EXHIBIT 99
THE POWERS, PREFERENCES, RIGHTS AND LIMITATIONS
OF THE SERIES OF THE PREFERRED STOCK
OF
ALANCO TECHNOLOGIES, INC.
DESIGNATED
SERIES E CONVERTIBLE PREFERRED STOCK
The series designated "Series E Convertible Preferred Stock" of the
Company's Preferred Stock, to be issued as the Board of Directors may determine,
shall have the following preferences, rights and limitations in addition to
those applicable generally to the preferred stock of the Company:
1. Number of Authorized Shares in Series. There shall be a total of
750,000 authorized shares of Series E Convertible Preferred Stock.
2. Priority. The Series E Convertible Preferred Stock shall have a
priority ranking superior to the Common Stock of the Company and all other
series of Preferred Stock of the Company, except the Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, and Series D Preferred
Stock of the Company which all shall have a ranking superior to the Series E
Convertible Preferred Stock, with respect to payment of dividends and upon
dissolution, liquidation and winding-up of the Company.
3. Dividends. Holders of shares of Series E Convertible Preferred Stock
shall be entitled to receive, when declared by the Board of Directors, out of
funds and assets of the Company legally available therefore, an annual dividend
(calculated on the basis of the redemption price of $4.50 per share of Series E
Convertible Preferred Stock) of five (5%) percent per annum, payable quarterly
on or before the 20th day following each calender quarter for the calender
quarters ended March 31, June 30, September 30 and December 31, respectively, to
stockholders of record on the respective record dates (which shall be the tenth
day of the last month for each such calendar quarter just ended). Dividends on
each share of the Series E Convertible Preferred Stock shall accrue and be
cumulative from the date of issue and shall be appropriately prorated with
respect to the period between such date of issue and the first dividend payment
date. Accumulations of unpaid dividends shall not bear interest.
So long as any shares of Series E Convertible Preferred Stock are
outstanding, the Company shall not declare and pay or set apart for payment any
dividends or make any other distribution on the Common Stock and shall not
redeem, retire, purchase or otherwise acquire, any shares of Common Stock or
Preferred Stock ranking inferior to the Series E Convertible Preferred Stock,
unless at the time of making such declaration, payment, distribution,
redemption, retirement, purchase or acquisition dividends on all outstanding
shares of Series E Convertible Preferred Stock for all past quarterly dividend
periods shall have been paid or declared and sufficient funds set apart for the
payment thereof.
4. Conversion. Each share of Series E Convertible Preferred Stock shall
be convertible/converted into twelve (12) shares of Class A Common Stock of the
Company, subject to readjustment as provided herein below, without the payment
of any additional consideration by the holder thereof as follows:
(a) at the option of the holder thereof at any time, including up to
the close of business on the redemption date with respect to any
shares of Series E Convertible Preferred Stock called for
redemption; or
(b) at the option of the Company on or after the date ("Trigger Date")
that (i) is at least six (6) months from the issue date of the
shares of Series E Convertible Preferred Stock to be converted,
and (ii) the average NASDAQ closing market price for the Company's
Class A Common Stock for preceding ten (10) consecutive trading
days equals or exceeds $0.75 per share. The notice of redemption
shall be sent by certified mail to the holders of record of the
Series E Convertible Preferred Stock to be converted at least five
(5) days prior to the date of conversion specified in such notice,
addressed to each such holder at his address as it appears in the
records of the Company.
The holder of a share or shares of Series E Convertible Preferred Stock
may exercise the conversion right in subparagraph (a) above by delivering to the
Company during regular business hours, at the principal office of the Company,
or at such other places as may be designated by the Company, the certificate or
certificates for the shares to be converted, duly endorsed or assigned in blank
or to the Company (if required by it), accompanied in any event by written
notice stating that the holder elects to convert such shares and stating the
name or names (with address) in which the certificate or certificates for Class
A Common Stock are to be issued. Conversion shall be deemed to have been
effected on the date when such delivery is made, or in the case of conversion
pursuant to subparagraph (b) above on the date specified by the Company in its
notice of conversion, and such date is referred to herein as the "Conversion
Date". As promptly as practicable thereafter the Company shall issue and
deliver to or upon the written order of such holder, at such office or other
place designated by the Company, a certificate or certificates for the number
of full shares of Class A Common Stock to which he is entitled and a check in
respect of any fraction of shares provided below, as well as for the amount of
any accrued but unpaid dividends. The person in whose name the certificate or
certificates for Class A Common Stock are to be issued (that is the person
designated if the conversion is elective under subparagraph (a) above, or the
holder of the Series E Convertible Preferred Stock in the case of a conversion
under subparagraph (b) above) shall be deemed to have become a holder of Class
A Common Stock of record on the Conversion Date unless the transfer books of the
Company are closed on that date, in which event he shall be deemed to have
become a holder of Class A Common Stock of Record on the next succeeding date on
which the transfer books are open, but the conversion rate shall be that in
effect on the Conversion Date.
The issuance of Class A Common Stock on conversion of Series E
Convertible Preferred Stock shall be without charge to the converting holder of
Series E Convertible Preferred Stock for any fee, expense or tax in respect of
the issuance therefore, but the Company shall not be required to pay any fee,
expense or tax which may be payable with respect of any transfer involved in the
issuance and delivery of shares in any name other than that of the holder of
record on the books of the Company of the shares of Series E Convertible
Preferred Stock converted, and the Company shall not, in any such case, be
required to issue or deliver any certificate for shares of Class A Common Stock
unless and until the person requesting the issuance thereof shall have paid to
the Company the amount of such fee, expense or tax or shall have established to
the satisfaction of the Company that such fee, expense or tax has been paid.
The number of shares of Class A Common Stock deliverable upon
conversion of each share of Series E Convertible Preferred Stock shall be
subject to adjustment from time to time upon the happening of certain events as
follows:
(i) Merger, Sale of Assets, Consolidation. If the Company at any time
shall consolidate with or merge into or sell or convey all or substantially all
its assets to any other entity, the Series E Convertible Preferred Stock shall
thereafter evidence the right to be converted into capital stock in such number
and kind of securities and property as would have been issuable or distributable
on account of such consolidation, merger, sale or conveyance upon or with
respect to the securities subject to the conversion or purchase right
immediately prior to such consolidation, merger, sale or conveyance. The
foregoing provision shall similarly apply to successive transactions of a
similar nature by any such successor or purchaser. Without limiting the
generality of the foregoing, the anti-dilution provisions of the Series E
Convertible Preferred Stock shall apply to such securities of such successor or
purchaser after any such consolidation, merger, sale or conveyance.
(ii) Reclassification. If the Company at any time shall, by
subdivision, combination reclassification of securities or otherwise, change
any of the securities then purchasable upon the exercise of the conversion right
associated with the Series E Convertible Preferred Stock into the same or a
different number of securities of any class or classes, the Series E Convertible
Preferred Stock shall thereafter evidence the right to purchase such number and
kind of securities as would have been issuable as the result of such change with
respect to the securities which were subject to the conversion right immediately
prior to such subdivision, combination, reclassification or other change. If
shares of Class A Common Stock is subdivided or combined into a greater or
smaller number of shares of Class A Common Stock, the number of shares of Class
A Common Stock deliverable upon conversion of each share of Series E Convertible
Preferred Stock shall be proportionately reduced or increased, as appropriate,
by the ratio which the total number of shares of Class A Common Stock to be
outstanding immediately after such event bears to the total number of shares of
Class A Common Stock outstanding immediately prior to such event.
Whenever any adjustment is required in the number of shares into which
each share of the Series E Convertible Preferred Stock is convertible, the
Company shall forthwith file a statement describing in reasonable detail the
adjustment and the method of calculation used at the office or agency maintained
for the purpose for conversion of the Series E Convertible Preferred Stock, and
shall mail a copy thereof the holders of the Series E Convertible Preferred
Stock.
The Company shall at all times keep available for issue and delivery
the full number of shares of Class A Common Stock into which all outstanding
shares of Series E Convertible Preferred Stock are convertible.
No certificate for a fraction of a share of Class A Common Stock shall
be issued upon any conversion, but in lieu of any fractional share that would
otherwise be required to be issued in accordance with the foregoing provisions,
the Company shall make a cash payment for any such fractional share interest
based upon a value for such Class A Common Stock equal to the average NASDAQ
closing market price for ten (10) trading days prior to the conversion date.
5. Voting. The holders of shares of Series E Convertible Preferred Stock
shall be entitled to notice of any stockholders' meeting and to vote upon
matters submitted to shareholders for a vote, in the same manner and with the
same effect as the holders of shares of Class A Common Stock, voting together
with the holders of Class A Common Stock as a single class to the extent
permitted by law. Holders of Series E Convertible Preferred Stock shall have
that number of votes equal to the number of shares of Class A Common Stock into
which such preferred stock is convertible, as adjusted from time to time
pursuant to section 4 above.
So long as any shares of the Series E Convertible Preferred Stock are
outstanding, the Company shall not, without the affirmative vote or written
consent of the holders of at least two thirds of the aggregate number of shares
at the time outstanding of the Series E Convertible Preferred Stock:
(i) authorize, create or increase any class of capital stock ranking
equal or prior to the Series E Convertible Preferred Stock as to dividends or
upon liquidation, dissolution or winding-up; or
(ii) alter or change any of the powers, preferences or special rights
given to the Series E Convertible Preferred Stock so as to affect the same
adversely.
6. Redemption. The Company may, at the option of the Board of Directors,
redeem all or any part of the outstanding Series E Convertible Preferred Stock
at any time after two years from the issue date of the shares to be redeemed at
the redemption price equal to $4.50 per share of the Series E Convertible
Preferred Stock to be redeemed, plus accrued unpaid dividends, if any, provided
that notice of redemption is sent by certified mail to the holders of record of
the Series E Convertible Preferred Stock to be redeemed at least thirty (30)
days prior to the date of redemption specified in such notice, addressed to each
such holder at his address as it appears in the records of the Company. In case
of the redemption of a part only of the Series E Convertible Preferred Stock,
the shares of such series to be redeemed shall be selected pro rata or by lot or
in such other manner as the Board of Directors may determine.
On or after the redemption date each holder of shares of Series E
Convertible Preferred Stock to be redeemed shall present and surrender his
certificate or certificates for such shares to the Company and thereupon the
redemption price of such shares shall be paid to or on the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. In case less than all of the
shares represented by any such certificates are redeemed, a new certificate
shall be issued representing the unredeemed shares.
All rights arising under this Designation of Powers, Preferences,
Rights and Limitations, other than the right to receive the redemption price,
shall terminate upon the payment of good funds on or before the redemption date
to the holder of the applicable shares. The Company may also deposit the
aggregate redemption price payable with respect to the shares of Series E
Convertible Preferred Stock to be redeemed (or the portion thereof not already
paid in the redemption of such shares) (the "Redemption Deposit") with the
Company's transfer agent or any bank or trust company in the United States
named in the notice of redemption. Such deposits are to be payable in amounts
as aforesaid to the respective orders of the holders of record of the shares of
Series E Convertible Preferred Stock upon surrender of the certificates
evidencing such shares as described above. From and after the making of the
Redemption Deposit, all rights of the holders of the applicable shares arising
under this Designation of Powers, Preferences, Rights and Limitations shall
terminate, other than the right to receive from such transfer agent, bank or
trust company, without interest, the moneys so deposited with it, and such
shares shall not thereafter be transferred (except with the consent of the
Company) on the books of the Company, and such shares shall not be deemed to be
outstanding for any purpose whatsoever.
7. No Sinking Fund. The shares of the Series E Convertible Preferred
Stock shall not be entitled to benefit of any sinking or purchase fund to be
applied to the redemption or purchase of such stock.
8. Liquidation. In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, holders of Series E Convertible
Preferred Stock shall be entitled to be paid out of the assets of the Company
available for distribution to its stockholders before any payment shall be made
in respect of any class or series of stock which shall rank subordinate thereto
as to assets the fixed sum of $4.50 for each share of Series E Convertible
Preferred Stock held by them plus accrued and unpaid dividends, if any,
thereon.
If upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the assets of the Company available for distribution
to its Series E Convertible Preferred Stock holders shall be insufficient to pay
the holders of Series E Convertible Preferred Stock the full amount to which
they are entitled hereunder, the holders of Series E Convertible Preferred Stock
shall share ratably in any distribution of assets according to the respective
amounts which would be payable in respect of the shares of Series E Convertible
Preferred Stock held by them upon such distribution if all amounts payable on or
with respect to such stock were paid in full. If upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company payments shall
have been made to the holders of the Series E Convertible Preferred Stock of the
full amount to which they shall respectively be entitled hereunder, such holders
shall not be entitled to any further participation in the distribution of the
remaining assets of the Company available for distribution to its stockholders.
Neither the merger or consolidation of the Company into or with another
corporation nor the merger or consolidation of any other corporation into or
with the Company, nor the sale, transfer or lease of all or substantially all of
the assets of the Company, shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding-up of the Company.
9. Redeemed Shares. Shares of the Series E Convertible Preferred Stock
redeemed or purchased by the Company or surrendered to the Company on the
conversion thereof into shares of Class A Common Stock as herein above provided
shall have the status of authorized and unissued shares of Series E Convertible
Preferred Stock.