Exhibit 99
$28,000.00 May 27, 2010
CONVERTIBLE DEMAND NOTE
FOR VALUE RECEIVED, ALANCO TECHNOLOGIES, INC., an Arizona corporation (the
"Maker"), hereby promises to pay to the order of JOHN A. CARLSON ("Payee") the
sum of Twenty-Eight Thousand ($28,000.00) Dollars (the "Principal"), with
interest thereon, on the terms and conditions set forth herein.
Payments of principal of, interest on and any other amounts with respect to
this Convertible Term Note (this "Note") are to be made in lawful money of the
United States of America.
Principal and accrued interest of this Note may be convertible into common
stock of the Maker as provided in Section3 below.
1. Payments.
(a) Interest. This Note shall bear interest ("Interest") on Principal
amounts outstanding from time to time from and after the date hereof at the rate
of eight (8%) percent per annum; provided, however, that during the continuance
of any default hereunder the interest rate hereunder shall be increased by five
hundred basis points (5%) per annum over the rate that would otherwise be
applicable hereunder. All Interest shall be computed on the daily unpaid
Principal balance of this Note based on a three hundred sixty (360) day year,
and shall be payable monthly in arrears on the first day of each calendar month
commencing June 1, 2010.
(b) Principal. The outstanding Principal of this Note shall be payable
within ten (10) days following written demand therefore.
2. Prepayment.
(a) Optional Prepayment of Principal. The Maker may prepay any portion of
the Principal from time-to-time upon three (3) days written notice to Payee's.
(b) Application of Payments. Any and all prepayments hereunder shall be
applied first to unpaid accrued Interest on the Principal amount being prepaid,
and then to Principal.
3. Conversion.
(a) Optional Conversion. The Payee may, at its option, upon written notice
to the Maker given at any time and from time to time, convert all or any portion
of the unpaid Principal balance of this Note, and/or any accrued Interest
thereon, into shares of common stock of the Maker ("Common Stock"), at a price
of $0.28 per share of Common Stock (as same may be adjusted from time to time in
accordance herewith, the "Conversion Price"). The date on which the Maker
receives a conversion election is herein referred to as the "Conversion Date."
To the extent that the Principal of this Note is converted only in part, then
such conversion shall be treated as a prepayment of the Principal amount
converted in accordance with Section 2(a) above.
(b) Mechanics of Conversion. Upon notice to the Maker of the Payee's
conversion election as provided in Section 3(a), the Maker shall, in accordance
with Section 3(c), issue to the Payee (or to the Payee's designee(s) set forth
in the Payee's conversion election) the number of shares of Common Stock to
which the Payee shall be entitled upon such conversion, and shall deliver or
cause to be delivered to the Payee or such designee(s) the certificates
representing such shares of Common Stock. All shares of Common Stock issued or
delivered upon any conversion hereunder shall, when issued or delivered, be duly
authorized, validly issued, fully paid and nonassessable. In lieu of any
fractional shares to which the Payee would otherwise be entitled, the Maker
shall pay cash equal to such fraction multiplied by the per share Conversion
Price.
(c) Issuance of Common Stock Upon Conversion. Within a reasonable time, not
exceeding five (5) Business Days after the Conversion Date, the Maker shall
deliver or cause to be delivered, to or upon the written order of the Payee of
this Note so converted, certificates representing the number of fully paid and
nonassessable shares of Common Stock into which this Note has been converted in
accordance with the provisions of this Section 3. If so requested by the Maker,
the Payee shall, within a reasonable time (not exceeding five (5) Business Days
after receipt by the Payee of such certificates), surrender this Note to the
Maker for cancellation, against delivery of a replacement Note representing the
remaining balance (if any) of this Note which has not been converted. Subject to
the following provisions of this Section 3, such conversion shall be deemed to
have occurred on the Conversion Date, so that the Payee or the Payee's
designee(s) shall be treated for all purposes as having become the record holder
of such shares of Common Stock at such time.
(d) Taxes on Conversion. The issuance of certificates for shares for Common
Stock upon the conversion of this Note shall be made without charge by the Maker
to the converting Payee for any tax in respect of the issuance of such
certificates and such certificates shall be issued in the name of, or in such
names as may be directed by, the Payee; provided, however, that the Maker shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance or delivery of any such certificate in a name other
than that of the Payee, and the Maker shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Maker the amount of any such tax or shall have
established to the satisfaction of the Maker that any such tax has been paid.
(e) Adjustment of Shares.
(i) Stock Dividends, Distributions or Subdivisions. In the event that, at
any time and from time to time from and after the date of this Note, the Maker
shall issue additional shares of Common Stock (or securities convertible into
Common Stock) in a stock dividend, stock distribution or subdivision paid with
respect to Common Stock, or declare any dividend or other distribution payable
in additional shares of Common Stock (or securities convertible into Common
Stock) or effect a split or subdivision of the outstanding shares of Common
Stock, then, concurrently with the effectiveness of such stock dividend, stock
distribution or subdivision, the then-effective Conversion Price shall be
proportionately decreased, and the number of shares of Common Stock issuable
upon conversion of this Note shall thus be proportionately increased.
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(ii) Combinations or Consolidations. In the event that, at any time and
from time to time from and after the date of this Note, the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then, concurrently
with the effectiveness of such combination or consolidation, the then-effective
Conversion Price shall be proportionately increased, and the number of shares of
Common Stock issuable upon conversion of this Note shall thus be proportionately
decreased.
(iii) Other Dividends or Distributions. If the Maker, at any time or from
time to time after the issuance of this Note, makes a distribution to the
holders of Common Stock which is payable in securities of the Maker other than
Common Stock, then, in each such event, provision shall be made so that the
Payee shall receive upon conversion of this Note, in addition to the number of
shares of Common Stock, the amount of such securities of the Maker which would
have been received if the portion of this Note so converted had been exercised
for Common Stock on the date of such event, subject to adjustments subsequent to
the date of such event with respect to such distributed securities which shall
be on terms as nearly equivalent as practicable to the adjustments provided in
this Section 3(e)(iii) and all other adjustments under this Section 3(e).
Nothing contained in this Section 3(e)(iii) shall be deemed to permit the
payment of any distribution in violation of the Loan Agreement.
(iv) Merger, Consolidation or Exchange. If, at any time or from time to
time after the date of this Note, there occurs any merger, consolidation,
arrangement or statutory share exchange of the Maker with or into any other
person or entity, then, in each such event, provision shall be made so that the
Payee shall receive upon conversion of this Note the kind and amount of shares
and other securities and property (including cash) which would have been
received upon such merger, consolidation, arrangement or statutory share
exchange by the Payee if the portion of this Note so converted had been
converted into shares of Common Stock immediately prior to such merger,
consolidation, arrangement or statutory share exchange, subject to adjustments
for events subsequent to the effective date of such merger, consolidation,
arrangement or statutory share exchange with respect to such shares and other
securities which shall be on terms as nearly equivalent as practicable to the
adjustments provided in this Section 3(e)(iv) and all other adjustments under
this Section 3(e). Nothing contained in this Section 3(e)(iv) shall be deemed to
permit any such transaction in violation of the Loan Agreement.
(v) Recapitalization or Reclassification. If, at any time or from time to
time after the date of this Note, the shares of Common Stock issuable upon
conversion of this Note are changed into the same or a different number of
securities of any class of the Maker, whether by recapitalization,
reclassification or otherwise (other than a merger, consolidation, arrangement
or statutory share exchange provided for elsewhere in this Section 3(e)), then,
in each such event, provision shall be made so that the Payee shall receive upon
conversion of this Note the kind and amount of securities or other property
which would have been received in connection with such recapitalization,
reclassification or other change by the Payee if the portion of this Note so
converted had been converted immediately prior to such recapitalization,
reclassification or change, subject to adjustments for events subsequent to the
effective date of such recapitalization, reclassification or other change with
respect to such securities which shall be on terms as nearly equivalent as
practicable to the adjustments provided in this Section 3(e)(v) and all other
adjustments under this Section 3(e).
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(vi) Extraordinary Dividends or Distributions. If, at any time or from time
to time after the date of this Note, the Maker shall declare a dividend or any
other distribution upon the Common Stock payable otherwise than out of current
earnings, retained earnings or earned surplus and otherwise than in shares of
Common Stock, then the Conversion Price in effect immediately prior to such
declaration shall be reduced by an amount equal, in the case of a dividend or
distribution in cash, to the amount thereof payable per share of Common Stock
or, in the case of any other dividend or distribution, to the value thereof per
share of Common Stock at the time such dividend or distribution was declared, as
determined by the Board of Directors of the Maker in good faith. Such reductions
shall take effect as of the date on which a record is taken for the purposes of
the subject dividend or distribution, or, if a record is not taken, the date as
of which the holders of record of Common Stock entitled to such dividend or
distribution are to be determined. Nothing contained in this Section 3(e)(vi)
shall be deemed to permit the payment of any dividend or distribution in
violation of the Loan Agreement.
(vii) Certificate of Adjustment. Whenever the Conversion Price and/or the
number of shares of Common Stock receivable upon conversion of this Note is
adjusted, the Maker shall promptly deliver to the Payee a certificate of
adjustment, setting forth the Conversion Price and/or shares of Common Stock
issuable after adjustment, a brief statement of the facts requiring the
adjustment and the computation by which the adjustment was made. The certificate
of adjustment shall be prima facie evidence of the correctness of the
adjustment.
(viii) Successive Application. The provisions of this Section 3(e) shall be
applicable successively to each event described herein which may occur
subsequent to the date of this Note and prior to the conversion in full of this
Note.
(ix) Fractional Shares. No fractional shares of Common Stock shall be
issuable by reason of any adjustments made pursuant to this Section 3(e); and in
lieu of any such fractional shares, the Maker shall pay cash therefor in
accordance with Section 3(b) above.
(f) No Impairment. The Maker will not, by amendment of its Organic
Documents or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder but will at all times in good faith assist in
the carrying out of all the provisions of this Section 3 and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion rights of the Payee against impairment. In the event of any merger or
consolidation in which the Maker is not the surviving entity, the Maker shall
make appropriate arrangements in order that, upon any subsequent conversion of
this Note, the Payee shall become entitled to receive the same securities or
other consideration that the Payee would have received had such conversion been
made immediately prior to the consummation of such merger or consolidation,
subject to further adjustments, of the type provided in this Note, with respect
to any events relating to any such securities occurring subsequent to the
consummation of such merger or consolidation.
(g) Common Stock Reserved. The Maker shall at all times reserve and keep
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect the full
conversion of this Note into Common Stock.
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4. Events of Default. The occurrence a default under this Note and shall
entitle the Payee to accelerate the entire indebtedness hereunder and take such
other action as may be provided for under the law.
5. Assignment. This Note shall be binding upon and shall inure to the
benefit of the respective successors and permitted assigns of the parties
hereto, provided that the Maker may not assign any of its rights or obligations
hereunder without the prior written consent of the Payee.
6. Waiver and Amendment. No waiver of a right in any instance shall
constitute a continuing waiver of successive rights, and any one waiver shall
govern only the particular matters waived. Neither any provision of this Note
nor any performance hereunder may be amended or waived except pursuant to an
agreement in writing signed by the party against whom enforcement thereof is
sought. Except as otherwise expressly provided in this Note, the Maker hereby
waives diligence, demand, presentment for payment, protest, dishonor,
nonpayment, default, notice of any and all of the foregoing, and any other
notice or action otherwise required to be given or taken under the law in
connection with the delivery, acceptance, performance, default, enforcement or
collection of this Note, and expressly agrees that this Note, or any payment
hereunder, may be extended, modified or subordinated (by forbearance or
otherwise) from time to time, without in any way affecting the liability of the
Maker. The Maker further waives the benefit of any exemption under the homestead
exemption laws, if any, or any other exemption, appraisal or insolvency laws,
and consents that the Payee may release or surrender, exchange or substitute any
personal property or other collateral security now held or which may hereafter
be held as security for the payment of this Note.
7. Governing Law. This Note shall be construed in accordance with and
governed by the laws of the State of Arizona, except to the extent superseded by
Federal enactments.
8. Collection Costs. In the event that the Payee shall place this Note in
the hands of an attorney for collection during the continuance of any Event of
Default, the Maker shall further be liable to the Payee for all costs and
expenses (including reasonable attorneys' fees) which may be incurred by the
Payee in enforcing this Note, all of which costs and expenses shall be
obligations under and part of this Note; and the Payee may take judgment for all
such amounts in addition to all other sums due hereunder.
IN WITNESS WHEREOF, the Maker has executed this Note on the date first
above written.
ALANCO TECHNOLOGIES, INC.
By:_______________________________________
Name:
Title:
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