SECOND EXTENSION OF PURCHASE AGREEMENT
SECOND
EXTENSION OF PURCHASE AGREEMENT
AMONG
SECUREALERT,
INC. (FORMERLY REMOTEMDX, INC.),
AND
MIDWEST
MONITORING AND SURVEILLANCE, INC.,
XXXX
XXXXXXX, XXXX XXXXXXXX, XXXXX XXXXXXX AND XXX XXXXXXX
This Second Extension of Purchase
Agreement (“Second
Extension”) is made and entered into effective April 1, 2010 as
follows:
RECITALS:
A. SecureAlert,
Inc., formerly RemoteMDx, Inc., a Utah corporation (the "Buyer"),
Midwest Monitoring & Surveillance, Inc. (“MM&S”),
a Minnesota corporation, Xxxx Xxxxxxxx (“Xxxxxxxx”),
Xxxx Xxxxxxx (“Xxxxxxx”),
Xxxxx Xxxxxxx (“X.
Xxxxxxx”), and Xxx Xxxxxxx (“X.
Xxxxxxx”) (Bengtson, Shelton, X. Xxxxxxx and X. Xxxxxxx are referred to
individually herein as a “Seller,”
and collectively, as the "Sellers")
entered into a Stock Purchase Agreement effective as of December 1, 2007 (as
thereafter amended and supplemented, the “Purchase
Agreement”). The Purchase Agreement was amended and extended
by agreement effective March 1, 2009 (the “First
Extension”). The Buyer, MM&S and the Sellers are referred to
collectively herein as the "Parties."
B. Pursuant
to the Purchase Agreement, Buyer acquired from Sellers 51% of the issued and
outstanding capital stock of MM&S.
C. The
Purchase Agreement, Sections 2.3 and 2.4, granted to the Buyer and to the
Seller, respectively, certain options regarding the remaining 49% of the issued
and outstanding capital stock of MM&S.
D. Pursuant
to the First Extension, the Parties supplemented and amended the Purchase
Agreement by terminating the Buyer’s and Sellers’ Options and providing for the
purchase and sale of the remaining shares of MM&S capital stock on the terms
contained therein. The period to consummate the purchase and sale was extended
to March 31, 2010.
E. The
Parties now desire to extend the period for closing of the purchase and sale of
the Remaining MM&S Shares on the terms and subject to the conditions and the
consideration contained in this Second Extension.
NOW
THEREFORE, in consideration of the understandings and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained, the Parties agree as follows.
ARTICLE
1
DEFINITIONS
1.1 Defined Terms.
In this
Agreement terms will have the same meaning as defined within the Purchase
Agreement and the First Extension with the following addition or
substitution:
"Purchase
Price" has the meaning set forth in Section 3.1, below.
ARTICLE
2
CONSIDERATION
2.1 Payments to Extend Purchase
Period. As consideration and an inducement to Sellers for the
extension of time to complete the purchase of the Remaining MM&S Shares
hereunder, Buyer shall deliver to Sellers within thirty (30) days of the
execution of this Second Extension, one hundred fifty thousand (150,000) shares
(in the aggregate) of Buyer’s common stock (the fair market value of which as of
the effective date hereof to be credited against the payment of the Purchase
Price for the Remaining MM&S Shares), allocated among Sellers as
follows:
(i) Fifty thousand (50,000)
shares collectively to X. Xxxxxxx and X. Xxxxxxx;
(ii) Fifty thousand
(50,000) shares to Xxxxxxxx; and
(iii) Fifty thousand
(50,000) shares to Xxxxxxx
In
addition, Buyer hereby waives the payment due to Buyer by MM&S in the amount
of ten thousand dollars ($10,000) for April 2010.
2.2 Purchase of Additional
Shares. In consideration of the delivery of the Buyer’s common
stock under Section 2.1 above and the following cash payments to the Sellers,
the ownership interest of Buyer is hereby increased to 53.145% of the total
issued and outstanding capital stock of MM&S. Sellers shall
deliver shares representing such increased ownership interest to Buyer within
thirty (30) days of the date of execution of this Second
Extension. Payment for these additional shares of MM&S shall be
made as follows: Over a twelve-month period commencing May 2010, Buyer shall
make equal monthly payments (i) totaling forty-eight thousand dollars ($48,000)
jointly to X. Xxxxxxx and X. Xxxxxxx and (ii) totaling forty-eight thousand
dollars ($48,000) to Xxxxxxxx, and (iii) totaling forty-eight thousand dollars
($48,000) to Xxxxxxx; provided, however, that the Buyer and a Seller may agree
to a modification of the payment schedule set forth in this Section 2.2 as to
the individual Seller’s installments hereunder.
ARTICLE
3
PURCHASE AND
CLOSING
3.1
Completion of Purchase and
Sale of MM&S Shares.
(A) Purchase
of Remaining MM&S Shares. Buyer shall
purchase from Sellers, and each Seller shall sell, convey, assign, transfer and
deliver to Buyer, all shares of the outstanding capital stock of MM&S (the
“Remaining
MM&S Shares”) owned by such Seller, free and clear of any lien and
restriction on transfer, as set forth on Schedule 2.1(A) of
the Purchase Agreement under the heading “Common Stock to be Sold” next to such
Seller's name for the consideration specified in Section 3.1(B), below. Sellers
represent and warrant to Buyer that such shares represent all of the remaining
issued and outstanding shares of the equity or capital stock of MM&S not
presently held by Buyer and that there are no outstanding options, warrants,
notes, or other instruments related to the issuance of any shares of common
stock or other capital stock of MM&S; provided, however, that the number of
shares to Common Stock to be Sold by each Seller shall be reduced by the number
of additional shares acquired by Buyer under Article 2 above.
(B) Purchase
Price. In consideration
for the Remaining MM&S Shares to be sold pursuant to this Agreement, Buyer
shall pay a purchase price of three million five hundred thirty-eight thousand
dollars ($3,538,000), hereinafter the “Purchase
Price”, subject to adjustment as follows: In the event
MM&S should have Earnings Before Interest, Depreciation and Amortization
(“EBIDA”)
in excess of seven hundred thousand dollars ($700,000) for the period April 1,
2010 through March 31, 2011, the Purchase Price shall be increased to three
million eight hundred thirty-eight thousand dollars
($3,838,000).
3.2
Closing.
(A) Closing
Date. The Closing of the sale and purchase of the Remaining
MM&S Shares (the “Closing”)
will occur at the offices of the Buyer at 10:00 a.m. on Wednesday, April 21,
2011; provided, however, that the Parties may, by mutual written consent, set
the date and location of Closing at such other time and place as they may
mutually desire without further amendment to this Agreement.
(B) Deliveries
at the Closing. At the Closing, (i) the Sellers will deliver
to the Buyer stock certificates representing all of the Remaining MM&S
Shares, endorsed in blank or accompanied by duly executed assignment documents,
(ii) the Buyer will deliver to each of the Sellers the Purchase Price for such
shares as specified in Section 3.1(B) above, subject to the
following:
(i) In
the event the Purchase Price is not adjusted as provided in Section 3.1(B)(i),
above, Buyer shall pay 75% ($2,631,000) thereof in cash in proportion to the
Sellers’ respective ownership of the Remaining MM&S Shares and the balance
of the Purchase Price ($907,000) in shares of the Buyer’s common stock valued at
the average sale price of such shares over the five (5) trading days immediately
preceding the Closing; or
(ii) If
the Purchase Price is adjusted as provided in Section 3.1(B)(i), above, then
Buyer shall pay 90% ($3,454,200) thereof in cash in proportion to the Sellers’
respective ownership of the Remaining MM&S Shares and the balance of the
Purchase Price ($383,800) in shares of the Buyer’s common stock valued at the
average sale price of such shares over the five (5) trading days immediately
preceding the Closing.
ARTICLE
4
DEFAULT OR FAILURE TO
PERFORM
4.1
Default.
(A) Performance. In
the event Buyer fails to perform and complete its purchase of the Remaining
MM&S Shares as provided in this Agreement, Buyer shall be in default and
shall immediately forfeit any and all payments made to Sellers under the
Purchase Agreement and under Section 2.1, above, and its ownership of the
MM&S Shares previously acquired under Section 2.1 of the Purchase Agreement
and Buyer shall return, convey, assign, transfer and deliver Buyer’s MM&S
Shares to Sellers.
(B) Early
Termination by Buyer. Buyer may, at any time, terminate this
Agreement. Buyer’s commencement of any proceeding in Bankruptcy prior
to Closing shall be deemed to be a voluntary election on the part of Buyer to
terminate this Agreement. Upon Buyer’s early termination of this
Agreement, Buyer shall immediately forfeit its ownership of the MM&S shares
previously acquired under Section 2.1 of the Purchase Agreement and shall
return, convey, assign, transfer and deliver Buyer’s MM&S Shares to Sellers
and provide the deliveries provided in Section 4.1(D) below within 15 business
days of such termination.
(C) Insolvency
Default. In addition to any other rights of the Sellers
hereunder, this Agreement shall be deemed to be immediately terminated in the
event that the Buyer should become bankrupt
or insolvent or any debtor proceedings shall be taken by or against the
Buyer. In such event, in addition to any and all other legal remedies
and rights, the Sellers may immediately declare Buyer to be in default of this
Agreement and the Buyer shall make delivery to Sellers, as described in Section
4.1 (D) below, of the stock certificates representing the MM&S Shares
previously acquired within 10 business days of such
event.
(D) Deliveries
in the event of Early Termination. Buyer shall, in the event
of an early termination or other event provided under this Section 4.1, deliver
to the Sellers the stock certificates representing the MM&S Shares
previously acquired under Section 2.1 of the Purchase Agreement, free and clear
of any lien or restriction on transfer to Sellers in the same amounts set forth
opposite Sellers’ names on Schedule 2.1(B) of the Purchase
Agreement.
ARTICLE
5
AGREEMENTS REGARDING
OPERATION OF MM&S DURING EXTENSION PERIOD
5.1 Emphasis
on Profitability. The Parties agree to work cooperatively to
stabilize, optimize and grow the revenue and profitability of MM&S by
undertaking the following (and such other steps as they may mutually agree
during the period):
(A) Monitoring
Center Efficiencies. The parties will work cooperatively so
that the headcount of net full-time equivalent employees (“FTE”)
at the Seller’s monitoring center will be reduced during the extension period
ending March 31, 2011; with a target date for implementation of June 1,
2010. Coordination of monitoring for MM&S accounts would be
facilitated through MM&S senior monitoring center liaison (Xxxx Xxxxxx or
successor) and the Buyer’s monitoring center supervisor.
(B) Central
Administrative Functions. The Parties would
move to consolidate control over accounting, supply chain, implementation of
shared inventory management system, and human resource functions (including
payroll) to Buyer’s control and current Aplicor CRM software, tools
and other licenses will be consolidated with Buyer to reduce operating expense
and redundancy; with a target date for implementation of June 1,
2010.
(C) Other
Efficiencies. The Parties will work to achieve common
management of idle and available equipment, improved shipping and deployment
costs, consolidation of inventory line-of-sight, management and controls, and
collaborative large account sales initiatives and identify additional
opportunities to reduce headcount and optimize economies of scale and synergies
in the combined operations. Priority will be placed in sales and
marketing efforts to emphasize the placement of Buyer’s products and
services. Specifically, the Parties will jointly participate in large
(greater than $500,000 or 200 devices) Requests for Proposal.
ARTICLE
6
REMAINING CONDITIONS AND
AGREEMENTS
6.1
Remaining
Conditions and Agreements to Continue in Effect. The Parties
agree that except where expressly modified or amended by this Second Extension,
all of the terms, conditions, agreements and understandings as set forth in the
Purchase Agreement (as modified and supplemented) and the First
Extension shall remain in full force and effect.
IN
WITNESS WHEREOF, the Parties have executed this Agreement effective April 1,
2010.
By: /s/ Xxxx X. Xxxxxxxx,
III
Xxxx X. Xxxxxxxx, III
Title: President
MIDWEST
MONITORING AND SURVEILLANCE, INC
By: /s/ Xxxx X.
Xxxxxxx
Xxxx X. Xxxxxxx
Title: President
/s/ Xxxx X.
Xxxxxxxx
Xxxx X.
Xxxxxxxx, Seller
/s/ Xxxx X.
Xxxxxxx
Xxxx X.
Xxxxxxx, Seller
/s/ Xxxxx X.
Xxxxxxx
Xxxxx X.
Xxxxxxx, Seller
/s/ Xxx
Xxxxxxx
Xxx
Xxxxxxx, Seller
