UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 1, 2013
SECUREALERT, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 0-23153
Utah
(State or other jurisdiction of incorporation)
87-0500306
(IRS Employer Identification Number)
150 West Civic Center Drive, Suite 400, Sandy, Utah 84070
(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: (801) 451-6141
Former name or former address, if changed since last report: Not Applicable
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
[ ]
4(c))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-
Item 1.01 Entry into a Material Agreement
On February 1, 2013, SecureAlert, Inc., a Utah corporation (“Registrant”) entered into a “Settlement
Agreement and Royalty and Share Buy Back” (the “Agreement”) with Borinquen Container Corporation, a Puerto
Rico corporation and shareholder of the Registrant (“Borinquen”) and Sapinda Asia Limited, a British Virgin
Islands corporation (“Sapinda Asia”). As of the date of the Agreement, both Borinquen and Sapinda Asia were
beneficial owners of more than 10 percent of the Registrant’s issued and outstanding voting securities.
The Agreement concludes a transaction originally agreed upon pursuant to a “Royalty and Stock Purchase
Agreement” (“Royalty Purchase Agreement”) entered into by the Registrant, Borinquen and Tetra House Pte Ltd., a
Singapore corporation (“THP”) on September 5, 2012. Registrant filed a Current Report on Form 8-K on
September 11, 2012, reporting entry into the Royalty Purchase Agreement.
Under the Royalty Purchase Agreement, Registrant agreed to purchase from Borinquen a royalty granted
by the Registrant to Borinquen under a “Royalty Agreement” dated July 1, 2011, which required the Registrant to
pay Borinquen a royalty of 20 percent of the Registrant’s net revenues from a territory comprising Spain, Portugal,
and the Spanish-speaking countries of Central and South America and the Caribbean (the “Royalty”).Registrant
filed a Current Report on Form 8-K to report the entry into the Royalty Agreement on August 10, 2011. Under the
terms of the Royalty Agreement the Registrant had the option to buy back the Royalty by September 30, 2012. The
Royalty Purchase Agreement was intended by the Registrant to effect the exercise of the repurchase right contained
in the Royalty Agreement.
The purchase price for the Royalty under the Royalty Purchase Agreement was agreed to be $13,100,000,
payable in two installments: (1) $6,000,000 on or before September 17, 2012 and (2) $7,100,000 on or before
November 16, 2012. In addition, THP was granted the right to purchase from Borinquen all shares of common and
preferred stock of the Registrant beneficially owned by Borinquen at a price not to exceed $0.025 per share.
Funds for the purchase were to be made available to the Registrant under a Loan and Security Agreement
entered into on August 19, 2012, by the Registrant and Sapinda Asia. Registrant filed a Current Report on Form 8-K
to report this transaction on August 25, 2012. Sapinda Asia failed to fund the Loan and Security Agreement in an
amount sufficient to meet the deadlines for the payments to Borinquen under the Royalty Purchase
Agreement. Borinquen extended the deadline for payment under the Royalty Purchase Agreement to October 19,
2012. The deadline was subsequently extended again, first to November 17, 2012 and then to December 19,
2012. Borinquen terminated the Royalty Purchase Agreement on December 26, 2012 after the Registrant failed to
make the full payments required by the agreement.
On February 1, 2013, Borinquen and the Registrant agreed to settle the defaults under the terminated
Royalty Purchase Agreement and to release the Royalty to the Registrant, in consideration of the Registrant’s
payment of $13,000,000. Funds for the purchase were provided by Sapinda Asia, pursuant to the Loan and Security
Agreement; the obligation of the Registrant to repay the loan is secured by the Royalty repurchased from Borinquen.
In addition to the sale of the Royalty to the Registrant, Borinquen granted Sapinda Asia the option to
purchase all of the shares of Registrant beneficially owned by Borinquen and to release the shares upon receipt of a
payment from Sapinda Asia of $3,000,000 by February 28, 2013. Borinquen also granted a revocable proxy to
Sapinda Asia, permitting Sapinda Asia to vote the shares of the Registrant’s voting securities held by
Borinquen. The proxy is valid for one year, unless terminated earlier by Borinquen, and is renewable for up to four
additional years.
Sapinda Asia also agreed under the Royalty Purchase Agreement to loan the Registrant an additional
$1,200,000 for working capital. This loan is to be established as an unsecured revolving line of credit continuing
through June 30, 2014, and bears interest at 10 percent for borrowed funds and 3 percent on unused funds.
Upon execution and closing of the Royalty Purchase Agreement, the parties released each other from any
claims they might have under the July 1, 2011 Royalty Agreement and the September 5, 2012 Royalty Purchase
Agreement, as amended.
5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers
On February 1, 2013, Larry G. Schafran, a director of the Registrant since October 2006, tendered his
resignation from the Board of Directors of the Registrant. During his tenure on the Board of Directors, Mr. Schafran
had served as a member and chairman of the Audit Committee of the Board of Directors of the Registrant until
December 28, 2012. At the time of his resignation, Mr. Schafran was a member of the Nominating Committee of
the Board of Directors of the Registrant. Mr. Schafran was not a nominee for election at the Registrant’s upcoming
Annual Meeting of Shareholders, scheduled for February 28, 2013.
Mr. Schafran informed the Board of his resignation and his reasons for terminating his association with the
Registrant by letter addressed to the Chairman of the Board of Directors. A copy of Mr. Schafran’s letter is
furnished with this Current Report as an exhibit. The Registrant’s Board of Directors disagrees with the position
asserted by Mr. Schafran in his letter of resignation.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
10.1 Settlement Agreement and Royalty and Share Buy Back, dated February 1, 2013
17.1 Letter of Resignation from Board of Directors from Larry G. Schafran
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
SecureAlert, Inc.
By: /s/Chad Olsen
Its: Chief Financial Officer
Date: February 7, 2013
Exhibit 10.1
SETTLEMENT AGREEMENT AND ROYALTY
AND SHARE BUY BACK
This Agreement is entered into and effective as of February 1, 2013 by and between SECUREALERT, INC., a Utah
corporation (“SA”) with its principal executive office located at 150 West Civic Center Drive, Suite 100, Sandy,
Utah 84070, BORINQUEN CONTAINER CORPORATION (“BQN”) a Puerto Rican corporation, with a principal
mailing address of P.O. Box 36477 San Juan, Puerto Rico 00936-4744, and Sapinda Asia Limited, a British Virgin
Islands corporation (“Sapinda”). SA, BQN and Sapinda are also referred to individually as a “party” and collectively
as the “parties.”
WHEREAS, SA and BQN entered into that certain Royalty Agreement dated July 1, 2011, subsequently amended
effective as of July 1, 2011 (the “Royalty Agreement”) granting BQN the right to receive royalties based on income
derived by SA in the Territory (as defined in the Royalty Agreement). The parties agree that SA owes BQN certain
amounts for royalties earned by BQN under the Royalty Agreement and for other concepts; and
WHEREAS, the parties later entered into certain agreements for the sale of BQN’s rights under the Royalty
Agreement and for the sale of BQN’s shares of stock in SA (herein referred to as the “Buy Back Agreements”) and
Sapinda and SA defaulted under those agreements. In connection with those agreements SA and Sapinda entered
into a $16,640,000 loan agreement and
WHEREAS, BQN terminated the Buy Back Agreements, and
WHEREAS, SA desires to purchase BQN’s rights under the Royalty Agreement and pay BQN all amounts owed to
BQN under that agreement and Sapinda has agreed to contribute funds to SA to enable SA to purchase such royalty
rights; and
WHEREAS, Sapinda desires to purchase all of BQN’s shares of stock in SA, and
WHEREAS, the parties and Tetra House Pte. Ltd., a Singapore corporation, (“TH”) desire to release each other from
any claims that they may have against each other under the Royalty Agreement and the Buy Back Agreements and
any extensions or amendments thereof,
NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and good and valuable
consideration between the parties, the adequacy of which is hereby acknowledged, the parties hereby agree as
follows:
1. Initial Payment: Simultaneously with the execution of this agreement SA will make a payment to
BQN of Thirteen Million Dollars ($13,000,000.00) by wire transfer of immediately available funds from a bank in
the United States.
2. Second Payment: Not later than February 28, 2013, Sapinda will pay BQN Five Million Dollars
($5,000,000.00) consisting of Three Million Dollars ($3,000,000.00) by wire transfer of immediately available funds
from a bank in the United States and Two Million Dollars ($2,000,000.00) that BQN has previously received from
Sapinda. In the event of a failure by Sapinda to make this second payment BQN shall return One Million Dollars
($1,000,000.00) to Sapinda and shall be entitled to keep all of its shares in SA and all monies previously received
from Sapinda as liquidated damages.
3. Settlement of Claims and Transfer of Shares and Royalty Rights: BQN’s royalty rights will be
transferred to SA immediately upon receipt of the Initial Payment by BQN at its bank in Puerto Rico and the parties
and TH will release each other fully from any and all claims that any of the parties may have against each other that
may arise under the Royalty Agreement and the Buy Back Agreements and any extensions or amendments thereof.
BQN agrees to provide a revocable proxy to Sapinda of all its shares in SA for a period of one year, renewable for a
maximum of four more years based on a review and discussion between BQN and Sapinda of the performance and
future plans of SA. In addition, upon receipt by BQN of the Second Payment, BQN will assign all of its shares in
SA to Sapinda and the parties will release each other fully from any and all claims that any of the parties may have
against each other that may arise under this agreement or under the Royalty Agreement and the Buy Back
Agreements.
4. Representations and Warranties of the parties: SA, BQN and Sapinda, and each of them, represents
and warrants that it possesses all of the rights and authority necessary to enter into and fulfill its obligations under
this Agreement.
5. Additional Actions: Each of the parties hereto covenants and agrees, at its own cost and expense, to
execute and deliver, at the request of any other party hereto, such additional documents and instruments and to take
such other action as such other party may reasonably request to consummate the transactions contemplated herein.
5.1 Sapinda shall enter into a Revolving Loan Agreement with SA wherein SA can borrow up to
$1,200,000 at an interest rate of three percent (3%) per annum for unused funds and ten percent (10%) per
annum for borrowed funds. The term of the agreement shall run until June 30, 2014.
6.
Miscellaneous:
(a) Applicable Law. This Agreement shall be interpreted under the laws of the Commonwealth
of Puerto Rico and any dispute arising under this Agreement shall be decided in the courts of Puerto Rico.
(b) Severability. In the event that in any legal proceeding it is determined that any of the
sections of this Agreement or any subsection, provision, or part thereof is 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.
(c) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit
of the parties and their respective successors and assigns.
(d) Amendment. No amendment, supplement, modification, waiver or termination of this
Agreement or any provision hereof shall be binding unless executed in writing by the party to be charged
therewith. No waiver of any provisions of this Agreement shall constitute a waiver of any other provision (whether
or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.
(e) Counterparts. This Agreement may be executed by facsimile or electronically (e-mail) and
in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and
the same instrument.
(f) Attorney’s Fees. In the event of any lawsuit, action, proceeding or mediation brought by
either party for a breach of any term or provision hereof, or to enforce any term or provision hereof, the prevailing
party shall be entitled to reasonable attorney’s fees in addition to court costs and other expenses of litigation or
mediation in said action or proceeding. For purposes of this Agreement “prevailing party” includes, without
limitation, a party who agrees to dismiss an action or proceeding upon the other party’s payment of the sums
allegedly due or performance of the covenants allegedly breached, or who obtains substantially the relief sought.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
IN WITNESS WEREOF, each of the parties has caused this Agreement to be executed in its name and on
its behalf by its duly authorized representative as of the date first set forth above.
SECUREALERT, INC.
A Utah corporation
By; /s/ George Schmitt
George Schmitt
Executive Committee Acting CEO
By: /s/ Winfried Kunz
Winfried Kunz
Executive Committee Acting CEO
BORINQUEN CONTAINER CORPORATION
A Puerto Rico Corporation
By: /s/ Hector Gonzalez
Hector Gonzalez
Chairman of the Board of Directors
SAPINDA ASIA LIMITED
A British Virgin Islands corporation
By: /s/ Lars Windhorst
Lars Windhorst
CEO
TETRA HOUSE PTE. LTD.
A Singapore corporation
By: /s/ Luc Ceulemans
Luc Ceulemans
Director
Exhibit 17.1
L. G. Schafran
January 31, 2013
David P. Hanlon, Chairman
SecureAlert, Inc.
150 West Civic Drive/Suite 100
Sandy, Utah 84070
Re: SecureAlert, Inc.: Resignation Letter
Dear Dave:
The difficulties with which the Company has had to contend during the past several years
have been primarily and substantially, although not exclusively, caused by Sapinda’s repeated
failures to timely honor its financing commitments.
As of this date, Sapinda is again in default respecting its most recent financing
commitment. As of this date, Sapinda is poised to take control of the Company at the
Company’s next General Annual Meeting (GAM), scheduled for February 28, 2013. And, as of
this date, the Board, “approved” a Loan and Security Agreement (LSA), which, I believe (i)
strongly favors Sapinda, (ii) was improperly voted upon by at least two members of the Board
who should have recused themselves, and which (iii) disadvantages the Company.
(i) Even though Sapinda is presumably not a party to the LSA, if the vote is allowed to
stand, Sapinda will be relieved of certain obligations/penalties for which it, and it alone,
is and should be responsible.
(ii) Board members Guy Dubois and Rene Klinkammer should have recused themselves
from voting. They were justifyibly asked to do so and declined to do so.
54 Riverside Drive/NY, NY 10024/212.799.9668
917.319.3563/lgschafran@schafran.com
Page Two
Rene Klinkhammer is associated with Sapinda but denies any association with Sapinda
Asia. He has not presented any evidence to support this non-association, has acted as a
spokesperson for Sapinda Asia in at least one discussion with the Board, and in the past, I
believe, has indeed recused himself from voting with respect to at least one matter related to
Sapinda Asia. In addition, it is clear that Sapinda and Sapinda Asia are related parties. This fact
alone, should argue in favor of Mr. Klinkhammer’s recusal.
Guy Dubois should have recused himself because he is related to Sapinda Asia, a party to
the LSA. He was introduced to the Company by Sapinda. He committed to invest in the
Company and, as set forth in the Company’s Proxy Statement: “Mr. Dubois’ appointment to the
Board of Directors was a requirement of a financing arrangement with Sapinda Asia, whereby
Sapinda Asia is obligated to loan funds to the Company.” As of this date, to my knowledge, Mr.
Dubois has not invested in the Company as he stated he would. Nor is it clear that he will do so,
and if so, to what extent.
Further, Mr. Dubois was a party to the recent negotiations re the LSA with Mr. Hector
Gonzales. It is understood that Mr. Dubois’ participation was not on behalf of the
Company. This fact alone, should argue in favor of Mr. Dubois’ recusal.
(iii) I believe that the Company is disadvantaged for reasons that include likely increased
financial obligations to, and dependence upon, Sapinda and its related parties.
These and other concerns, particularly respecting the disagreements I have with a majority
of a purportedly independent Board concerning corporate governance, transparency, related party
transactions and full disclosure, support my decision to resign as a Director of the Company.
Page Three
I have enjoyed working with you, wish you well and remain,
Very truly
yours,
/s/ L. G. Schafran
L. G. Schafran
CC:
Directors: SecureAlert, Inc.
Daniel S. Boone
Guy Dubois
Rene Klinkhammer
Dan L. Mabey
Winfried Kunz
Antonio J. Rodriguez, Esq.
George F. Schmitt
Counsel:
Gordon Jesperson, Esq., General Counsel, SecureAlert, Inc.
Kevin Pinegar, Esq., Managing Partner, Durham, Jones & Pinegar
Chad D. Olsen, Chief Financial Officer, SecureAlert, Inc.
SCRA.ResignationLetter.20130131