DISTRIBUTION AGREEMENT
This
DISTRIBUTION AGREEMENT (the “Agreement”) is made and entered into as of December
28, 2006 (the “Effective Date”), by and among the following: (1) SecureAlert,
Inc., a Utah corporation (the “Company”), with its principal executive office
located at 000 Xxxx Xxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxx, XX 00000:
(2) RemoteMDx, Inc., a Utah corporation (“RMDX”) with its principal executive
office located at 000 Xxxx Xxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxx, Xxxx 00000; and
(3) Security Investment Holdings, LLC, a Utah limited liability company
(“Distributor”) with its principal office located at 0000 Xxxxx Xxxxx, Xxxx
Xxxxxx, Xxxx 00000.
RECITALS
WHEREAS, the Company is, among
other things, the manufacturer and seller of electronic location monitoring
devices (the “Device”) and provider of services for the monitoring, maintenance
and repair of the Device (“Device Services”); and
WHEREAS, the Company and
Distributor now desire to enter into a business arrangement whereby Distributor
will provide specific Services (as defined herein) for the Company under the
terms and conditions set forth herein.
NOW, THEREFORE, based upon the
foregoing premises, and in consideration of the mutual covenants, promises, and
agreements here, it is hereby agreed as follows:
AGREEMENT
1. Term.
1.1 Initial
Term. The initial term of this Agreement shall commence as of
the Effective Date and shall continue until the earlier of: (i) three (3)
years after the Effective Date or (ii) the date this Agreement is terminated in
accordance with the terms hereof (the “Initial Term”).
1.2 Renewal
Term. This Agreement will automatically renew for consecutive
one (1) year terms under the same terms and conditions set forth herein (each a
“Renewal Term”) unless terminated in accordance with the terms
hereof. Either party may elect not to renew the Agreement by
delivering written notice to the other party at least ninety (90) days but not
more than one hundred twenty (120) days prior to the end of the then existing
term. The Renewal Term(s), if any, together with the Initial Term are
collectively referred to hereinafter as the “Term.”
2. Services and
Performance.
2.1 Services. During
the Term of this Agreement, Distributor shall perform the following services
(collectively, the “Services”) for the Company:
(a) Distributor
shall use commercially reasonable efforts to identify, locate and introduce
potential purchasers of the Device and Device Services to the Company
(including, but not limited to, governmental entities, agencies, bureaus and the
representatives thereof) and assist the Company in securing binding contracts
for the Company’s sale of Devices and Device Services to such potential
customers identified and introduced by the Distributor (“Distributor Initiated
Customers”);
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(b) Distributor
shall deliver units of the Device to Distributor Initiated Customers, train such
customers in the use of the Device, provide relevant information to such
customers relating to the Device and Device Services, and otherwise assist such
customers by responding to requests for information relating to the Device and
Device Services; and
(c)
Distributor shall provide guidance and advice to the Company with regard to the
Company’s strategy to exploit its products and services, and such other support
for the Company’s products and services as the parties may mutually
agree.
2.2 Distributor’s
Resources. Distributor shall employ a sufficient number of
trained professional staff and shall have sufficient facilities and resources
necessary to perform the Services in accordance with the terms of this
Agreement. Distributor is solely responsible for all costs associated
with providing the Services.
2.3 Assignment and
Sub-Licensing. The rights and obligations of Distributor under
this Agreement are personal to Distributor and, except as expressly provided
herein, may not be sold, assigned, delegated, transferred or conveyed, nor shall
Distributor sub-license the duties or any rights or interests herein without the
Company’s prior written consent, and any such action shall be null and
void. Any such unauthorized action, or any attempt at any such
unauthorized action, shall constitute a material breach of this
Agreement. In the event of any such unauthorized action, any
consideration or fees of any type received by Distributor from an intended
unauthorized transferee or sub-licensee shall be deemed to be collected by
Distributor for and on behalf of the Company and shall be forthwith paid to the
Company.
3. Sales, Payments and
Pricing.
3.1 Sales. All
contracts with Distributor Initiated Customers for the sale of Devices and for
Device Services will be entered into directly by the Company and the Company
will provide Device Services to Distributor Initiated Customers.
3.2 Payments. The
Company shall collect all amounts due from Distributor Initiated Customers for
sales of Devices and Device Services.
3.3 Pricing. The
retail prices for the Device and Device Services (including equipment warranty
and non-emergency airtime for subscribers and sales personnel) shall be
determined solely by the Company. The Company shall inform the
Distributor in writing of any pricing changes and any such changes will become
effective upon receipt by Distributor of notice thereof.
3.4 Initial Sale To
Distributor: Effective on the Effective Date, Distributor will purchase
from the Company 667 units of the Device for $400,000. As to these
667 units of the Device purchased by Distributor pursuant to this Section 3.4
only, the Company will charge a daily Device Service fee for such units which
will be $1.00 per day per active Device less than the then-effective daily
Device Service fee. This reduction in the daily Device Service fee
for the 667 units sold under this Section 3.4 will only apply for a period of
three (3) years from the Effective Date.
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4. Commission.
4.1 Commission. For
each Device or Device Service sold by the Company to a Distributor Initiated
Customer, the Company shall pay Distributor a commission based upon the daily
fee it receives from a Distributor Initiated Customer for each active
Device. The per day/per active Device commission is as
follows:
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(a)
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For
contracts with Distributor Initiated Customers within the State of Utah:
$0.60
per day per unit.
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(b)
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For
contracts with Distributor Initiated Customers outside the State of
Utah: $0.85
per day per unit.
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4.2 Commission
Payment. Distributor is only entitled to receive a commission
described in Section 4.1 when the Company has been paid in full by the customer
for the specific Device or Device Service. The Company shall pay each
month’s accrued commissions (based on accounts that are paid in full) on or
before the 20th day of the succeeding month. If a customer account is
paid in full in a subsequent month, the Company shall include the commission in
that subsequent month’s payment to Distributor.
4.3 Distributor Initiated
Customer Report. Together with each payment to Distributor
pursuant to Section 4.2, above, the Company will provide Distributor a monthly
subscriber report for Distributor Initiated Customers including payment,
non-payment and cancellation information for such customers.
4.4 Termination/Non-Renewal.
In the event that this Agreement is terminated or not renewed pursuant to the
terms of this Agreement, commissions due to distributor under this Agreement
shall continue for a period of six (6) months following such termination or
non-renewal.
5. Issuance of RemoteMDx, Inc.
Warrant.
In the
even that sales of the Device and Device Services to Distributor Initiated
Customers exceed five thousand (5,000) units, with set distributor initiative
customers paying on the 5,000 units for a period of six months, upon notice and
request by Distributor, RMDx will issue to Distributor a Warrant (in
substantially the form annexed hereto as Exhibit A, as such
form may be modified in the discretion of RMDx to comply with any applicable
federal or state securities laws) for the purchase of 200,000 shares of RMDx
common stock at $1.00 per share (the “Warrant”). The Warrant will be
exercisable from the date of issuance through May 17, 2011.
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6. Distributor Contacts With
Potential Customers.
6.1 Written Approvals for
Potential Distributor Initiated Customers. The Distributor shall not
contact any person, entity, or organization on behalf of the Company in
connection with the sale or marketing of the Device and Device Services without
the Company’s prior written consent.
6.2 Identification of
Distributor Initiated Customers. The Company’s consent to and approval of
Distributor’s contacts with potential Distributor Initiated Customers shall be
evidenced by the listing of such potential customers on Exhibit B, attached
hereto and incorporated herein by this reference, and the Company’s Initials
next to the name of such potential customer on Exhibit
B. The inclusion of a potential Distributor Initiated Customer
on Exhibit B
shall establish that the Distributor was the source for such customer, thereby
entitling Distributor to receive commissions for sales of Devices/Device
Services to such customer pursuant to Section 4, above.
6.3 Term of Company
Approvals. The Company’s approval of potential Distributor
Initiated Customer shall be valid for six (6) months from the time that the
potential Distributor Initiated Customer is added to Exhibit
B. If a potential customer does not enter into a contract for
Devices/Device Services with the Company within such six (6) month period of
being placed on Exhibit B, the
potential customer will no longer be considered a Distributor Initiated Customer
under this Agreement. In the event that a potential customer is
removed from Exhibit
B pursuant to this Section 6.3, Distributor may seek the Company’s
approval to re-list such potential customer discretion, may approve such request
and re-list such potential customer on Exhibit B as a
potential Distributor Initiated Customer
6.4 Referrals. All
referrals that the Company receives as a result of Distributor’s efforts will be
forwarded to Distributor.
7. Marketing, Promotion and
Training Materials.
The
Company will supply marketing, promotion and training materials to be used by
Distributor in connection with the marketing and distribution of the Devices and
Device Services. Distributor shall only use marketing, promotion and
training materials supplied by the Company unless the Company has provided
written pre-approval for the use of specified non-Company provided
materials. Distributor is solely responsible for any expenses
incurred by Distributor in connection with any marketing
promotions.
8. Warranties and
Representations.
Distributor
agrees that it shall not make any warranty or representation to any person
regarding the nature, capability, dependability or terms of sale or service
regarding the Device or Device Services which are not made in Company-provided
or Company-approved marketing or promotional materials of that are not otherwise
specifically pre-approved in writing by the Company.
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9. Indemnity.
9.1 The Company’s
Indemnity. The Company agrees to indemnify and hold harmless
Distributor and Distributor’s parent, subsidiaries, affiliates, successors,
assigns, officers, directors, members, governors, shareholders, employees and
agents (the “Distributor Indemnified Parties”) from and against any and all
losses, damages, liabilities, obligations, judgments, reasonable attorneys fees
and costs, settlements, costs and other expenses (collectively, “Losses”)
associated with any claim that may be asserted against a Distributor Indemnified
Party arising as a direct result of any material breach by the Company of this
Agreement during the Term of this Agreement in connection with Distributor
Initiated Customers (a “Company Indemnified Claim”). The Company’s
indemnity obligations under this section for any Company Indemnified Claim shall
not exceed the lesser of: (i) the actual aggregate amount of any Losses for a
Company Indemnified Claim or (ii) the aggregate amount of all commissions paid
by the Company to Distributor in connection with the Distributor Initiated
Customer giving rise to such Company Indemnified Claim over the 12-month period
immediately preceding the date on which Distributor receives notice of such
Company Indemnified Claim.
9.2 Distributor’s
Indemnity. Distributor hereby agrees to indemnify and hold
harmless the Company and the Company’s parents, subsidiaries, affiliates,
successors, assigns, officers, directors, members, governors, shareholders,
employees and agents (the “Company Indemnified Parties”) from and against any
Losses that directly or indirectly arises from, or is related to, any material
breach by Distributor of this Agreement, including, but not limited, any Losses
resulting from the negligent or intentional misrepresentation by Distributor or
its employees or agents to any person or entity with respect to the Device or
Device Services (a “Distributor Indemnified Claim”).
9.3 Indemnification
Procedure.
(a) Within
five (5) business days of receipt of notice of an actual or potential
Indemnified Claim (either a Company Indemnified Claim or Distributor Indemnified
Claim, as applicable), the indemnified party will notify the indemnifying party
of the existence of any actual or potential Indemnified Claim and shall tender
the defense of the Indemnified Claim to the indemnifying party.
(b) The
indemnifying party will assume the defense, at its sole expense, and with legal
counsel reasonably acceptable to the indemnified party, of any claim or
proceeding as to which such indemnifying party has an indemnification obligation
hereunder. If the indemnifying party fails to do so, the indemnified
party will have the right to assume its own defense, and, subject to other
applicable provisions of this Agreement, the indemnifying party will be
obligated to reimburse the indemnified party for any and all reasonable expenses
(including but not limited to reasonable attorneys’ fees and costs) incurred in
the defense of such claims or litigation, in addition to the indemnifying
party’s other indemnity obligations hereunder.
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(c) The
indemnified party may, at is sole cost and expense, retain counsel to monitor
the Indemnified Claim, provided that such counsel shall not have authority to
take any action that affects the defense of the Indemnified Claim unless the
indemnified party disclaims its right to indemnification hereunder.
(d) An
indemnifying party may not enter into any settlement or compromise of any claim
without the prior written consent of the indemnified party unless such
settlement or compromise is solely for money damages or will have no continuing
effect in any material respect on the indemnified party.
(e) In
the event that an indemnified party is subject to any demand or claim which
involves conduct that is outside of the scope of this indemnification as well as
an Indemnified Claim, the indemnified party shall cooperate with the
indemnifying party in the defense of the Indemnified Claim, and may control the
overall defense of such action, with the indemnifying party liable only to the
extent of any Losses directly attributable to the Indemnified Claim component of
such claim.
10. Non-Solicitation.
Without
the prior written consent of the other party, during the Term of this Agreement
and for a period of one (1) year after the termination of this Agreement, each
of the parties hereto agrees not to hire or sub-contract any employee or agent
of the other party for purposes of providing services similar to those
contemplated by this Agreement.
11. Non-Competition.
Without
the prior written consent of the Company, during the Term of this Agreement and
for a period of one (1) year after the termination of this Agreement,
Distributor agrees not to promote, market, or distribute non-Company products
and services which compete with the Device and Device Services.
12. Termination.
This
Agreement may be terminated by the Company: (a) immediately upon the occurrence
of a material breach of this Agreement or fraud by Distributor and (b) for any
reason upon thirty (30) days’ prior written notice to the
Distributor. This Agreement may also be terminated by the written
agreement of the parties.
13. Dispute
Resolution.
13.1 Disputes. The
parties agree that in the event any dispute arises between them under this
Agreement, they desire to avoid litigation. Accordingly, the
aggrieved party will give written notice of the dispute to the other party and
both parties will attempt to settle the dispute amicably during the thirty
(30)-day period following such notice.
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13.2 Mediation. If
the dispute remains unsettled after the thirty (30)-day period referenced in
Section 13.1, the parties agree to mediate their dispute with a mutually agreed
upon mediator. Mediation will, if possible, be conducted during the
ninety (90)-day period following expiration of the thirty (30)-day period
referenced in Section 13.1.
13.3 Arbitration. If
mediation fails to resolve the dispute within the ninety (90)-day period
referenced in Section 13.2, the parties agree that the dispute will be submitted
to final and binding arbitration by a single arbitrator in accordance with the
Commercial Rules of the American Arbitration Association (“AAA”) in effect at
the time of the dispute. Unless otherwise directed by the arbitrator,
such arbitration must be concluded within one hundred twenty (120) days of the
expiration of the ninety (90)-day period for mediation referenced in Section
13.2.
13.4 Situs. Unless
otherwise agreed to by the parties, any mediation or arbitration hearing or
meeting held under this Section 13 shall take place in Salt Lake City,
Utah.
13.5 Costs. The
costs of mediation (including the mediator’s fees and expenses and costs
directly related to the conduct of the mediation, but excluding each party’s
direct costs for transportation, attorneys, etc., for which each will be solely
responsible) will be shared equally by the parties. The costs of
arbitration shall be allocated among or between the parties as determined by the
arbitrator.
14. Miscellaneous.
14.1 Compliance with
Laws. Distributor shall fully comply with all applicable laws,
regulations, ordinances, court or agency decisions and other issuances having
the authority of law regarding the matters that are the subject of this
Agreement.
14.2 Authority. Each
of the persons who signs this Agreement represents and warrants that he or she
has full power and authority to execute this Agreement on behalf of the party
for whom he or she is signing, and that upon execution hereof, this Agreement
will be valid, binding and enforceable against the party in accordance with its
terms.
14.3 Governing
Law. This Agreement shall be construed according to and
governed by the laws of the State of Utah, without giving effect to principles
of conflict of laws. The parties agree that jurisdiction over and
venue in any legal proceeding arising out of or relating to this Agreement will
exclusively be in the state or federal courts located in Salt Lake City,
Utah.
14.4 Notices. All
notices, demands or other communications which are required or permitted to be
given pursuant to 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.
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If to
Company:
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If to
Distributor:
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SecureAlert,
Inc.
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Security
Investment Holdings, LLC
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000
X. Xxxxx Xxxxxx Xx., Xxx. 000
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0000
Xxxxx Xxxxx
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Xxxxx,
XX 00000
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Xxxx
Xxxxxx, XX 00000
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Attn:
President
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Attn:
Managing Member
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If to
RMDx:
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RemoteMDx,
Inc.
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000
X. Xxxxx Xxxxxx Xx., Xxx. 000
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Xxxxx,
XX 00000
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Attn:
President
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Each of
the foregoing shall be entitled to specify a different person and/or address by
giving notice thereof pursuant to this section.
14.5 Amendments. This
Agreement may not be amended, modified, supplemented or waived orally, and may
only be so amended, modified, supplemented or waived by an instrument in writing
executed by the parties hereto. Any change to Exhibit B hereto must
be initialed by both parties.
14.6 Binding
Effect. This Agreement and all the terms and provisions hereof
shall be binding upon and inure solely to the benefit of the parties hereto and
their respective permitted successors and assigns.
14.7 Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which, when taken together, shall constitute one
and the same instrument.
14.8 Entire
Agreement. This Agreement contains the entire agreement
between the Parties hereto concerning the subject matter hereof and supersedes
all prior and contemporaneous agreements, arrangements, negotiations and
understandings between the Parties relating to the subject matter
hereof. There are no other understandings, statements, promises or
inducements, oral or otherwise contrary to the terms of this
Agreement. No representations, warranties, covenants or conditions,
express or implied, whether by statute or otherwise, other than as set forth
herein, have been made by any Party hereto.
14.9 No Implied
Waiver. No waiver of any term, provision or condition of this
Agreement whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or shall constitute, a waiver of any other provision hereof,
whether or not similar, nor shall such waiver constitute a continuing waiver,
and no waiver shall be binding unless executed in writing and delivered as per
Section 14.4 by the party making the waiver.
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14.10 Severability. In
the event that in any legal proceedings before a competent tribunal it is
determined that any of the sections of this Agreement or any subsection,
provision or, part thereof is invalid, such section, subsection, provision or
part thereof shall be deemed to be severed from this Agreement for the purposes
only of particular legal proceedings in question, and this Agreement, and the
said section, subsection, provision or part thereof, shall in every other
respect continue in full force and effect.
IN
WITNESS WHEREOF, the parties have executed this Distribution Agreement as of the
Effective Date.
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THE
COMPANY:
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DISTRIBUTOR:
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SecureAlert,
Inc.
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Security
Investment Holdings, LLC
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By:
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________________________
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By:
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________________________
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Name:
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________________________
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Name:
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________________________
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Title:
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________________________
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Title:
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________________________
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Date:
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________________________
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Date:
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________________________
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RMDx:
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By:
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________________________
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Name:
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________________________
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Title:
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________________________
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Date:
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________________________
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