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 150 West Civic Center
Drive, Suite 400, Sandy, UT 84070: (2) RemoteMDx,
Inc., a Utah corporation (“RMDX”) with its
principal executive office located at 150 West Civic Center
Drive, Suite 400, Sandy, Utah 84070; and (3) Security
Investment Holdings, LLC, a Utah limited liability company
(“Distributor”) with its principal office located
at 2522 Alice Drive, West Jordan, Utah 84088.
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”);
(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.
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:
|
|
(a)
|
For
contracts with Distributor Initiated Customers within the State of
Utah: $0.60
per day per unit.
|
|
|
(b)
|
For
contracts with Distributor Initiated Customers outside the State of
Utah: $0.85
per day per unit.
|
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.
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
