Alanco at the Closing to be credited against other obligations owed to them
by StarTrak).
8.0 Agreement Expenses. Each of the parties shall bear their own
expenses in connection with the transactions covered or contemplated by this
Agreement (except that none of the expenses of the StarTrak Primary Members
shall be allocated to StarTrak). Each of the parties represent each to the other
parties that each has had no dealings with any broker, finder or other party
concerning Alanco's acquisition of StarTrak except Cronus, to whom Slfkin,
Xxxxxxxx and Alanco shall pay a commission pursuant to a separate agreement
between them and Cronus, including Alanco's portion as described in section 7.5
above. Each party hereby agrees to indemnify and hold the other parties harmless
from all loss, cost, damage or expense (including reasonable attorney's fees)
incurred by another party as a result of any claim arising out of the acts of
the indemnifying party (or others on its behalf) for a commission, finder's fee
or similar compensation made by any broker, finder or any party who claims to
have dealt with such party, other than Cronus. The representations and
warranties contained in this section shall survive the Closing.
9.0 Conditions Precedent to Closing.
9.1. Conditions to the Obligations of Alanco. The performance
of the obligations of Alanco hereunder is subject to the fulfillment, or waiver
by Alanco, on or before the Closing Date of the following conditions:
(a) Authorization. All action necessary to authorize the
execution, delivery and performance of this Agreement by the StarTrak Primary
Members and StarTrak and the consummation of the transactions contemplated
hereby and thereby shall have been duly and validly taken, and each shall have
full power and right to consummate the transactions contemplated hereby and
thereby.
(b) Conduct of Business in Ordinary Course. To the Closing
Date, StarTrak shall have conducted its business only in the ordinary course,
consistent with the past practices, except for actions expressly permitted or
required by this Agreement, matters incident to carrying out this Agreement, or
such further matters as may be consented to in writing by Alanco.
(c) Consents and Approvals. The StarTrak Primary Members and
StarTrak shall have obtained all material consents, authorizations, orders or
approvals and waivers and given such notices as may be necessary to consummate
the transactions contemplated hereby, including but not limited to (i) the
consent of the landlord with respect to the lease of StarTrak's business
premises, if required by the terms of the lease agreement, (ii) the consent to
22
the transactions contemplated hereby of the parties to all material agreements
under which StarTrak would otherwise be in default as a result of the
transactions contemplated hereby, and (iii) any filings or registrations with
any federal, state or local governmental commission, board or other regulatory
body which is required for or in connection with the execution, delivery, and
performance of this Agreement and the Additional Agreements and the consummation
of the transactions contemplated hereby.
(d) No Litigation or Legislation. No federal, state, local or
foreign statute, rule or regulation shall have been enacted or litigation,
proceeding, government inquiry or investigation commenced or threatened which
prohibits, restricts or delays the consummation of the transactions contemplated
by this Agreement or any of the conditions to the consummation of such
transactions or adversely affects the desirability of consummating the
transactions contemplated hereby and by the Additional Agreements.
(e) Accuracy of Representations and Warranties. Each of the
representations and warranties of the StarTrak Primary Members and StarTrak set
forth in Sections 3 and 4 hereof shall be true and correct in all material
respects on and as of the Closing Date, except as may be disclosed to Alanco in
writing on or before the Closing Date.
(f) Completion of Audit. The audit of the StarTrak Financials
for the years ending December 31, 2004 and 2005 shall have been completed to the
satisfaction of Alanco and its auditor complying with the requirement of the
Securities Exchange Commission.
(g) Consent for Change of Control in Xxxxxxx'x and Xxxxxxxx'x
existing Employment Agreements. Xxxxxxx and Xxxxxxxx shall each have given their
written consent to the Change of Control of StarTrak (as defined in their
existing Employment Agreements) so that the acquisition of StarTrak by Alanco
shall not constitute "Good Reason" for their termination of such Employment
Agreements under section 1.7.5 thereof.
(h) Delivery of Closing Documents. Alanco shall have received
the closing documents set forth in Section 11.1 hereof.
(i) No Adverse Change. There shall not have occurred a
Material Adverse Change to StarTrak.
9.2 Conditions to the Obligations of StarTrak Primary Members.
The performance of the obligations of the StarTrak Primary Members hereunder is
subject to the fulfillment, or waiver by the StarTrak Primary Members, on or
before the Closing Date of the following conditions:
(a) Authorization. All action necessary to authorize the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby and thereby, shall have been duly and
validly taken by Alanco, and Alanco shall have full power and right to
consummate the transactions contemplated hereby and thereby.
23
(b) No Litigation or Legislation. No federal, state, local or
foreign statute, rule or regulation shall have been enacted or litigation,
proceeding, government inquiry or investigation commenced or threatened which
prohibits, restricts or delays the consummation of the transactions contemplated
by this Agreement or any of the conditions to the consummation of such
transactions or adversely affects the desirability of consummating the
transactions contemplated hereby and thereby.
(c) Accuracy of Representations and Warranties. Each of the
representations and warranties of Alanco set forth in Section 5 hereof shall be
true and correct in all respects on the Closing Date except as may be modified
by Alanco in its Public Reports. (As a public reporting company, Alanco cannot
issue changes or notices concerning its financial statements or activities
except as may be issued by Alanco through its regular public channels, including
the filing of a Form 8-K when appropriate.)
(d) Delivery of Closing Documents. the StarTrak Primary
Members shall have received the closing documents set forth in Section 11.2
hereof.
(e) No Adverse Change. There shall not have occurred a
Material Adverse Change to Alanco.
(f) Working Capital. Following the execution hereof, Alanco
shall have initiated financing arrangements for adequate monies to fund
obligations of StarTrak due at the Closing and for the forty (45) day period
thereafter satisfactory to Xxxxxxx and Xxxxxxxx in accordance with section 2.4
above.
9.3. Option to Terminate. In the event any of the conditions
precedent to the obligation of either of the parties to consummate the
transactions contemplated hereby is not satisfied and/or waived on or before the
Closing Date, then any party whose obligation is subject to such conditions
shall have the right to terminate this Agreement by written notice to the other
party. Upon the effective date of any termination made pursuant to this Section
9.3, none of the parties to this Agreement shall have any further liability or
obligation to the other parties hereunder, unless otherwise specifically stated.
10.0 Closing: Effective Date. The closing ("Closing") shall occur at
the office of legal counsel for StarTrak, Xxxxxxxxxx Xxxxxxx PC, 00 Xxxxxxxxxxx
Xxxxxx, Xxxxxxxx, XX 00000 at 10:00 a.m. on June 30, 2006, or such other time as
the parties mutually agree (the "Closing Date"). The Closing shall constitute
the acts which take place on the Closing Date by which the transactions
contemplated by this Agreement are consummated. Effective upon the Closing Date,
the shares of STAC shall be automatically converted into one Membership Unit in
StarTrak and the previously outstanding Membership Units in StarTrak shall be
automatically converted into shares of Alanco Common Stock or the right to
24
receive shares of Alanco Common Stock as described in this Agreement (the
"Effective Date"). If the actual Closing Date occurs on a date other than June
30, 2006, for accounting and income tax purposes, the Effective Date shall be
deemed to have occurred at 12:00 noon EDT, on June 30, 2006.
11.0 Closing Documents. On the Closing Date, the parties shall
exchange documents as follows:
11.1 Delivery by the StarTrak Primary Members. The
StarTrak Primary Members shall deliver, or cause StarTrak to deliver to Alanco:
(a) A copy of the resolutions duly adopted by the governing
authority of StarTrak authorizing and approving the execution, delivery and
performance of this Agreement and the applicable Additional Agreements, and the
execution and delivery of any and all other documents and agreements
contemplated hereunder and thereunder, certified by an appropriate officer of
StarTrak, as applicable.
(b) A certificate signed by the StarTrak Primary Members to
the effect that the StarTrak Primary Members and StarTrak have fully performed
all of their pre-closing commitments hereunder and that all their warranties and
representations contained herein continue to be true and accurate as of the
Closing Date, except as disclosed to Alanco in writing on or before the Closing
Date, or as may be modified by the results of the audit of StarTrak's books and
records.
(c) The Additional Agreements.
(d) Written evidence reasonably satisfactory to Alanco that
the StarTrak Primary Members have obtained all necessary governmental or
regulatory approvals for the transactions contemplated hereby.
(e) Such further instruments or documents as Alanco or its
counsel may reasonably request to assure the effective carrying out of the
transactions contemplated hereby.
11.2. Delivery by Alanco. Alanco shall deliver to the StarTrak
Primary Members:
(a) A copy of the resolutions duly adopted by the Board of
Directors of Alanco authorizing and approving the execution, delivery and
performance of this Agreement and the applicable Additional Agreements, and the
execution and delivery of any and all other documents and agreements
contemplated hereunder and thereunder, certified by the Secretary or an
Assistant Secretary of Alanco.
(b) A certificate signed by Alanco to the effect that Alanco
has fully performed all of Alanco's pre-closing commitments hereunder and that
all of Alanco's warranties and representations contained herein continue to be
true and correct as of the Closing Date, except that the Alanco Financials shall
be true and correct as of the dates thereof and as modified by any Public
Reports issued thereafter by Alanco.
25
(c) A copy of the letter of instructions to Alanco's transfer
agent (original to be sent to the transfer agent) requesting the prompt issuance
and delivery to the StarTrak Members stock certificates representing the
5,000,000 shares, aggregately, of Alanco Common Stock to be issued to the
StarTrak Members upon conversion of their Membership Units in StarTrak.
(d) The Additional Agreements.
(e) All monies to be paid or advanced to StarTrak by Alanco
hereunder to allow StarTrak to pay its obligations then to be paid by StarTrak,
including $500,000 to be paid to Tenix at Closing.
(f) Such further instruments or other documents as StarTrak,
the StarTrak Primary Members or their counsel may reasonably request to assure
the effective carrying out of the transactions contemplated hereby.
11.3 Filing of Certificate or Plan of Merger. Upon Closing, or
as promptly as possible thereafter, the parties shall cooperated in filing an
appropriate Plan of Merger with the Arizona Corporation Commission and a
Certificate of Merger with the Office of the Delaware Secretary of State as
required by the statutes of said states for the consummation of the Merger.
11.4 Form of Closing Documents. All closing documents shall be
in form and substance reasonably satisfactory to counsel for the respective
parties.
11.5 Additional Documents. The parties further agree that at
any time subsequent to the Closing Date, they will, upon request and at the
expense of the requesting party, do, execute, acknowledge and deliver, or cause
to be done, executed, acknowledged and delivered, all such further acts,
assignments, transfers, conveyances, powers of attorney or assurances as may be
required for the better assigning, transferring, granting, conveying and
assuring to the parties any of the transactions contemplated herein.
12.0 Post-Closing Agreements.
12.1 Short-Term Financial Requirements. Alanco shall provide
capital as set forth in section 2.5 adequate to retire the StarTrak Short Term
Liabilities as shown on Schedule 2.5 attached hereto.
12.2 Additional Financial Requirements. Alanco shall further
provide adequate financing to StarTrak to enable StarTrak to achieve its
financial performance projections as presented in Exhibit "A" attached hereto.
12.3 Other Employee Option Agreements. Within thirty (30) days
following the Closing, Alanco shall execute and deliver Employee Stock Option
Agreements for an aggregate of 2,500,000 to the employees of StarTrak other than
Xxxxxxx and Xxxxxxxx, which options agreements shall be issued under and conform
to the requirements of Alanco's Employee Stock Option Plans.
26
12.4 Alanco Board Membership. Promptly following the Closing,
Xxxxxxx shall be elected (by the Alanco Board of Directors) as a director to
serve on the Alanco Board of Directors. The current Alanco Board intends to
nominate Xxxxxxx for election to the Board for at least two consecutive one-year
terms.
12.5 Alanco Shareholder Approval. The management of Alanco
shall use their best efforts to obtain the approval of the Alanco shareholders
with respect to allowance of the issuance of Alanco Common Stock with respect to
the additional shares to be issued subsequent to the Closing Date in accordance
with sections 2.2b, 2.3b and 2.4b above and the Earn-Out Payments as described
in sections 2.3c and 2.3d above. Such approval shall be sought at Alanco's next
Annual Meeting of Shareholders to be held in November or December of 2006.
12.6 Registration of Shares. As soon after the Closing as
practicable, but in no event more than ninety (90) days following the Closing,
Alanco shall file an S-3 registration statement under the Securities Act of 1933
with respect to 1,000,000 shares of Alanco Common Stock issued to each of
Xxxxxxx and Xxxxxxxx, and 875,000 shares of Alanco Common Stock to be paid to
Tenix at Closing (2,875,000 aggregately), and use its best efforts to have the
registration statement declared effective by the SEC as soon as possible
thereafter. All expenses of registering said shares shall be borne by Alanco,
excluding underwriting commissions, if any. In addition, Alanco agrees that in
the event Alanco files a registration statement with respect to Alanco's Common
Stock under the Securities Act of 1933 following issuance to Tenix of the shares
of Alanco Common Stock to be issued to Tenix in accordance with Section 2.2b
above (other than in connection with an exchange offer or a registration
statement on Form S-4 or S-8 or other similar registration statements not
available to register Tenix' Alanco Common Stock), Alanco shall include in such
registration statement said shares issued to Tenix. All additional expenses of
registering said shares shall be borne by Alanco, excluding underwriting
commissions, if any.
13.0 Indemnification.
13.1 By the StarTrak Primary Members. Each of the StarTrak
Primary Members, severally and not jointly and severally, agree to pay, protect
and defend and does hereby indemnify, and hold harmless Alanco, Alanco's
Subsidiary, and their officers, directors, employees, agents, successors and
assigns, against and in respect to any claims, losses, expenses, obligations and
liabilities, including reasonable attorney's fees, which arise or result from or
relate to any breach of or failure by the StarTrak Primary Members or StarTrak
to perform any of their warranties, representations, guarantees, commitments,
covenants, or conditions under this Agreement ("Losses"). Alanco shall not be
entitled to receive any indemnification payments hereunder until the aggregate
amount of Losses incurred by Alanco exceed $50,000 (the "Basket Amount"),
whereupon Alanco shall be entitled to receive indemnity payments equal to the
amount by which such aggregate amount of Losses exceeds the Basket Amount. If
the StarTrak Primary Member against whom indemnification is sought had
knowledge, as of the Closing, of the breach of warranty or representation for
which indemnification is sought, the maximum amount of indemnification payments
which Alanco shall be entitled to receive hereunder, shall not exceed the value
of the consideration to be paid by Alanco to such indemnifying StarTrak Primary
27
Member under this Agreement for such StarTrak Primary Member's StarTrak Units,
and if the StarTrak Primary Member against whom indemnification is sought had no
knowledge, as of the Closing, of the breach of warranty or representation for
which indemnification is sought, the maximum amount of indemnification payments
which Alanco shall be entitled to receive hereunder, shall not exceed one-half
of the value of the consideration to be paid by Alanco to such indemnifying
StarTrak Primary Member under this Agreement for such StarTrak Primary Member's
StarTrak Units, said value of the consideration paid by Alanco, in either case,
to be determined based upon the value of the Alanco Common Stock as of the time
it was issued to the indemnifying StarTrak Primary Member (the "Indemnity Cap").
Indemnification shall be limited to the amount of any Loss that remains after
deducting therefrom any insurance proceeds or any indemnity, contribution or
other similar payment actually recovered (net of out-of-pocket costs incurred in
connection with such recovery) by Alanco from any insurer or third party with
respect thereto. Any indemnification payment made pursuant hereto shall be
payable either (i) as a credit against any monies owed by StarTrak to the
indemnifying StarTrak Primary Member after the Closing, if any, or (ii) if no
monies are owed, then either in cash, or at the option of the indemnifying
Member, in shares of Alanco*s Common Stock, such stock to be valued at the
higher of (X) the price of such stock as of the Closing if received by the
StarTrak Primary Member at Closing, or if received by the StarTrak Primary
Member later, then at the value set forth in this Agreement for such stock, or
(Y) the market value of such stock at the time that it is tendered to Alanco in
payment of an indemnity obligation determined for such purpose equal to the
average NASDAQ closing market price for Alanco Common Stock for the five (5)
trading days immediately preceding the tender date. From and after the Closing,
the remedies provided in this Section 13.1 shall be the sole recourse of Alanco
for all Losses based upon, arising from or relating to any breach of any
representation, warranty or covenant contained in this Agreement or in any
document delivered pursuant hereto. Notwithstanding anything in this section
13.1 to the contrary (other than the limitation to several and not joint and
several liability), nothing herein shall limit Alanco*s right to seek and obtain
any equitable relief to which it may be entitled or to seek any remedy on
account of any fraud, willful misconduct, or lack of ownership of the StarTrak
Membership Units owned by the StarTrak Primary Members.
13.2 By Alanco. Alanco agrees to pay, protect and defend and
hereby indemnifies and holds harmless the StarTrak Primary Members and their
officers, directors, employees, agents, successors and assigns, against and in
respect to any claims, losses, expenses, costs, obligations and liabilities,
including reasonable attorney's fees, which the StarTrak Primary Members may
incur or suffer by reason of a breach of or failure by Alanco to perform any of
its warranties, representations, guarantees, commitments or covenants in this
Agreement ("Losses"). The StarTrak Primary Members shall not be entitled to
receive any indemnification payments hereunder until the aggregate amount of
Losses incurred by them exceed $50,000 (the "Basket Amount"), whereupon the
StarTrak Primary Members shall be entitled to receive indemnity payments equal
to the amount by which such aggregate amount of Losses exceeds the Basket Amount
on a pro rata basis as among the StarTrak Primary Members. If Alanco had no
28
knowledge of the breach of warranty or representation for which indemnification
is sought, the maximum amount of indemnification payments which Alanco may be
obligated hereunder, shall not exceed one-half of the value of the Units in
StarTrak currently owned by the StarTrak Primary Members as measured by the
consideration to be paid by Alanco to them under this Agreement for such Units
(the "Indemnity Cap"). Indemnification shall be limited to the amount of any
Loss that remains after deducting therefrom any insurance proceeds or any
indemnity, contribution or other similar payment actually recovered (net of
out-of-pocket costs incurred in connection with such recovery) by Alanco from
any insurer or third party with respect thereto. From and after the Closing, the
remedies provided in this Section 13.2 shall be the sole recourse of the
StarTrak Primary Members for all Losses based upon, arising from or relating to
any breach of any representation, warranty or covenant contained in this
Agreement or in any document delivered pursuant hereto. Nothing herein shall
limit the StarTrak Primary Members' right to seek and obtain any equitable
relief to which he or it may be entitled or to seek any remedy on account of any
fraud or willful misconduct.
13.2 Survival. All representations, warranties, covenants and
agreements shall survive the Closing. All representations and warranties
contained in this Agreement shall terminate and expire at 5:00 p.m., New York
City time, on the first anniversary of the Closing. Any and all claims for
indemnification hereunder must be brought within 60 days after such anniversary
or be time barred.
13.3 Procedure for Indemnification.
a. The party making a claim for indemnification under
this Section 13 is referred to as the "Indemnified Party," and the party against
whom such claims are asserted under this Section 13 is referred to as the
"Indemnifying Party." All claims by any Indemnified Party under this Section 13
shall be asserted and resolved as follows:
b. Notice of Asserted Liability. Promptly after
receipt by the Indemnified Party of notice of the commencement of any action or
proceeding, the assertion of any claim by a third party, the imposition of any
penalty or assessment or a claim not involving a third party for which the
Indemnified Party seeks to be indemnified that may result in a Loss (each, an
"Asserted Liability"), the Indemnified Party shall give written notice of such
Asserted Liability (the "Claims Notice") to the Indemnifying Party. The failure
to give such prompt written notice shall not, however, relieve the Indemnifying
Party of their indemnification obligations, except and only to the extent that
the Indemnifying Party forfeits rights or defenses by reason of such failure or
actually incurs an incremental out-of-pocket expense by reason of such failure.
The Claims Notice shall describe the Asserted Liability in reasonable detail,
including (i) the representation, warranty, covenant or agreement that is
alleged to have been inaccurate or to have been breached, (ii) the basis for
such allegation, including the provision of supporting documentation and (iii)
if known, the aggregate amount of the Losses for which a claim is being made
under this Section 13 or, to the extent that such Losses are not known or have
not been incurred at the time such claim is made, an estimate, to be prepared in
good faith and accompanied by supporting documentation, of the aggregate
potential amount of such Losses.
c. Non Third Party Claims. If the Claims Notice from
the Indemnified Party pertains to an Asserted Liability other than a claim or
demand from a third party, then the Indemnifying Party shall have 30 days
following receipt of the Claims Notice to make such investigation at the expense
of the Indemnifying Party of the Asserted Liability as the Indemnifying Party
29
deems necessary or desirable. For the purposes of such investigation, the
Indemnified Party agrees to make available to the Indemnifying Party the
information relied upon by the Indemnified Party to substantiate the Asserted
Liability. If the Indemnified Party and the Indemnifying Party agree at or prior
to the expiration of said 30-day period (or any mutually agreed upon extension
thereof) on the validity and amount of such Asserted Liability, the Indemnifying
Party shall promptly pay to the Indemnified Party the full amount of the claim
in the manner provided for hereunder. If the Indemnified Party and the
Indemnifying Party do not agree at or prior to the expiration of said 30 day
period (as such period may be extended by mutual agreement) on the validity and
amount of such Asserted Liability, then each of the Indemnified Party and the
Indemnifying Party may pursue the remedies available under this Agreement.
d. Opportunity to Defend Third Party Claims.
(i) If the Claims Notice pertains to an
Asserted Liability that relates to a claim or demand from a third party, the
Indemnifying Party may elect to compromise, negotiate or defend, at its own
expense and by its own counsel, such Asserted Liability.
(ii) If the Indemnifying Party elects to
compromise or defend such Asserted Liability, it shall promptly notify the
Indemnified Party in writing of its intent to do so, and the Indemnified Party,
at the expense of the Indemnifying Party, shall cooperate in the compromise of,
or defense against, such Asserted Liability.
(iii) If the Indemnifying Party elects not
to compromise or defend such
Asserted Liability, fails to promptly notify the Indemnified Party in writing of
its election as provided in this Agreement, or otherwise abandons the defense of
such Asserted Liability, the Indemnified Party may pay, compromise or defend
such Asserted Liability and seek indemnification for any and all Losses based
upon, arising from or relating to such Asserted Liability. Notwithstanding the
foregoing, neither the Indemnifying Party nor the Indemnified Party shall settle
or compromise any Asserted Liability without the prior written consent of the
other unless all claimants shall provide an unqualified release to the
Indemnifying and Indemnified Parties.
(iv) The Indemnified Party shall have the
right to participate in the defense of any Asserted Liability with counsel
selected by it and reasonably satisfactory to the Indemnifying Party subject to
the Indemnifying Party*s right to control the defense. The fees and
disbursements of one such counsel (and any necessary local counsel) shall be at
the expense of the Indemnified Party; provided, that if in the reasonable
opinion of counsel to the Indemnified Party, (A) there are legal defenses
available to an Indemnified Party that are different from or additional to those
available to the Indemnifying Party or (B) there exists a conflict of interest
between the Indemnifying Party and the Indemnified Party, the Indemnifying Party
shall be liable for the reasonable legal fees and expenses of one separate
counsel to all of the applicable Indemnified Parties (in addition to one local
counsel in each jurisdiction that may be necessary or appropriate). If the
Indenmifying Party chooses to defend any Asserted Liability, the Indemnified
Party shall make available to the Indemnifying Party any personnel, books,
records or other documents within its control that are reasonably necessary or
appropriate for such defense.
30
14.0 Benefits of this Agreement. Nothing in this Agreement shall be
construed to give any benefits to any person (including, without limiting the
generality of the foregoing, any present or former employee of StarTrak) or
corporation or other entity, other than the parties hereto, and this Agreement
shall be for the sole and exclusive benefit of the parties hereto.
15.0 Successors and Assigns. This Agreement shall inure to the benefit
of, and be binding upon, the successors, heirs, executors, administrators and
permitted assigns of the parties hereto. This Agreement may not be assigned by
any of the parties hereto without the prior written consent of the other
parties.
16.0 Notices. Any notice or demand to be given by any party shall be
given in writing and delivered in person; by courier service during days other
than legal holidays; by facsimile transmission between 8:00 a.m. and 5:00 p.m.,
local time of the recipient; or by certified mail, postage prepaid, to the
recipient at their respective addresses set forth below. Any such notices or
demands shall be deemed effective on the date of receipt if delivered in person,
by courier service or by facsimile transmission posting, and three business days
following posting if mailed by certified mail, provided, however, any notice
sent by facsimile transmission shall be given by overnight delivery or other
personal delivery on the next business day. Any recipient may change its address
for notices by notice given in accordance herewith.
(a) If to Alanco:
Alanco Technologies, Inc.
00000 Xxxxx 00xx Xxx, Xxxxx 0
Xxxxxxxxxx, XX 00000
Atttn: Xxxxxx X. Xxxxxxxx, President
(Facsimile Number (000) 000-0000)
with a copy to:
Xxxxxx X. Xxxx, Esq.
0000 X. Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
(Facsimile Number (000) 000-0000)
(b) If to Tenix:
Tenix Holding Inc.
c/o Tenix Pty Ltd
000 Xxxxxx Xxxxxx
Xxxxx Xxxxxx XXX 0000
Xxxxxxxxx
(Facsimile Number x000 0000 0000)
31
with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxx & Xxxxxxx LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
(Facsimile Number (000) 000-0000)
(c) If to Xxxxxxx:
Xxxxxxx X. Xxxxxxx
00-X Xxxx Xxxx
Xxxxxxxxxx, XX 00000
(Facsimile Number (000) 000-0000)
with a copy to:
Xxxx Xxxx
Xxxxxxx XxXxxxx & Xxxx
120 Mountain View Xxxxxxxxx
Xxxx Xxxxxx Xxx 000
Xxxxxxx Xxxxx, Xxx Xxxxxx 00000
(Facsimile Number (000) 000-0000)
(d) If to Xxxxxxxx:
Xxxxxx X. Xxxxxxxx
0 Xxxxxx Xxxx
Xxxxxxx, XX 00000
(Facsimile Number (000) 000-0000)
(e) If to StarTrak:
StarTrak Systems, LLC
000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
ATTN: Xxxxxxx X. Xxxxxxx
(Facsimile Number (000) 000-0000)
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
(Facsimile Number (000) 000-0000)
32
17.0 Severability. In the event any covenant, condition or other
provision of this Agreement is held to be invalid or unenforceable by a final
judgment of a court of competent jurisdiction, then such covenant, condition or
other provision shall be automatically terminated and performance thereof
waived, and such invalidity or unenforceability shall in no way affect any of
the other covenants, conditions or provisions hereof, and the parties hereto
shall negotiate in good faith to agree to such amendments, modifications or
supplements of or to this Agreement or such other appropriate actions as, to the
maximum extent practicable, shall implement and give effect to the intentions of
the parties as reflected herein.
18.0 Entire Agreement. This Agreement and the Additional Agreements
contain all of the terms agreed upon by the parties with respect to the subject
matter hereof and thereof and there are no representations or understandings
between the parties except as provided herein and therein. This Agreement may
not be amended or modified in any way except by a written amendment to this
Agreement duly executed by the parties.
19.0 Waiver. No waiver of a breach of, or default under, any provision
of this Agreement shall be deemed a waiver of such provision or of any
subsequent breach or default of the same or similar nature or of any other
provision or condition of this Agreement.
20.0 Applicable Law. This Agreement shall be governed by and construed
(both as to validity and performance) and enforced in accordance with the laws
of the State of Arizona.
21.0 Attorneys' Fees. In any action brought to enforce the provisions
of this Agreement, the prevailing party shall be entitled to recover its
attorneys' fees and costs as determined by the court and not the jury.
22.0 Equitable Relief. The parties agree that the remedies at law for
any breach of the terms of this Agreement are inadequate. Accordingly, the
parties consent and agree that an injunction may be issued to restrain any
breach or alleged breach of such provisions. The parties agree that terms of
this Agreement shall be enforceable by a decree of specific performance. Such
remedies shall be cumulative and not exclusive, and shall be in addition to any
other remedies which the parties may have at law or in equity.
23.0 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument, but all of such counterparts taken together shall be
deemed to constitute one and the same instrument. No party shall be bound until
each party has signed at least one (1) such counterpart.
(See next page for signatures)
33
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in their respective names as of the day and year first above written.
ALANCO TECHNOLOGIES, INC.
an Arizona corporation
By: /s/ Xxxx X Xxxxxxx
--------------------------------------
Its: Senior Vice President & CFO
-----------------------------------
ST ACQUISITION CORPORATION
an Arizona corporation
By:
--------------------------------------
Its:
------------------------------------
/s/ Xxxxxxx X. Xxxxxxx
------------------------------------------
XXXXXXX X. XXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
XXXXXX X. XXXXXXXX
STARTRAK SYSTEMS, LLC
a Delaware limited liability company
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxx, Chief Executive Officer
TENIX HOLDING, INC.
a Delaware corporation
By: /s/
--------------------------------------
Its: ----------------------------------
34
EXHIBITS:
A StarTrak Projected Income Statement
B Tenix Note
C Alanco Guaranty
D-1 Agreement Not to Compete of Xxxxxxx X. Xxxxxxx
D-2 Agreement Not to Compete of Xxxxxx X. Xxxxxxxx
SCHEDULES:
2.6 StarTrak Short Term Liabilities
3.2 StarTrak Certificate of Formation and Operating Agreement
3.8 StarTrak Financials
3.9 Undisclosed Liabilities
3.10 Changes
3.14 Patent Exceptions
3.18 Indebtedness
3.20 Employee Benefit Plans
3.23 Insurance Policies
EXHIBIT "A"
StarTrak Projected Income Statement
(To be supplied upon SEC request)
EXHIBIT "B"
PROMISSORY NOTE
$2,000,000.00 Xxxxxx Plains, New Jersey
June 21, 2006
FOR VALUE RECEIVED, the undersigned, STARTRAK SYSTEMS, LLC, a Delaware limited
liability company ("Maker"), promises to pay to the order of TENIX HOLDINGS,
INC., a Delaware corporation ("Holder"), having an address at c/o Tenix Pty Ltd,
000 Xxxxxx Xxxxxx, Xxxxx Xxxxxx XXX 0000 Xxxxxxxxx, or such other place as
Holder may designate in writing, in lawful money of the United States of
America, the principal sum of Two Million and no/100ths Dollars ($2,000,000.00),
without interest, as follows:
A. The principal balance of this Note shall not bear interest.
B. Maker shall pay the Holder a principal payment in the amount
of $500,000.00 upon the Closing of the Acquisition Agreement
between Maker and Alanco Technologies, Inc., an Arizona
corporation ("Alanco"), pursuant to which Alanco will acquire
all of the issued and outstanding membership units of Maker.
It is anticipated that such closing will occur on or about
June 30, 2006.
C. The remaining principal balance shall be due and payable in full
on December 31, 2007 (the "Maturity Date"), or earlier as provided
for herein.
If any payment provided for herein is not paid when due, each such
delinquent payment, including the entire principal balance, shall bear interest
at a rate (the "Default Rate") which shall be twelve (12%) per annum, such
interest being due from the due date of the delinquent payment until the date of
receipt by Holder of the delinquent payment.
Maker may prepay this Note, in full or in part, at any time, without
premium or penalty. The outstanding principal balance shall become immediately
due and payable in the event of (i) any petition or application for a custodian,
as defined by Xxxxx 00, Xxxxxx Xxxxxx Code, as amended from time to time (the
"Bankruptcy Code") or for any form of relief under any provision of the
Bankruptcy Code or any other law pertaining to reorganization, insolvency or
readjustment of debt is filed by or against Maker or any guarantor hereof, or
their respective assets or affairs; (ii) Maker or any guarantor hereof makes an
assignment for the benefit of creditors, is not paying debts as they become due,
or is granted an order for relief under any chapter of the Bankruptcy Code;
(iii) a custodian, as defined by the Bankruptcy Code, takes charge of any
property of Maker or any guarantor hereof; (iv) any material garnishment,
attachment, levy or execution is issued against any of the property or effects
of Maker or any guarantor hereof; or (v) the dissolution or termination of
existence of Maker or any guarantor hereof.
It is agreed that time is of the essence hereof. The failure to
exercise any right or remedy hereunder shall in no event be construed as a
waiver or release of such rights and remedies or of the right to exercise them
at any later time.
1
The Maker, endorsers, guarantors, and all other persons liable or to
become liable for all or any part of the indebtedness evidenced hereby, jointly
and severally waive all applicable diligence, presentment, protest and demand,
and also notice of protest, of demand, of nonpayment, of dishonor and of
maturity and recourse to suretyship defenses generally; and they also jointly
and severally hereby consent to any and all renewals or extensions hereof, and
further agree that any such renewal or extension hereof, or the release or
substitution of any security for the indebtedness evidenced hereby or any other
indulgences shall not affect the liability of any of such parties for the
indebtedness evidenced by this Note. Any such renewals or extensions may be made
without notice to any of such parties.
In any action brought to enforce the provisions of this Agreement, the
prevailing party shall be entitled to recover its attorneys' fees and costs as
determined by the court and not the jury.
All endorsers, guarantors, and all other persons liable or to become
liable on this Note, agree that, without notice to or consent from any of them
and without affecting their obligations hereunder, (a) this Note may from time
to time be extended or renewed; (b) any of the provisions of this Note may be
waived or any departure herefrom consented to or any other forbearance or
indulgence exercised with respect thereto; (c) any collateral now or hereafter
securing this Note may be exchanged, substituted, realized upon, released,
compromised, extended or otherwise dealt with or disposed of.
Whenever used herein, the words "Maker" and "Holder" shall be deemed to
include their respective heirs, personal representatives, successors and
assigns. This Note shall be governed by and construed in accordance with the
laws of the State of New Jersey.
IN WITNESS WHEREOF, Maker has executed this Note as of the date first
above written.
STARTRAK SYSTEMS, LLC
a Delaware limited liability company
By:
--------------------------------------------
Xxxxxxx X. Xxxxxxx, Chief Executive Officer
2
EXHIBIT "C"
COMMERCIAL UNCONDITIONAL CONTINUING GUARANTY
-------------------------------------------------------------------------------
BORROWER: STARTRAK SYSTEMS, LLC
000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
GUARANTOR: ALANCO TECHNOLOGIES, INC.
00000 X. 00xx Xxx, Xxxxx 0
Xxxxxxxxxx, XX 00000
LENDER: TENIX HOLDING, INC.
c/o Tenix Pty Ltd
000 Xxxxxx Xxxxxx
Xxxxx Xxxxxx XXX 0000
Xxxxxxxxx
-------------------------------------------------------------------------------
AMOUNT OF GUARANTY. The amount of this Guaranty is One Million Five
Hundred Thousand and No/100 Dollars ($1,500,000.00), the amount of any other
obligations under the Note, and costs and expenses, including Lender's
attorney's fees in collecting such sums and such sums as are otherwise set forth
hereinafter.
CONTINUING GUARANTY. For good and valuable consideration, the above
identified Guarantor ("Guarantor") absolutely and unconditionally, guarantees
and promises to pay to TENIX HOLDING, INC. ("Lender") or its successors and
assigns, in legal tender of the United States of America, the Indebtedness (as
the term is defined below) of STARTRAK SYSTEMS, LLC ("Borrower") to Lender on
the terms and conditions set forth in this Guaranty. The obligations of
Guarantor under this Guaranty are primary, continuing and irrevocable.
DEFINITIONS. The following words shall have the following meanings
when used in this Guaranty:
Indebtedness. The word "Indebtedness" means and includes
the obligations under the Note.
Note. The word "Note" means that certain
promissory note in the original principal
amount of Two Million and No/100 Dollars
($2,000,000.00) dated June 21, 2006, made by
Borrower to the order of Lender, and all
extensions or renewals thereof.
1
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be
open and continuous for so long as this Guaranty remains in force. Guarantor
intends to guarantee at all times the performance and prompt payment when due,
whether at maturity or earlier by reason of acceleration or otherwise, of all
Indebtedness. Accordingly, no payments made upon the Indebtedness will discharge
or diminish the continuing liability of Guarantor in connection with any
remaining portions of the Indebtedness.
DURATION OF GUARANTY. This Guaranty will take effect when received by
Lender without the necessity of any acceptance by Lender, or any notice to
Guarantor or to Borrower, and will continue in full force until the Note and all
other Indebtedness incurred or contracted shall have been fully and finally paid
and satisfied and all other obligations of Guarantor under this Guaranty shall
have been performed in full.
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender,
without notice or demand and without lessening Guarantor's liability under this
Guaranty, from time to time: (a) to compromise, renew, extend the Indebtedness;
(b) to release, substitute, agree not to xxx, or deal with any one or more of
Borrower's sureties, endorsers, or other guarantors on any terms or in any
manner Lender may choose; (c) to determine how, when and what application of
payments and credits shall be made on the Indebtedness; and (d) to assign or
transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Lender that (a) no representations or agreements of any kind have
been made to Guarantor which would limit or qualify in any way the terms of this
Guaranty; (b) this Guaranty is executed at Borrower's request and not at the
request of Lender; (c) Lender has made no representation to Guarantor as to the
creditworthiness of Borrower; and (d) Guarantor has established adequate means
of obtaining from Borrower on a continuing basis information regarding
Borrower's financial condition. Guarantor agrees to keep adequately informed
from such means of any facts, events, or circumstances which might in any way
affect Guarantor's risks under this Guaranty, and Guarantor further agrees that,
absent a request for information, Lender shall have no obligation to disclose to
Guarantor any information or documents acquired by Lender in the course of its
relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor
waives any right to require Lender (a) to continue lending money or to extend
other credit to Borrower; (b) to make any presentment, protest, demand, or
notice of any kind, including notice of any nonpayment of the Indebtedness, or
notice of any action or nonaction on the part of Borrower, Lender, any surety,
endorser, or other guarantor in connection with the Indebtedness; (c) to resort
for payment or to proceed directly or at once against any person, including
Borrower or any other guarantor; (d) to pursue any remedy within Lender's power;
or (g) to commit any act or omission of any kind, or at any time, with respect
to any matter whatsoever.
Guarantor also waives any and all rights or defenses arising by reason
of (a) any "one action" or "anti-deficiency" law or any other law which may
prevent Lender from bringing any action, including a claim for deficiency,
2
against Guarantor, before or after Lender's commencement or completion of any
foreclosure action, either judicially or by exercise of a power of sale; (b) any
election of remedies by Lender which destroys or otherwise adversely affects
Guarantor's subrogation rights or Guarantor's rights to proceed against Borrower
for reimbursement, including without limitation, any loss of rights Guarantor
may suffer by reason of any law limiting, qualifying, or discharging the
Indebtedness; (c) any disability or other defense of Borrower, of any other
guarantor, or of any other person, or by reason of the cessation of Borrower's
liability from any cause whatsoever, other than payment in full in legal tender,
of the Indebtedness; or (d) any defenses given to guarantors at law or in equity
other than actual payment and performance of the Indebtedness. If payment is
made by Borrower, whether voluntarily or otherwise, or by any third party, on
the Indebtedness and thereafter Lender is forced to remit the amount of that
payment to Borrower's trustee in bankruptcy or to any similar person under any
federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of enforcement of this
Guaranty.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants
and agrees that each of the waivers set forth above is made with Guarantor's
full knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any such waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent permitted by
law or public policy.
EVENTS OF DEFAULT. At the option of the holder hereof, upon the
occurrence of any of the following, all obligations hereunder shall become
immediately fixed, due and payable, the same as if the Indebtedness guaranteed
had become in default or past due, without demand or notice of any kind, all of
which are hereby expressly waived: (a) the Indebtedness, or any portion thereof,
or any other sum owing by Guarantor to Lender is not paid as agreed; (b) any
petition or application for a custodian, as defined by Xxxxx 00, Xxxxxx Xxxxxx
Code, as amended from time to time (the "Bankruptcy Code") or for any form of
relief under any provision of the Bankruptcy Code or any other law pertaining to
reorganization, insolvency or readjustment of debt is filed by or against
Guarantor or Borrower, or their respective assets or affairs; (c) Guarantor or
Borrower makes an assignment for the benefit of creditors, is not paying debts
as they become due, or is granted an order for relief under any chapter of the
Bankruptcy Code; (d) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of Guarantor or Borrower; (e) any material garnishment,
attachment, levy or execution is issued against any of the property or effects
of Guarantor or Borrower; (f) the dissolution or termination of existence of
Guarantor; or (g) there is any material default or breach of any representation,
warranty or covenant, or any false statement or material omission by Guarantor
under any document forming part of the transaction in respect of which this
Guaranty is made or forming part of any other transaction under which Guarantor
is indebted to Lender.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are
part of this Guaranty:
3
Amendments. This Guaranty constitutes the entire understanding and
agreement of the parties as to the matters set forth in this Guaranty.
No alteration of or amendment to this Guaranty shall be effective
unless given in writing and signed by the party or parties sought to be
charged or bound by the alteration or amendment.
Applicable Law. This Guaranty has been delivered to Lender and accepted
by Lender in the State of Arizona. If there is a lawsuit, Guarantor
agrees upon the Lender's request to submit to the jurisdiction of the
courts of Maricopa County, State of Arizona. Lender and Guarantor
hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Guarantor against the other.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of Arizona.
Attorneys' Fees; Expenses. In any action brought to enforce the
provisions of this Agreement, the prevailing party shall be entitled to
recover its attorneys' fees and costs as determined by the court and
not the jury.
Notices. All notices required to be given by either party to the other
under this Guaranty shall be in writing and shall be effective when
actually delivered (by personal delivery or by courier service such as
Federal Express) or three (3) days after deposit in the United States
mail, registered or certified, first class postage prepaid, addressed
to the party to whom the notice is to be given at the address shown
above or to such other addresses as either party may designate to the
other in writing. If there is more than one Guarantor, notice to any
Guarantor will constitute notice to all Guarantors. For notice
purposes, Guarantor agrees to keep Lender informed at all times of
Guarantor's current address.
Interpretation. The words "Guarantor," "Borrower," and "Lender" include
the successors, assigns, and transferees of each of them. Caption
headings in this Guaranty are for convenience purposes only and are not
to be used to interpret or define the provisions of this Guaranty. If a
court of competent jurisdiction finds any provision of this Guaranty to
be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to
any other persons or circumstances, and all provisions of this Guaranty
in all other respects shall remain valid and enforceable. It is not
necessary for Lender to inquire into the powers of Borrower or
Guarantor or of the officers, directors, partners, members or agents
acting or purporting to act on their behalf, and any indebtedness made
or created in reliance upon the professed exercise of such powers shall
be guaranteed under this Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Guaranty shall not prejudice or
constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this Guaranty
shall not prejudice or constitute a waiver of Lender's right otherwise
4
to demand strict compliance with that provision or any other provision
of this Guaranty. No prior waiver by Lender, nor any course of dealing
between Lender and Guarantor, shall constitute a waiver of any of
Lender's rights or of any of Guarantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Guaranty, the granting of such consent by Lender in any instance shall
not constitute continuing consent to subsequent instances where such
consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
THE UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL OF THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, THE GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL THE NOTE AND ALL
OTHER INDEBTEDNESS IS FULLY SATISFIED. NO FORMAL ACCEPTANCE BY LENDER IS
NECESSARY TO MAKE THIS GUARANTY EFFECTIVE.
THIS GUARANTY IS DATED , 2006.
-------------
GUARANTOR:
ALANCO TECHNOLOGIES, INC.
an Arizona corporation
By:
-----------------------------
Xxxxxx X. Xxxxxxxx, President
5
EXHIBIT "D-1"
NON-COMPETITION AND NON-DISCLOSURE
AGREEMENT
(Xxxxxxx X. Xxxxxxx)
This Non-Competition and Non-Disclosure Agreement (the "Agreement") is
made and entered into this --- day of ----------, 2006, by and between XXXXXXX
X. XXXXXXX ("Xxxxxxx") and ALANCO TECHNOLOGIES, INC., an Arizona corporation
("Alanco"), and is made with reference to the following:
RECITALS
A. Pursuant to that certain Agreement and Plan of Reorganization, dated
June 25, 2006, by and among StarTrak Systems, LLC ("StarTrak") (in which Xxxxxxx
is a member), Xxxxxxx, Alanco as acquirer, and others (the "Acquisition
Agreement"), Alanco is acquiring StarTrak. As a result of such acquisition,
Alanco is engaging in the business presently conducted by StarTrak. The Company
intends to conduct such business world wide.
X. Xxxxxxx is or will be a shareholder of Alanco, has been employed by
StarTrak in a senior management position, and will be employed by Alanco's
StarTrak subsidiary pursuant to the existing Employment Agreement or a
subsequent or modified Employment Agreement (the "Employment Agreement").
X. Xxxxxxx acknowledges that Alanco, through its acquisition has
devoted substantial time, effort and resources to developing the trade secrets
and other confidential and proprietary information, as well as relationships
with customers, suppliers, employees and others doing business with StarTrak and
Alanco; that such relationships, trade secrets and other information are vital
to the successful conduct of Alanco's business in the future; that Alanco is
entering into the Acquisition Agreement relying on the fact that Xxxxxxx, as a
member of StarTrak, has established personal and professional relationships with
customers, suppliers, employees and others having business relationships with
StarTrak which is being acquired by Alanco, and Xxxxxxx has had unlimited access
to StarTrak's trade secrets and other confidential and proprietary information,
and because of Xxxxxxx'x employment, Xxxxxxx will have substantial access to
Alanco's other trade secrets and confidential information; and that because of
such relationships and because of Xxxxxxx'x access to Alanco's confidential
information and trade secrets, Xxxxxxx would be in a unique position to divert
business from Alanco and to commit irreparable damage to Alanco were Xxxxxxx to
be allowed to compete with Alanco or to commit any of the other acts prohibited
below; that the enforcement of said restrictive covenants against Xxxxxxx would
not impose any undue burden upon Xxxxxxx; that none of said restrictive
covenants is unreasonable as to period or geographic area; and that the ability
to enforce said restrictive covenants against Xxxxxxx is a material inducement
to the decision of Alanco to consummate the transactions contemplated in the
Acquisition Agreement.
1
NOW, THEREFORE in consideration of the foregoing recitals, the mutual
agreements hereinafter set forth and the mutual benefits to be derived
therefrom, Xxxxxxx covenants and agrees as follows:
1. Definitions.
(a) The term "Alanco," as used herein, means not only Alanco,
but also any company, partnership or entity which, directly or indirectly,
controls, is controlled by or is under common control with Alanco.
(b) The term "Confidential Information", as used herein, means
all information or materials not generally known by non-Alanco personnel which
(i) gives Alanco some competitive business advantage or the opportunity of
obtaining such advantage or the disclosure of which could be detrimental to the
interest of Alanco; (ii) which is owned by Alanco or in which Alanco has an
interest and (iii) which is either (A) marked "Confidential Information",
"Proprietary Information" or other similar marking, (B) known by Xxxxxxx to be
considered confidential and proprietary by Alanco, or (C) from all the relevant
circumstances would reasonably be assumed by Xxxxxxx to be confidential and
proprietary to Alanco. Confidential Information includes, but is not limited to,
the following types of information and other information of a similar nature
(whether or not reduced to writing): trade secrets, inventions, drawings, file
data, documentation, diagrams, specifications, know how, processes, formulas,
models, flow charts, software in various stages of development, source codes,
object codes, research and development procedures, research or development and
test results, marketing techniques and materials, marketing, development and
distribution plans, price lists, pricing policies, business plans, information
relating to customers and/or suppliers' identities, characteristics and
agreements, financial information and projections, and employee files.
Confidential Information also includes any information described above which
Alanco obtains from another party and which Alanco treats as proprietary or
designates as Confidential Information, whether or not owned or developed by
Alanco. Notwithstanding the above, however, no information constitutes
confidential information if it is generic information or general knowledge which
Xxxxxxx would have learned in the course of similar employment elsewhere in the
trade or if it is otherwise publicly known and in the public domain.
(c) The term "Closing" shall have the meaning ascribed to it in
the Acquisition Agreement.
(d) The term "Restricted Period" shall mean the later to occur
of (a) the end of the two (2) year period immediately following the Closing or
(b) the end of the two (2) year period following the termination of Xxxxxxx'x
employment with Alanco either for "cause", (as that term is defined in the
Employment Agreement), or as a result of Xxxxxxx'x voluntary resignation;
provided, however, in the event that Xxxxxxx is terminated by Alanco without
cause (as defined in the Employment Agreement), or if Xxxxxxx terminates his
2
employment by reason of Alanco's material breach of his employment agreement or
for "good reason" (as that term is defined in the Employment Agreement), the
Restricted Period shall be the longer of (i) one year following such termination
of employment, or the term ending two years after the Closing, and further shall
be subject to the provisions of Paragraph 9 below.
2. Covenant Not to Compete. Xxxxxxx shall not during the Restricted
Period, have any ownership interest (of record or beneficial) in or have any
interest (other than in Alanco, or its parent company) as an employee, salesman,
consultant, officer or director in, or otherwise aid or assist in any manner (i)
any firm, corporation, partnership, proprietorship or other business that
engages anywhere in the state of New Jersey, Arizona, the United States, North
America, Europe or the World in a business that competes with or that intends to
compete with that business in which Alanco is engaged, or pursuant to the
Acquisition Agreement contemplates engagement in, within said territory, so long
as Alanco, or any successor in interest of Alanco to the business and goodwill
of Alanco, remains engaged in such business in such territory or continues to
solicit customers or potential customers, provided, however, that Xxxxxxx may
own, directly or indirectly, solely as an investment, securities of any person
which are traded on any national securities exchange if such shareholder (i) is
not a controlling person of, or a member of a group which controls, such person
or (ii) does not, directly or indirectly own one percent or more of any class of
securities of such person.
3. Solicitation of Business. During the Restricted Period, Xxxxxxx
shall not solicit or assist any other person to solicit any business (other than
for Alanco) from any present or past customer of Alanco or StarTrak, or request
or advise any present or future customer, vendor or consultant of Alanco to
withdraw, curtail or cancel its business dealings with Alanco; or commit any
other act or assist others to commit any other act which might injure the
business of Alanco.
4. Employees. During the Restricted Period, Xxxxxxx shall not directly
or indirectly (i) solicit or encourage any employee of Alanco to leave the
employ of Alanco or (ii) hire any employee who has left the employ of Alanco if
such hiring is proposed to occur within one year after the termination of such
employee's employment with Alanco.
5. Nondisclosure. From and after the Closing, Xxxxxxx shall not (nor
will Xxxxxxx assist any other person to do so) directly or indirectly reveal,
report, publish or disclose the Confidential Information to any person, firm or
corporation not expressly authorized by Alanco to receive such Confidential
Information, or use (or assist any person to use) such Confidential Information
except for the benefit of Alanco.
6. Ownership and Return of Materials. To the extent that Xxxxxxx has
not already done so, Xxxxxxx shall immediately following termination of
employment with Alanco surrender to Alanco all notes, data, sketches, drawings,
manuals, documents, records, data bases, programs, blueprints, memoranda,
specifications, customer lists, financial reports, equipment and all other
physical forms of expression incorporating or containing any Confidential
Information, it being distinctly understood that all such writings, physical
forms of expression and other things are the exclusive property of Alanco.
3
7. Rights and Remedies Upon Breach. If Xxxxxxx breaches, or threatens
to commit a breach of, any of the provisions of this Agreement (the "Restrictive
Covenants"), Alanco shall have the following rights and remedies, each of which
shall be in addition to, and not in lieu of, any other rights and remedies
available to Alanco under law or in equity;
(a) Specific Performance. The right and remedy to attempt to
have the Restrictive Covenants specifically enforced or to have any actual or
threatened breach thereof enjoined by any court having equity jurisdiction, all
without the need to post a bond or any other security or to prove any amount of
actual damage or that money damages would not provide an adequate remedy, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to Alanco and that monetary damages will not provide an
adequate remedy to Alanco; and
(b) Accounting and Indemnification. The right and remedy to
pursue a remedy to require Xxxxxxx (i) to account for and pay over to Alanco all
compensation, profits, monies, accruals, increments or other benefits derived or
received by Xxxxxxx or any associated party deriving such benefit as a result of
any such breach of the Restrictive Covenants; and (ii) to indemnify Alanco
against any other losses, damages (including special and consequential damages)
which may be incurred by them and which result from or arise out of any such
breach or threatened breach of the Restrictive Covenants.
8. Severability of Covenants/Blue Penciling. The Restrictive Covenants
shall be subject to Section 11(f) hereof.
9. Enforceability of Restrictive Covenants.
(a) The Restrictive Covenants and Restrictive Periods set
forth in this Agreement shall not be enforceable in the event that Xxxxxxx'x
employment is terminated without "cause" (as that term is defined in the
Employment Agreement), or Xxxxxxx resigns for "good reason" (as that term is
defined in the Employment Agreement).
(b) Notwithstanding the foregoing, the Restrictive Covenants
and Restrictive Periods shall be enforceable in the event that Alanco continues
to pay Xxxxxxx'x salary (as set forth in the existing Employment Agreement and
any subsequent and/or modified Employment Agreement) during the applicable
Restrictive Period.
10.[Intentionally left blank.]
11. Miscellaneous.
(a) Modification. This Agreement, the Employment Agreement and
the Acquisition Agreement and all other documents entered into pursuant to their
terms set forth the entire understanding of the parties with respect to the
4
subject matter hereof, supersedes all existing agreements between them
concerning such subject matter, and may be modified only by a written instrument
duly executed by each party.
(b) Successors and Assigns. The terms and provisions of this
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto, their personal representatives, administrators, executors, heirs,
successors and assigns.
(c) Waiver. The failure of either party hereto at any time to
enforce performance by the other party of any provision of this Agreement shall
in no way affect such party's rights thereafter to enforce the same; nor shall
the waiver by either party of any breach of any provision hereof be deemed to be
a waiver by such party of any other breach of the same or any other provision
hereof.
(d) Notices. All notices, requests and other communications
hereunder shall be in writing and shall be delivered by courier or other means
of personal service (including by means of a nationally recognized courier
service or professional messenger service), or sent telex or telecopy or mailed
first class, postage prepaid, by certified mail, return receipt requested, in
all cases addressed to:
If to Alanco: Alanco Technologies, Inc.
00000 Xxxxx 00xx Xxx, Xxxxx 0
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, CEO
(Facsimile Number (000) 000-0000)
If to Xxxxxxx: Xxxxxxx X. Xxxxxxx
00-X Xxxx Xxxx
Xxxxxxxxxx, XX 00000
(Facsimile Number (000) 000-0000)
All notices, requests and other communications shall be deemed given on
the date of actual receipt or delivery as evidenced by written receipt,
acknowledgment or other evidence of actual receipt of delivery to the address.
In case of service by telecopy, a copy of such notice shall be personally
delivered or sent by registered or certified mail, in the manner set forth
above, within three business days thereafter. Any party hereto may from time to
time by notice in writing served as set forth above designate a different
address or a different or additional personal to which all such notices or
communications thereafter are to be given.
(e) Time of Essence. Time is hereby declared to be of the
essence of this Agreement and of every part hereof.
(f) Severance and Enforcement. All Sections, clauses and
covenants contained in this Agreement are severable, and in the event any of
them shall be held to be invalid by any court, this Agreement shall be
interpreted as if such invalid Sections, clauses or covenants were not contained
5
herein. Without limitation, the parties intend that the covenants contained in
this Agreement shall be severable insofar as the geographic and time
restrictions set forth herein are concerned. If, in any judicial proceeding, a
court shall refuse to enforce the geographic and/or time restriction set forth
herein to their fullest extent, then the geographic and/or time restrictions set
forth herein shall be reduced to the extent necessary to permit enforcement of
the foregoing covenant to the fullest extent possible.
(g) Governing Law and Venue. This Agreement is to be governed
by and construed in accordance with the laws of the State of Arizona applicable
to contracts made and to be performed wholly within such State, and without
regard to the conflicts of laws principles thereof. Any suit brought hereon
shall be brought only in the state or federal courts sitting in the State of New
Jersey, the parties hereto hereby waiving any claim or defense that such forum
is not convenient or proper. Each party hereby agrees that any such court shall
have in personam jurisdiction over it and consents to service of process in any
manner authorized by New Jersey law.
(h) Gender. Where the context so requires, the use of the
masculine gender shall include the feminine and/or neuter genders and the
singular shall include the plural, and vice versa, and the word "person" shall
include any corporation, firm, partnership or other form of association.
(i) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
(j) Construction. The language in all parts of this Agreement
shall in all cases be construed simply, accordingly to its fair meaning, and not
strictly for or against any of the parties hereto. Without limitation, there
shall be no presumption against any party on the ground that such party was
responsible for drafting this Agreement or any part thereof.
IN WITNESS WHEREOF, the parties hereto duly executed this Agreement as
of the date and year first above written.
----------------------------------
XXXXXXX X XXXXXXX
ALANCO TECHNOLOGIES, INC.
an Arizona corporation
By:
-------------------------------
Xxxxxx X. Xxxxxxxx, President
6
EXHIBIT "D-2"
NON-COMPETITION AND NON-DISCLOSURE
AGREEMENT
(Xxxxxx X. Xxxxxxxx)
This Non-Competition and Non-Disclosure Agreement (the "Agreement") is
made and entered into this ---- day of --------, 2006, by and between XXXXXX
X. XXXXXXXX ("Xxxxxxxx") and ALANCO TECHNOLOGIES, INC., an Arizona corporation
("Alanco"), and is made with reference to the following:
RECITALS
A. Pursuant to that certain Agreement and Plan of Reorganization, dated
June 25, 2006, by and among StarTrak Systems, LLC ("StarTrak") (in which
Xxxxxxxx is a member), Xxxxxxxx, Alanco as acquirer, and others (the
"Acquisition Agreement"), Alanco is acquiring StarTrak. As a result of such
acquisition, Alanco is engaging in the business presently conducted by StarTrak.
The Company intends to conduct such business world wide.
X. Xxxxxxxx is or will be a shareholder of Alanco, has been employed by
StarTrak in a senior management position, and will be employed by Alanco's
StarTrak subsidiary pursuant to the existing Employment Agreement or a
subsequent or modified Employment Agreement (the "Employment Agreement").
X. Xxxxxxxx acknowledges that Alanco, through its acquisition has
devoted substantial time, effort and resources to developing the trade secrets
and other confidential and proprietary information, as well as relationships
with customers, suppliers, employees and others doing business with StarTrak and
Alanco; that such relationships, trade secrets and other information are vital
to the successful conduct of Alanco's business in the future; that Alanco is
entering into the Acquisition Agreement relying on the fact that Xxxxxxxx, as a
member of StarTrak, has established personal and professional relationships with
customers, suppliers, employees and others having business relationships with
StarTrak which is being acquired by Alanco, and Xxxxxxxx has had unlimited
access to StarTrak's trade secrets and other confidential and proprietary
information, and because of Xxxxxxxx'x employment, Xxxxxxxx will have
substantial access to Alanco's other trade secrets and confidential information;
and that because of such relationships and because of Xxxxxxxx'x access to
Alanco's confidential information and trade secrets, Xxxxxxxx would be in a
unique position to divert business from Alanco and to commit irreparable damage
to Alanco were Xxxxxxxx to be allowed to compete with Alanco or to commit any of
the other acts prohibited below; that the enforcement of said restrictive
covenants against Xxxxxxxx would not impose any undue burden upon Xxxxxxxx; that
none of said restrictive covenants is unreasonable as to period or geographic
area; and that the ability to enforce said restrictive covenants against
Xxxxxxxx is a material inducement to the decision of Alanco to consummate the
transactions contemplated in the Acquisition Agreement.
1
NOW, THEREFORE in consideration of the foregoing recitals, the mutual
agreements hereinafter set forth and the mutual benefits to be derived
therefrom, Xxxxxxxx covenants and agrees as follows:
1. Definitions.
(a) The term "Alanco," as used herein, means not only Alanco,
but also any company, partnership or entity which, directly or indirectly,
controls, is controlled by or is under common control with Alanco.
(b) The term "Confidential Information", as used herein, means
all information or materials not generally known by non-Alanco personnel which
(i) gives Alanco some competitive business advantage or the opportunity of
obtaining such advantage or the disclosure of which could be detrimental to the
interest of Alanco; (ii) which is owned by Alanco or in which Alanco has an
interest and (iii) which is either (A) marked "Confidential Information",
"Proprietary Information" or other similar marking, (B) known by Xxxxxxxx to be
considered confidential and proprietary by Alanco, or (C) from all the relevant
circumstances would reasonably be assumed by Xxxxxxxx to be confidential and
proprietary to Alanco. Confidential Information includes, but is not limited to,
the following types of information and other information of a similar nature
(whether or not reduced to writing): trade secrets, inventions, drawings, file
data, documentation, diagrams, specifications, know how, processes, formulas,
models, flow charts, software in various stages of development, source codes,
object codes, research and development procedures, research or development and
test results, marketing techniques and materials, marketing, development and
distribution plans, price lists, pricing policies, business plans, information
relating to customers and/or suppliers' identities, characteristics and
agreements, financial information and projections, and employee files.
Confidential Information also includes any information described above which
Alanco obtains from another party and which Alanco treats as proprietary or
designates as Confidential Information, whether or not owned or developed by
Alanco. Notwithstanding the above, however, no information constitutes
confidential information if it is generic information or general knowledge which
Xxxxxxxx would have learned in the course of similar employment elsewhere in the
trade or if it is otherwise publicly known and in the public domain.
(c) The term "Closing" shall have the meaning ascribed to it in
the Acquisition Agreement.
(d) The term "Restricted Period" shall mean the later to occur
of (a) the end of the two (2) year period immediately following the Closing or
(b) the end of the two (2) year period following the termination of Xxxxxxxx'x
employment with Alanco either for "cause", (as that term is defined in the
Employment Agreement), or as a result of Xxxxxxxx'x voluntary resignation;
provided, however, in the event that Xxxxxxxx is terminated by Alanco without
cause (as defined in the Employment Agreement), or if Xxxxxxxx terminates his
2
employment by reason of Alanco's material breach of his employment agreement or
for "good reason" (as that term is defined in the Employment Agreement), the
Restricted Period shall be the longer of (i) one year following such termination
of employment, or the term ending two years after the Closing, and further shall
be subject to the provisions of Paragraph 9 below.
2. Covenant Not to Compete. Xxxxxxxx shall not during the Restricted
Period, have any ownership interest (of record or beneficial) in or have any
interest (other than in Alanco, or its parent company) as an employee, salesman,
consultant, officer or director in, or otherwise aid or assist in any manner (i)
any firm, corporation, partnership, proprietorship or other business that
engages anywhere in the state of New Jersey, Arizona, the United States, North
America, Europe or the World in a business that competes with or that intends to
compete with that business in which Alanco is engaged, or pursuant to the
Acquisition Agreement contemplates engagement in, within said territory, so long
as Alanco, or any successor in interest of Alanco to the business and goodwill
of Alanco, remains engaged in such business in such territory or continues to
solicit customers or potential customers, provided, however, that Xxxxxxxx may
own, directly or indirectly, solely as an investment, securities of any person
which are traded on any national securities exchange if such shareholder (i) is
not a controlling person of, or a member of a group which controls, such person
or (ii) does not, directly or indirectly own one percent or more of any class of
securities of such person.
3. Solicitation of Business. During the Restricted Period, Xxxxxxxx
shall not solicit or assist any other person to solicit any business (other than
for Alanco) from any present or past customer of Alanco or StarTrak, or request
or advise any present or future customer, vendor or consultant of Alanco to
withdraw, curtail or cancel its business dealings with Alanco; or commit any
other act or assist others to commit any other act which might injure the
business of Alanco.
4. Employees. During the Restricted Period, Xxxxxxxx shall not directly
or indirectly (i) solicit or encourage any employee of Alanco to leave the
employ of Alanco or (ii) hire any employee who has left the employ of Alanco if
such hiring is proposed to occur within one year after the termination of such
employee's employment with Alanco.
5. Nondisclosure. From and after the Closing, Xxxxxxxx shall not (nor
xxxx Xxxxxxxx assist any other person to do so) directly or indirectly reveal,
report, publish or disclose the Confidential Information to any person, firm or
corporation not expressly authorized by Alanco to receive such Confidential
Information, or use (or assist any person to use) such Confidential Information
except for the benefit of Alanco.
6. Ownership and Return of Materials. To the extent that Xxxxxxxx has
not already done so, Xxxxxxxx shall immediately following termination of
employment with Alanco surrender to Alanco all notes, data, sketches, drawings,
manuals, documents, records, data bases, programs, blueprints, memoranda,
specifications, customer lists, financial reports, equipment and all other
physical forms of expression incorporating or containing any Confidential
Information, it being distinctly understood that all such writings, physical
forms of expression and other things are the exclusive property of Alanco.
3
7. Rights and Remedies Upon Breach. If Xxxxxxxx breaches, or threatens
to commit a breach of, any of the provisions of this Agreement (the "Restrictive
Covenants"), Alanco shall have the following rights and remedies, each of which
shall be in addition to, and not in lieu of, any other rights and remedies
available to Alanco under law or in equity;
(a) Specific Performance. The right and remedy to attempt to
have the Restrictive Covenants specifically enforced or to have any actual or
threatened breach thereof enjoined by any court having equity jurisdiction, all
without the need to post a bond or any other security or to prove any amount of
actual damage or that money damages would not provide an adequate remedy, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to Alanco and that monetary damages will not provide an
adequate remedy to Alanco; and
(b) Accounting and Indemnification. The right and remedy to
pursue a remedy to require Xxxxxxxx (i) to account for and pay over to Alanco
all compensation, profits, monies, accruals, increments or other benefits
derived or received by Xxxxxxxx or any associated party deriving such benefit as
a result of any such breach of the Restrictive Covenants; and (ii) to indemnify
Alanco against any other losses, damages (including special and consequential
damages) which may be incurred by them and which result from or arise out of any
such breach or threatened breach of the Restrictive Covenants.
8. Severability of Covenants/Blue Penciling. The Restrictive Covenants
shall be subject to Section 11(f) hereof.
9. Enforceability of Restrictive Covenants.
(a) The Restrictive Covenants and Restrictive Periods set
forth in this Agreement shall not be enforceable in the event that Xxxxxxxx'x
employment is terminated without "cause" (as that term is defined in the
Employment Agreement), or Xxxxxxxx resigns for "good reason" (as that term is
defined in the Employment Agreement).
(b) Notwithstanding the foregoing, the Restrictive Covenants
and Restrictive Periods shall be enforceable in the event that Alanco continues
to pay Xxxxxxxx'x salary (as set forth in the existing Employment Agreement and
any subsequent and/or modified Employment Agreement) during the applicable
Restrictive Period.
10. [Intentionally left blank.]
11. Miscellaneous.
(a) Modification. This Agreement, the Employment Agreement and
the Acquisition Agreement and all other documents entered into pursuant to their
4
terms set forth the entire understanding of the parties with respect to the
subject matter hereof, supersedes all existing agreements between them
concerning such subject matter, and may be modified only by a written instrument
duly executed by each party.
(b) Successors and Assigns. The terms and provisions of this
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto, their personal representatives, administrators, executors, heirs,
successors and assigns.
(c) Waiver. The failure of either party hereto at any time to
enforce performance by the other party of any provision of this Agreement shall
in no way affect such party's rights thereafter to enforce the same; nor shall
the waiver by either party of any breach of any provision hereof be deemed to be
a waiver by such party of any other breach of the same or any other provision
hereof.
(d) Notices. All notices, requests and other communications
hereunder shall be in writing and shall be delivered by courier or other means
of personal service (including by means of a nationally recognized courier
service or professional messenger service), or sent telex or telecopy or mailed
first class, postage prepaid, by certified mail, return receipt requested, in
all cases addressed to:
If to Alanco: Alanco Technologies, Inc.
00000 Xxxxx 00xx Xxx, Xxxxx 0
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, CEO
(Facsimile Number (000) 000-0000)
If to Xxxxxxxx: Xxxxxx X. Xxxxxxxx
0 Xxxxxx Xxxx
Xxxxxxx, XX 00000
(Facsimile Number (000) 000-0000)
All notices, requests and other communications shall be deemed given on
the date of actual receipt or delivery as evidenced by written receipt,
acknowledgment or other evidence of actual receipt of delivery to the address.
In case of service by telecopy, a copy of such notice shall be personally
delivered or sent by registered or certified mail, in the manner set forth
above, within three business days thereafter. Any party hereto may from time to
time by notice in writing served as set forth above designate a different
address or a different or additional personal to which all such notices or
communications thereafter are to be given.
(e) Time of Essence. Time is hereby declared to be of the
essence of this Agreement and of every part hereof.
(f) Severance and Enforcement. All Sections, clauses and
covenants contained in this Agreement are severable, and in the event any of
them shall be held to be invalid by any court, this Agreement shall be
interpreted as if such invalid Sections, clauses or covenants were not contained
5
herein. Without limitation, the parties intend that the covenants contained in
this Agreement shall be severable insofar as the geographic and time
restrictions set forth herein are concerned. If, in any judicial proceeding, a
court shall refuse to enforce the geographic and/or time restriction set forth
herein to their fullest extent, then the geographic and/or time restrictions set
forth herein shall be reduced to the extent necessary to permit enforcement of
the foregoing covenant to the fullest extent possible.
(g) Governing Law and Venue. This Agreement is to be governed
by and construed in accordance with the laws of the State of Arizona applicable
to contracts made and to be performed wholly within such State, and without
regard to the conflicts of laws principles thereof. Any suit brought hereon
shall be brought only in the state or federal courts sitting in the State of New
Jersey, the parties hereto hereby waiving any claim or defense that such forum
is not convenient or proper. Each party hereby agrees that any such court shall
have in personam jurisdiction over it and consents to service of process in any
manner authorized by New Jersey law.
(h) Gender. Where the context so requires, the use of the
masculine gender shall include the feminine and/or neuter genders and the
singular shall include the plural, and vice versa, and the word "person" shall
include any corporation, firm, partnership or other form of association.
(i) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
(j) Construction. The language in all parts of this Agreement
shall in all cases be construed simply, accordingly to its fair meaning, and not
strictly for or against any of the parties hereto. Without limitation, there
shall be no presumption against any party on the ground that such party was
responsible for drafting this Agreement or any part thereof.
IN WITNESS WHEREOF, the parties hereto duly executed this Agreement as
of the date and year first above written.
----------------------------------
XXXXXX X. XXXXXXXX
ALANCO TECHNOLOGIES, INC.
an Arizona corporation
By:
------------------------------
Xxxxxx X. Xxxxxxxx, President
6
Agreement Schedules to be provided upon SEC request
