Exhibit 10.23
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SETTLEMENT AGREEMENT AND MUTUAL RELEASE
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This Settlement Agreement and Mutual Release (the "Agreement") dated as
of February 1, 2007 (the "Effective Date"), is entered into by and between
RemoteMDx, Inc., a Utah corporation ("RMDx"), and SecureAlert, Inc., a Utah
corporation ("SecureAlert"), on the one hand and Xxxxxxx Xxxxxxx ("Xxxxxxx") and
HGR Enterprises, a Utah Limited Liability Company ("HGR"), on the other hand.
As used herein, "Plaintiffs" refers collectively to Xxxxxxx and HGR,
"Defendants" refers collectively to RMDx and SecureAlert, and "Parties" refers
collectively to Plaintiffs and Defendants. The Parties enter into this Agreement
based on the following recitals.
RECITALS
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A. In or about January 2006, Defendants and HGR entered into an
"Agreement for Services" (the "Services Agreement"), pursuant to which HGR
agreed to, inter alia, assist Defendants in securing contracts for the sale of
electronic location monitoring devices to potential purchasers, including
various states and government agencies.
B. On or about September 20, 2006, Plaintiffs commenced an action
against Defendants in the Third Judicial District Court for Salt Lake County in
the State of Utah styled Xxxxxxx v. RemoteMDx, Civil No. 060915336 (the
"Lawsuit"), premised primarily on the allegation that Defendants breached the
Services Agreement.
C. In the Amended Complaint filed on or about October 23, 2006 in the
Lawsuit, Plaintiffs asserted claims against Defendants for: (1) Breach of
Contract and Wrongful Termination; (2) Breach of Covenant of Good Faith and Fair
Dealing; (3) Tortious Interference With Contract And/Or Prospective Economic
Advantage; (4) Unjust Enrichment; (5) Declaratory Judgment And Specific
Performance; (6) Constructive Trust; and (7) Equitable Estoppel.
D. Defendants deny and dispute Plaintiffs' allegations and claims and
also deny liability and damages.
E. To avoid the risk and expense of further litigation, the Parties
desire to settle their differences and, without admitting any liability
whatsoever, enter into this Agreement.
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AGREEMENT
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NOW, THEREFORE, without any admission of liability on the part of any
of the Parties or their affiliates and in consideration of the mutual covenants
and undertakings set forth below and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:
1. CONSIDERATION
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1.1 Dismissal of Lawsuit: Within five (5) business days of the
Effective Date, Plaintiffs shall deliver to Defendants' counsel a fully executed
Stipulation for Dismissal of the entire Lawsuit, as to all parties, with
prejudice. A copy of the Stipulation for Dismissal is attached hereto as Exhibit
1. Defendants will not file the Stipulation for Dismissal in the Lawsuit until
the payment referenced in Section 1.2, below, and the stock referenced in
Section 1.3, below, have been issued.
1.2 Payment By Defendants: Within ten (10) business days of the
Effective Date, Defendants shall pay Plaintiffs the sum of four hundred thousand
dollars ($400,000), payable to HGR Enterprises LLC.
1.3 Issuance of RMDx Stock: Within twenty (20) business days of
the Effective Date, RMDx will cause to be issued One Hundred Sixty Thousand
(160,000) shares of RMDx common stock (the "Shares") to HGR. RMDx's issuance of
the Shares is contingent on HGR's prior execution and delivery to RMDx of a
Nondistribution Letter in the form provided in the attached Exhibit 2. The
Shares are being issued in reliance on HGR's representations and warranties set
forth in the Nondistribution Letter.
(a) Piggyback Registration Rights. Whenever RMDx proposes
to register any of its common equity securities under the Act (other than a
registration statement on Form S-8 or on Form S-4 or any similar Form or any
successor Forms thereto), whether for its own account or for the account of one
or more stockholders of RMDx, and the registration form to be used may be used
for any registration of the Shares (a "Piggyback Registration"), RMDx shall
promptly give notice thereof to HGR and include in such registration and in any
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underwriting involved therein, all the Shares specified in a written request or
requests made within ten (10) days after the issuance of such notice to HGR,
subject to reduction as set forth below. RMDx may postpone or withdraw the
filing or the effectiveness of a Piggyback Registration at any time in its sole
discretion.
(i) Priority on Primary Registrations. If a
Piggyback Registration is an underwritten primary registration on behalf of
RMDx, and the managing underwriters advise RMDx in writing that in their opinion
the number of securities requested to be included in such registration exceeds
the number which can be sold in such offering and/or that the number of Shares
proposed to be included in any such registration would adversely affect the
price per share of RMDx's equity securities to be sold in such offering, the
Company shall include in such registration: (1) first, the securities RMDx
proposes to sell, and (2) second, the Shares issued to HGR under this Agreement
and any other securities requested to be included in such registration pro rata
among all the holders of such securities on the basis of the number of Shares
requested to be registered by such holders or as such holders may otherwise
agree.
(ii) Priority on Secondary Registrations. If a
Piggyback Registration is an underwritten secondary registration on behalf of a
holder of RMDx's securities, and the managing underwriters advise RMDx in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering
and/or that the number of Shares proposed to be included in any such
registration would adversely affect the price per share of RMDx's equity
securities to be sold in such offering, RMDx shall include in such registration:
(1) unless otherwise provided by a relevant agreement, first, the securities
RMDx proposes to sell, (2) unless otherwise provided by a relevant agreement,
second, the equity securities requested to be included in such registration by
any shareholders exercising demand registration rights, and (3) third, the
Shares issued to HGR under this Agreement and any other securities requested to
be included in such registration pro rata among all the holders of such
securities on the basis of the number of Shares requested to be registered by
such holders or as such holders may otherwise agree.
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(iii) Selection of Underwriters. If any Piggyback
Registration is an underwritten primary offering, RMDx shall have the right, in
its sole discretion, to select the managing underwriter or underwriters to
administer any such offering.
(iv) Termination of Piggyback Registration Rights.
The Piggyback Registration Rights under this Section 1.3 shall terminate 12
months after the Effective Date or such earlier date upon which HGR can sell all
of the Shares in a three month period in accordance with Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), including
pursuant to Rule 144(k).
(v) Underwriting. With respect to any registration
under this Section involving an underwriting (which shall be at the sole
discretion of RMDx), the right of HGR to registration hereunder shall be
conditioned upon its participation in such underwriting, and the inclusion of
all of the Shares in the underwriting to the extent provided herein. HGR shall
(together with RMDx and any other security holder distributing securities
through such underwriting) enter into an underwriting agreement with the
representative of the underwriter or underwriters selected for underwriting by
RMDx, containing customary (1) terms of offer and sale of the securities,
payment provisions, underwriting discounts and commissions; and (2)
representations, warranties, covenants and indemnities. Notwithstanding any
other provision hereof, if the representative of an underwriter in any primary
registration by RMDx determines that marketing factors require a "lock-up
period," HGR agrees not to transfer any of their Shares (other than pursuant to
the Registration Statement for such offering) during the thirty (30) day period
prior to the effective date of the Registration Statement and for such
additional period as may be required by the underwriters, up to one hundred
eighty (180) days after the effectiveness of the Registration Statement. If HGR
disapproves of the terms of any such underwriting, HGR shall withdraw therefrom
upon written notice to the Company and the underwriter. Any Shares or other
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
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(vi) Expenses of Registration. The Registration
Expenses of RMDx shall be borne by RMDx. All Selling Expenses and other expenses
of HGR, including without limitation HGR's attorney's fees, shall be borne by
HGR. Registration Expenses shall mean all expenses incurred by RMDx in
connection with a registration under this Section, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for RMDx, blue sky fees and expenses and the expense of
any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of RMDx, which shall be paid in
any event by RMDx). Selling Expenses shall mean all underwriting discounts and
selling commissions applicable to the sale of the Shares.
(vii) Indemnification. To the extent permitted by
law, HGR will, if Shares held by them are included in the securities as to which
registration, qualification or compliance is being effected, indemnify RMDx,
each of its directors, officers, agents and representatives and each
underwriter, if any, and each person controlling RMDx or such underwriter within
the meaning of Section 15 of the Securities Act against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such Registration Statement, prospectus, offering circular or
other document made by HGR, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements by HGR therein not misleading, or that arise out of or are based upon
any violation (or alleged violation) of the Securities Act, the Securities
Exchange Act of 1934, as amended, any state securities law or any rule or
regulation promulgated under any of the foregoing applicable to HGR and will
reimburse RMDx and such directors, officers, agents, representatives,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such Registration Statement, prospectus, offering circular
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or other document in reliance upon and in conformity with written information
furnished to RMDx by HGR and stated to be specifically for use therein;
provided, however, that the obligations of HGR hereunder shall be limited to an
amount equal to the proceeds to HGR from securities sold in the registration.
The indemnification obligations of HGR under this Section shall survive the
termination of this Agreement or the completion of any offering of Shares in a
Registration Statement under this Agreement or otherwise.
(viii) The right to cause RMDx to register
securities hereunder may not be assigned or transferred in whole or in part
without the prior written consent of RMDx.
1.4 Accounting By Plaintiffs: Within ten (10) business days of the
Effective Date, Plaintiffs will provide Defendants with an accounting of their
costs, expenses, and investments incurred in performing their obligations under
the Services Agreement. This accounting will not affect any of the Parties'
other rights and/or obligations under this Agreement, including the obligations
set forth in this Section 1.
1.5 Services Agreement: As of the Effective Date, to the extent
enforceable and not already terminated, the Services Agreement is revoked,
rescinded, and null and void ab initio, with no Party having any rights or
obligations thereunder.
2. RELEASES
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2.1 Plaintiffs' Releases: For good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by Plaintiffs, and in
further consideration of the release of Defendants by Plaintiffs herein,
effective on the Effective Date and with the exception of the executory
provisions of this Agreement set forth in Section 1, above, Plaintiffs for
themselves, their predecessors, divisions, subsidiaries, parents, and
affiliates, and their respective current and former officers, directors,
shareholders, owners, members, employees, servants, agents, and attorneys do
hereby forever release, acquit, and discharge Defendants, their predecessors,
divisions, subsidiaries, parents, and affiliates, and their respective current
and former officers, directors, shareholders, owners, members, employees,
servants, agents, and attorneys, of and from any and all claims, demands,
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obligations, actions, causes of action, rights, damages, costs, expenses, and
compensation of any nature whatsoever, whether at law or in equity, known or
unknown, that they have, had or may have at any time in the past, present or
future arising out of or relating in any way to the Services Agreement,
including without limitation all claims, assertions, or causes of action
asserted in or related in any way to the Lawsuit.
2.2 Defendants' Releases: For good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by Defendants, and in
further consideration of the release of Plaintiffs by Defendants herein,
effective on the Effective Date and with the exception of the executory
provisions of this Agreement set forth in Section 1, above, Defendants for
themselves, their predecessors, divisions, subsidiaries, parents, and
affiliates, and their respective current and former officers, directors,
shareholders, owners, members, employees, servants, agents, and attorneys do
hereby forever release, acquit, and discharge Plaintiffs, their predecessors,
divisions, subsidiaries, parents, and affiliates, and their respective current
and former officers, directors, shareholders, owners, members, employees,
servants, agents, and attorneys of and from any and all claims, demands,
obligations, actions, causes of action, rights, damages, costs, expenses, and
compensation of any nature whatsoever, whether at law or in equity, known or
unknown, that they have, had or may have at any time in the past, present or
future arising out of or relating in any way to the Services Agreement,
including without limitation all claims, assertions, or causes of action
asserted in or related in any way to the Lawsuit.
3. WARRANTY OF CAPACITY
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The person or persons who enter into and execute this Agreement on
behalf of each of the Parties warrants and represents that he or she has been
duly authorized to do so.
4. DENIAL OF LIABILITY
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The Parties agree and acknowledge that this Agreement is a full and
complete compromise of matters involving disputed issues of fact and law, and
that neither payment of any amounts or issuance of the Stock, nor negotiation
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for or agreement to this Agreement (including all statements, admissions, or
communications or exchange of documents) by the Parties, or their respective
representatives, shall be considered admissions by the Parties.
5. REPRESENTATION OF COMPREHENSION OF DOCUMENT
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The Parties each expressly warrant and represent that: (1) before
executing this Agreement, they have received independent legal advice from
attorneys of their choice with respect to the advisability of making the above
Agreement, or have had full and fair opportunity to do so; and (2) they have
fully informed themselves of its terms, contents, conditions, and effect, and
that they voluntarily agree to the terms of this Agreement. The Parties agree
that this instrument is executed as their voluntary act and deed.
6. SUCCESSORS
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This Agreement shall be binding upon and inure to the benefit of the
representatives, successors and assigns, trustees, agents, attorneys, heirs, and
legal representatives of the Parties, as well as any of their respective
officers, directors, members, employees, parents, subsidiaries, divisions,
partners, affiliates, agents, and heirs.
7. COUNTERPARTS AND FACSIMILE SIGNATURES
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This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original and all of which shall constitute one
and the same Agreement. Facsimile copies of signatures on this Agreement shall
be deemed valid and original.
8. ENTIRE AGREEMENT
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This Agreement contains the entire agreement between and among the
Parties with regard to the matters set forth in it and may only be amended,
modified or waived by a written instrument executed by each of the Parties
hereto. The terms of this Agreement are contractual and not merely recitals. The
mutual obligations and undertakings of the Parties expressly set forth in this
Agreement are the sole and only consideration for this Agreement, and no
representations, promises, or inducements of any nature whatsoever have been
made by the Parties other than those expressly appearing in this Agreement. Each
party and counsel for each party has reviewed and revised this Agreement, and
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accordingly, any rule of construction that a document is to be construed against
the drafting party shall be inapplicable to any interpretation of this
Agreement. This portion of the Agreement, like all other portions, was subject
to negotiation.
9. WAIVER AND SEVERABILITY
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The Parties agree that a waiver of any term or condition of this
Agreement will not be deemed to be, and may not be construed as, a waiver of any
other term or condition hereof. The Parties agree that if any provision of this
Agreement is adjudicated to be unenforceable or invalid for any reason, that
part will be severed from the balance of this Agreement and the validity and
enforceability of the remainder of this Agreement will in no way be affected or
impaired.
10. GOVERNING LAW
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This Agreement shall be governed by, and construed and enforced in
accordance with, the internal substantive laws of the State of Utah, without
regard to principles of choice or conflicts of laws except for provisions
applying Utah substantive law and granting jurisdiction and venue to the courts
of Utah.
11. HEADINGS
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Paragraph headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Settlement Agreement.
12. NOTICES
All notices or other communications under this Agreement shall be in
writing and deemed to be duly delivered if delivered in person, by overnight
mail, by certified mail, or by registered mail.
If to RMDx:
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RemoteMDx, Inc. and Xxxxx X. Xxxxxx, Esq.
000 X. Xxxxx Xxxxxx Xx., Xxx. 000 Fulbright & Xxxxxxxx L.L.P.
Xxxxx, XX 00000 000 X. Xxxxxx Xx., 00xx Xx.
Attn: President Xxx Xxxxxxx, XX 00000
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If to SecureAlert:
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SecureAlert, Inc. and Xxxxx X. Xxxxxx, Esq.
000 X. Xxxxx Xxxxxx Xx., Xxx. 000 Fulbright & Xxxxxxxx L.L.P.
Xxxxx, XX 00000 000 X. Xxxxxx Xx., 00xx Xx.
Attn: President Xxx Xxxxxxx, XX 00000
If to HGR:
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HGR Enterprises, LLC and Xxxxx X. Xxxxxx, Esq.
560 East 200 South, Suite 300 Xxxxxx, Xxxxxxxx & Xxxxxxxx, P.C.
Xxxx Xxxx Xxxx, Xxxx 00000 000 Xxxx 000 Xxxxx, Xxxxx 000
Attn: Xxxxx X. Xxxxxx Xxxx Xxxx Xxxx, XX 00000
If to Xxxxxxx:
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Xxxxxxx Xxxxxxx and Xxxxx X. Xxxxxx, Esq.
560 East 200 South, Suite 300 Xxxxxx, Xxxxxxxx & Xxxxxxxx, P.C.
Xxxx Xxxx Xxxx, Xxxx 00000 000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Each of the foregoing shall be entitled to specify a different person
and/or address by giving notice thereof pursuant to this section.
13. SURVIVAL OF TERMS
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If any paragraph, section, sentence, clause or phrase contained in this
Agreement shall be, or become illegal, null, or void, or against public policy
for any reason, and shall be held by any court of competent jurisdiction to be
illegal, null, or void, or against public policy, the remaining paragraphs,
sections, sentences, clauses or phrases contained herein shall not be affected
thereby. All covenants, agreements, representations and warranties, made herein,
shall survive the closing of this Agreement.
14. ENFORCEMENT
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In the event that any Party to this Agreement institutes or defends
against any action or proceeding, including, but not limited to, litigation or
arbitration (to the extent the Parties agree to arbitrate), to preserve, protect
or enforce any claim or right arising under this Agreement, the prevailing Party
in such action or proceeding shall be entitled to, in addition to any and all
other relief granted therein, to an award in said action or proceeding of that
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sum of money which represents the reasonable attorneys fees, costs and expenses
(including expert expenses) incurred by the prevailing Party therein in the
prosecution or defense of said action or proceeding.
THIS AGREEMENT IS MADE AND ENTERED INTO as of the Effective Date and is
effective as of that date.
APPROVED AND AGREED:
REMOTEMDX, INC. XXXXXXX XXXXXXX
By: /s/ Xxxxxxx X. Xxxxx /s/ Xxxxxxx Xxxxxxx
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Name: Xxxxxxx X. Xxxxx Date: February 1, 2007
Title: CFO
Date: February 2, 2007
SECUREALERT, INC. HGR ENTERPRISES, LLC
By: /s/ Xxxxx Xxxxxx By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx Xxxxxx Name: Xxxxx X. Xxxxxx
Title: CEO of SecureAlert Title: Managing Member / President
Date: February 2, 2007 Date: February 1, 2007
APPROVED AS TO FORM:
FULBRIGHT & XXXXXXXX, LLP XXXXXX, XXXXXXXX & XXXXXXXX, P.C.
Counsel for RemoteMDx, Inc. and Counsel for Xxxxxxx Xxxxxxx and
SecureAlert, Inc. HGR Enterprises, LLC.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx Name: Xxxxx X. Xxxxxx
Date: February 5, 2007 Date: February 5, 2007
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