CONSUMER ELECTRONICS DISTRIBUTION AGREEMENT
This Distribution Agreement (the "Agreement"), effective January 1,
2003 (the "Effective Date"), is entered into by RemoteMDx, Inc., a Utah
corporation ("RemoteMDx"), SecureAlert, Inc., a Utah corporation and wholly
owned subsidiary of RemoteMDx ("SecureAlert"), (RemoteMDx and SecureAlert are
sometimes referred to collectively herein as the "Company"), and SecureAlert
Entertainment, LLC, a Tennessee limited liability company ("Distributor").
RECITALS:
A. Company is the licensed distributor of Magnavox brand consumer
electronics products under agreements with the manufacturer.
B. Distributor desires to purchase and distribute consumer electronic
products on an exclusive basis in the Territory defined in this Agreement, and
Company desires to grant Distributor such right, pursuant to the terms and
conditions of this Agreement.
C. The parties acknowledge that Distributor's compliance with quality
specifications, and the compulsory acquisition of certain consumer electronic
products from Company or from an undertaking specified by Company, will be
required to ensure that Company's rights and reputation are properly protected.
AGREEMENTS:
In consideration of the mutual covenants and agreements contained
herein, the sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. General Definitions.
1.1 "Products," means all products sold in the Territory by Distributor
hereunder.
1.2 "Territory" means the manufactured homes marketing channel within
the United States of America, including without limitation those
firms listed on the attached Exhibit A.
2. Appointment.
2.1 Appointment as Distributor. Company appoints Distributor as its
distributor of the Products within the Territory. This appointment
will be exclusive as to the Territory during the term hereof provided
that Distributor at all times is in compliance with all provisions of
this Agreement. During the exclusive term of this Agreement, Company
will not sell or appoint any other distributor to sell Products in the
Territory.
2.2 Restrictions.
2.2.1Except as specifically provided in this Section 2.2.1,
Distributor will not sell any services or products (including,
without limitation the Products) in the PERS or home medical
monitoring and personal remote medical monitoring markets.
Notwithstanding the foregoing, Distributor may sell in any market
the 3000 Uniden GPS 1000's and 2200 ASC911A's transferred to
Distributor by Company pursuant to that certain Agreement among
Company, Distributor and others dated as of even date.
2.2.2 Distributor may purchase Products on a
non-exclusive basis from the Company or
other manufacturers for sale in markets
outside the Territory. Company may directly
or indirectly sell Products outside the
Territory.
2.3 Appointment of Dealers. Distributor may exercise its marketing,
distribution and selling rights both directly and through qualified
dealers authorized by Distributor to market and sell the Products
within the Territory. Distributor shall be responsible for ensuring
that its dealers comply with all applicable terms and restrictions
under this Agreement.
2.4 Commercially Reasonable Efforts. Distributor shall use commercially
reasonable, good faith efforts to continually promote and sell the
Products in the Territory.
3. Assignment of Certain Property. To assist Distributor in the development of
its business hereunder, Company hereby transfers and assigns to Distributor
the fixed assets listed on the attached Exhibit B free and clear of all
liens or encumbrances.
4. Order and Purchase Terms.
4.1 Pricing and Payment Terms. Company shall sell Products free and clear
of all liens or encumbrances to Distributor at a price equal to
Company's cost for such Products plus seven percent (7%) of such cost.
All payment for product will be deposited in a lock box account (the
"Account") in the name of Company with a bank selected by Company and
acceptable to Distributor ("Bank"). Bank shall hold all funds pursuant
to an agreement with the following provisions:
4.1.1Distributor shall pay into the Account the actual cost payable to
manufacturers and suppliers for all Products purchased by
Distributor in compliance with the payment terms and conditions
established by the manufacturer or supplier in sufficient time to
allow Bank to disburse payment to the manufacturer or supplier
according to such terms and conditions.
4.1.2Distributor shall pay into the Account the seven percent (7%)
markup for Products purchased during any month for disbursement
to Company not later than the 10th day of the next month,
beginning on February 10, 2003. Notwithstanding the foregoing,
all parties hereto acknowledge that in connection with the
execution and delivery of this Agreement RemoteMDx, SecureAlert,
Distributor and others have executed and delivered an Agreement
dated as of even date pursuant to which two promissory notes in
favor of Xx. Xx Xxxxxx and Xxxxxx Xxxxxx will be modified by
execution and delivery of two new promissory notes, each in the
principal amounts of $261,439.4. In the event any payment is not
made pursuant to either of such promissory notes, without regard
to any notice or cure periods contained therein, then Distributor
is hereby authorized to the extent of such nonpayment to withhold
payment into the Account pursuant to this subsection and make
payment directly to Dr. Ed. Xxxxxx or Xxxxxx Xxxxxx, as the case
may be.
4.1.3Bank shall be authorized to make disbursements from the Account
to manufacturers, suppliers and Company, respectively,
immediately upon receipt of funds from Distributor.
4.1.4Company shall have no right to alter the terms of the Account or
make or authorize withdrawals, subject, however to Section 4.1.5.
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4.1.5In the event Distributor has failed to make timely payment into
the Account pursuant to Section 4.1.1, the Company may, in its
sole discretion, make payment directly to a supplier or
manufacturer and, upon presentment of documentation to Bank,
satisfactory to Bank, evidencing such payment, Company shall be
reimbursed therefore from the Account. If Distributor fails to
make a payment into the Account to cover any payment made by the
Company directly to the manufacturer within five (5) days of the
date Company notifies Distributor in writing of its payment to
the manufacturer, such failure will be deemed a breach of this
Agreement and the Company may immediately and without further
notice to Distributor terminate the Agreement and all of
Distributor's rights hereunder.
4.1.6On or before the 10th of each month beginning with February
2003, Distributor shall prepare and deliver to Company a report
setting forth the cost of all Products sold by Distributor
pursuant to this Agreement during the immediately preceding month
based on Company's cost for Products sold.
4.2 Orders. Distributor shall place orders for the Products (or any other
item purchased by Distributor from Company in connection with this
Agreement) by written purchase order, signed by an authorized
representative of Distributor. Purchase orders may be mailed, e-mailed
or faxed to the manufacturer or supplier with a copy provided in the
same manner to Company. No additional or different terms in purchase
orders that conflict with the terms of this Agreement shall be binding
upon Company unless specifically agreed to in writing by an authorized
Company representative. Any modifications or additions to previously
received purchase orders must be in writing and must be accepted in
writing by Company.
4.3 Shipment. Distributor shall arrange for shipment directly from the
manufacturer or supplier and will negotiate all shipping charges with
the manufacturer or supplier. Product will not be shipped to or
received by Company. Company shall not be liable for any shipping
charges or Products damaged in shipping.
4.4 Taxes. Distributor shall be responsible for all property, use, value
added and other taxes, governmental duties or assessments, arising out
of this Agreement, other than taxes on Company's net income. If
requested by Company, Distributor shall supply Company with a valid
resale or tax exemption certificate.
4.5 Returns. All returns shall be handled by Distributor and the
manufacturers or suppliers. Company shall have no liability to
Distributor with respect to non-conforming Product.
4.6 Accounts Payable. On or about December 31, 2002, Company will deliver
to Distributor a schedule indicating all vendor accounts payable as of
December 31, 2002, with their respective due dates and terms of
payment. Such schedule shall be attached to this Agreement as Exhibit
C. Distributor hereby assumes the Xxxxxxx Xxxxx, CED, Inc. and RGI
Marketing accounts and Company hereby assigns to Distributor
those specific accounts receivable listed in Exhibit B free and clear
of all liens or encumbrances; provided that to the extent
the total amount realized by Distributor from such accounts receivable
exceeds the amount due on the three accounts payable assumed by
Distributor, then Distributor shall immediately pay such excess to
Company. Company will make all other payments listed on Exhibit C. To
the extent Distributor receives a payment with respect to an
account receivable assigned to Distributor, then Distributor is hereby
authorized to cash and deposit such payment to its credit regardless
of such payment being in the name of Company. To the extent
Distributor receives a payment with respect to an account receivable
not assigned to Distributor, then Distributor shall immediately
forward such payment to Company. To the extent Company receives a
payment with respect to any account receivable not retained by
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Company, then Company shall immediately forward such payment to
Distributor. Distributor will obtain the signature of Xxx Xxxxxx,
President of RemoteMDx and SecureAlert prior to cashing or depositing
any checks made payable to the Company; provided, however, that if Xx.
Xxxxxx is not available, then the signature of another authorized
officer of the Company will be accepted, and Company agrees to
authorize its officers to sign checks as provided herein. Distributor
shall provide the Company with a monthly report in form acceptable to
the Company, detailing all payments received directly by Distributor
with respect to the assigned accounts receivable hereunder. In the
event Distributor becomes aware of a vendor claiming payment for
obligations of Company incurred prior to January 1, 2003, Distributor
will give the Company written notice of the obligation. If the Company
fails to pay when due any obligation identified on Exhibit C, or any
valid obligation of which it receives notice from Distributor as
provided in the preceding sentence, within five (5) business
days of receipt of notice from Distributor, then Distributor may make
the required payments and offset the amounts paid by retaining the
Company's markup payable under Section 4.1.2. All shipments occurring
on or after January 2, 2003 shall be for Distributor's account and
Company hereby assigns to Distributor all purchase orders outstanding
as of December 31, 2002; provided, however, that Distributor shall
issue to Company a purchase order or vendor's statement for such
orders, which will be subject to the provisions of Section 4.1, above.
5. Initial Fees and Other Consideration. In addition to the purchase terms set
forth above, Distributor shall pay to Company, in consideration for the
rights and licenses granted in this Agreement, the following fees and other
consideration:
5.1 Initial Fee. In consideration of the rights granted Distributor under
this Agreement, and in settlement of certain obligations owed by the
Company under that certain Agreement and Plan of Merger dated July 31,
2001 entered into with the former SecureAlert II, Inc., Distributor
will transfer or cause to be transferred to the Company for
cancellation, 400,000 shares of the common stock of RemoteMDx.
Distributor and Company agree that Distributor will be responsible for
any federal or state tax reporting requirements with respect to such
transfer and Company will not issue any forms 1099 with respect to
such transfer.
5.2 Audit Rights. Distributor shall maintain complete books and records
regarding its operations, including, without limitation, all sales of
the Products distributed by Distributor and fees paid hereunder to
Company, for 5 years from the time period to which such records
relate. Company has the right, at its expense, to inspect and audit
these books and records upon five business days' notice to
Distributor. If an audit shows that any fees were underpaid,
Distributor shall promptly pay the additional amount due plus interest
as set forth above. If the underpayment was 5% or more of the total,
Distributor shall pay the actual cost of the audit.
5.3 Defective Product. Distributor agrees coordinate and assist Company
with respect to the return of defective products sold by Company.
5.4 Purchase of Inventory. Distributor agrees to purchase from the Company
the existing inventory listed on the attached Exhibit D free and clear
of all liens or encumbrances at the cost and markup and on the payment
terms contained on said exhibit. Payment shall be in cash or by
assumption and payment of the account payable for the inventory to the
extent the Company has not fully paid the purchase price thereof.
6. Noncompetition. So long as Distributor remains in compliance with the terms
and conditions of this Agreement, neither Company nor its officers or
directors shall, during the term hereof and for a period of five (5) years
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after the date of termination (except where such termination is due to the
default or breach of this Agreement by Distributor), directly or
indirectly, (a) engage, without the prior express written consent of
Distributor, in any business or activity, whether as an employee,
consultant, partner, member, principal, agent, representative, stockholder
or in any other individual, corporate or representative capacity, or render
any services or provide any advice to any business, activity, person or
entity, if such business, activity, service, person or entity, directly or
indirectly, is engaged in selling any Products in the Territory, (b)
meaningfully assist, help or otherwise support, without the prior express
written consent of Distributor, any person, business, corporation,
partnership, or other entity or activity, whether as an employee,
consultant, partner, principal, agent, representative, stockholder or in
any other individual, corporate or representative capacity, to create,
commence or otherwise initiate, or to develop, enhance or otherwise
further, any business or activity if such business or activity, directly or
indirectly, is engaged in selling any Products in the Territory. This
Section 6 shall survive the termination of this Agreement, subject to the
terms of Section 7.4. Notwithstanding the foregoing, if Distributor
breaches this Agreement without curing such breach in accordance with the
terms hereof, then if and to the extent that any employee or affiliate of
Distributor (including, without limitation, its president and
secretary-treasurer who execute this Agreement on the Distributor's behalf)
enters into a covenant not to compete with Distributor, Company shall be
deemed a third-party beneficiary of such covenant and said covenant will
survive the termination of this Agreement.
7. Term and Termination.
7.1 Term. The initial term of this Agreement begins upon the Effective
Date and shall continue for a period of one year, subject, however, to
the continuing payment obligations that extend beyond such date as
provided elsewhere herein.
7.2 Termination for Cause. Either party may terminate this Agreement if
the other party breaches any other material covenant or undertaking
contained herein, and the breach is not cured within the 60 days
following written notice thereof from the other party, provided
however, that to the extent another provision sets or otherwise limits
the right to cure, such provision shall control any cure rights.
7.3 Other. This Agreement shall terminate automatically and without
further notice to the other party in the event that either party shall
make any unauthorized assignment for the benefit of creditors, file
any petition under the bankruptcy or insolvency laws of any
jurisdiction, have or suffer a receiver or trustee to be appointed for
its business or property, or be adjudicated a bankrupt or an
insolvent.
7.4 Effect of Termination. Upon termination of this Agreement for any
reason both parties shall return all proprietary information and
property of the other party in their possession at the date of
termination. Termination shall not affect Distributor's obligation to
pay Company all amounts due as of the effective date of termination.
Provisions of this Agreement expressly intended to survive the
termination hereof shall not be affected by the termination of the
Agreement in accordance with their terms. In addition to the
foregoing, if the Agreement is terminated in accordance with its terms
for cause by the Company, Distributor shall immediately cease and
forever discontinue all offer and sale of the Products in the
Territory. In the event Distributor terminates this Agreement in
accordance with its terms for cause, then it may continue to sell the
Products in the Territory free any continuing obligations to Company
under this Agreement, subject to the provisions of this Section 7.4.
8. Certain Rights. After the initial 12-month term hereof Distributor may
approach Philips and MemCorp to obtain direct distribution rights for
Magnavox-branded home security products.
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9. Warranties; Indemnification; Limitations of Warranties and Damages.
9.1 Representations, Warranties and Covenants of Distributor. Distributor
represents, warrants and covenants as follows:
9.1.1Distributor has the right to enter into this Agreement and
perform in accordance with the terms of this Agreement, and such
actions do not violate any third party agreement or other
obligation by which Distributor is bound.
9.1.2The Products will be marketed, distributed and sold in
compliance with all applicable laws and regulations (including
without limitation local labor laws).
9.2 Representations, Warranties and Covenants of Company. Company
represents, warrants and covenants as follows:
9.2.1Company has the right to enter into this Agreement and perform in
accordance with the terms of this Agreement, and such actions do
not violate any third party agreement or other obligation by
which Company is bound.
9.2.2Company hereby assigns to Distributor any warranty provided by
the manufacturers or suppliers with respect to Products. Company
makes no other warranty to Distributor with respect to Products.
9.3 Indemnification. Each party agrees to indemnify, defend and hold the
other party harmless from and against any and all claims, liabilities,
judgments, costs, damages and expenses (including reasonable
attorneys' fees) arising out of any breach of such party's warranties,
covenants and representations in this Agreement, and any act by such
party in violation of this Agreement. With respect to any claims
falling within the scope of this indemnification obligation, (i) each
party agrees to promptly notify the other of any claim or lawsuit for
which it believes it is entitled to be indemnified; (b) the
indemnifying party shall assume, at its sole expense, the defense of
such claim or lawsuit; and (c) the party being indemnified shall have
the right to participate in the defense of any such claim or lawsuit
with separate counsel, at its sole expense.
9.4 Limitation of Warranties and Damages. EXCEPT AS OTHERWISE SPECIFICALLY
SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS
OR WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO
ITS PRODUCTS, COMPONENTS OR OTHER MATERIALS, INCLUDING WITHOUT
LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT
AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL COMPANY OR
DISTRIBUTOR BE LIABLE FOR, AND EACH PARTY COVENANTS NOT TO BRING ANY
CLAIM FOR, SPECIAL, CONSEQUENTIAL OR INDIRECT DAMAGES (INCLUDING
EXEMPLARY OR PUNITIVE DAMAGES), WHETHER OR NOT SUCH DAMAGES WERE
FORESEEABLE.
10. Miscellaneous.
10.1 Entire Agreement; Amendment; Waiver. The complete and exclusive
statement of the agreement between the parties relating to this
subject shall consist of this Agreement. For example, any written,
typed or preprinted terms contained on a purchase order shall be
superseded by the terms of this Agreement, unless both parties
specifically agree in writing to the different terms. The waiver by
either party of any default or breach of this Agreement, or any
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obligation hereunder, shall be ineffective unless in writing. No
failure to exercise any right or power under this Agreement or to
insist on strict compliance by the other party shall constitute a
waiver of the right subsequently to exercise such right or power or to
insist on strict compliance. This Agreement may not be amended except
by a written document signed by an authorized representative of both
parties.
10.2 Legal Proceedings. This Agreement shall be governed by and construed
in accordance with the laws of the state of Utah (without regard to
conflicts of laws provisions).
10.3 Mediation and Arbitration. In the event of any dispute under this
Agreement, the parties hereto desire to avoid litigation. Accordingly,
the aggrieved party will give notice of the dispute to the other party
and both parties will attempt to settle the dispute during the
thirty-day period following such notice. If such dispute remains
unsettled, the parties agree to then submit such dispute to mediation.
If the parties cannot agree on a mediator, each will select a mediator
and the two chosen mediators will select a third mediator who shall
alone hear the dispute. Such mediation will, if possible, be conducted
during the sixty-day period following expiration of the thirty-day
period. If such mediation fails to resolve the dispute, the parties
agree such dispute will be submitted to final and binding arbitration
in accordance with the rules of the American Arbitration Association.
Unless otherwise directed by the arbitrator, such arbitration must be
concluded within one hundred ninety (190) days of the expiration of
the sixty-day period previously specified for mediation. If the
parties cannot agree on a single arbitrator, each will select an
arbitrator, and the two chosen arbitrators will select a third
arbitrator who shall alone decide the dispute. Any mediation or
arbitration conducted hereunder will be conducted in Dallas, Texas.
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 responsible) will be shared equally by the parties.
10.4 Attorney Fees and Other Arbitration Expenses. If a party hereto
resorts to arbitration to remedy a breach of this Agreement, the
prevailing party in the arbitration, in addition to any other remedies
available under this Agreement or by law, may collect all or a portion
of its reasonable attorney fees and other costs and expenses of
arbitration at the discretion of the arbitrator, who shall consider
both the reasonableness of the attorney fees and other costs and the
relative merits of each party's position. It is the intent of the
parties hereto to avoid arbitration without preventing a party from
seeking redress for a valid dispute. To that end, the parties express
their intent and agreement that unreasonable attorney fees and costs
not be awarded, and that all or a portion of reasonable attorney fees
and costs be awarded when in the arbitrator's opinion the party
against whom such fees and costs are awarded has maintained positions
which have significantly less merit compared to the prevailing party's
positions. Further, it is all parties' intent that any party seeking
redress through litigation despite the fact that arbitration is
required by this Agreement shall not be entitled to recover any
attorney fees or costs for such litigation or in any subsequent
arbitration, regardless of the outcome of such litigation or
subsequent arbitration.
10.5 Force Majeure. Neither party shall be liable for any failure or delay
in performing hereunder, if such failure or delay is due to war,
strike, government requirements, acts of nature, acts or omissions of
carriers, or other cause(s) beyond its reasonable control; provided,
however, that if a party's performance of any material obligation is
reasonably expected to be delayed more than six (6) months due to any
such cause, the other party may terminate this Agreement upon thirty
(30) days' prior written notice.
10.6 Severability. If any provision of this Agreement is held to be
invalid, illegal or unenforceable by a court, authority or arbitrator
of competent jurisdiction, such provision shall be modified by such
court, authority or arbitrator to the minimum extent necessary to make
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it valid, legal and enforceable. If the provision cannot be so
modified, it shall be severed and all other provisions of this
Agreement shall remain in full force and effect. If a provision is
held illegal, invalid or unenforceable, the parties also agree to
negotiate reasonably and in good faith to modify this Agreement with a
new provision that approximates the intent and purpose of the original
provision as closely as possible, without being illegal or
unenforceable.
10.7 Notice. All notices between the parties shall be in writing and shall
be sent by certified or registered mail or commercial delivery
service, with provisions for a receipt, or by an e-mail or facsimile
(confirmed in writing thereafter), to the address of the other party
listed above (or to such other address as a party may furnish to the
other in writing).
10.8 Assignment; Binding Effect. Distributor may not sublicense or assign
its rights or delegate its duties or obligations under this Agreement
(excepting the limited rights permitted to be sublicensed to
Distributor's dealers) without prior written consent of Company.
Company agrees to not unreasonably withhold its consent to a requested
assignment of this Agreement, provided that the proposed new
Distributor is not a competitor of Company and meets Company's
reasonable requirements with respect to financial capability and
stability, experience, business skills, and the like. This Agreement
is binding upon and inures to the benefit of the parties and their
respective successors, representatives and permitted assigns.
10.9 No Agency, Franchise, Partnership or Other Relationship. This
Agreement shall not be construed to create an agency,
employer/employee relationship, franchisor/franchisee relationship,
joint venture relationship or partnership between the parties. Neither
party has the authority to bind the other, to incur any liability or
otherwise act on behalf of the other, or to direct the employees of
the other. The parties expressly agree that no franchise or
partnership laws are intended to or shall apply to this Agreement or
to the relationship of the parties.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date specified above.
RemoteMDx, Inc. SECUREALERT ENTERTAINMENT, LLC
By:______________________________________ By:_________________________________
Title:___________________________________ Title: President
Date:____________________________________ Date:_______________________________
Attest:
By:
---------------------------------
Title: Secretary-Treasurer
SecureAlert, Inc.
By:
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Title:
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Date:
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EXHIBIT A
Permitted Customers
Comprising the "Territory"
Oakwood
Fleetwood
Champion
Palm Harbor
Style Crest
Xxxxxxx
Xxxxxxxx
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EXHIBIT B
Assets Assigned to Distributor
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EXHIBIT C
Form of Assignment and
Schedule of Accounts Payable
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EXHIBIT D
List of Inventory Purchased By Distributor
