Exhibit 10.23
-------------
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
---------------------------------------
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 Michael Sibbett
("Sibbett") and
HGR Enterprises, a Utah Limited Liability Company ("HGR"), on the
other hand.
As used herein,
"Plaintiffs" refers
collectively to
Sibbett 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
--------
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 Sibbett 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.
Page 1 of 11
<PAGE>
AGREEMENT
---------
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
-------------
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
Page 2 of 11
<PAGE>
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.
Page 3 of 11
<PAGE>
(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.
Page 4 of 11
<PAGE>
(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 expe
