STEEL VAULT CORPORATION CONVERTIBLE NOTE AND WARRANT SUBSCRIPTION AGREEMENT
Exhibit 5
STEEL VAULT CORPORATION
This Convertible Note and Warrant Subscription Agreement (this “Agreement”), dated as of June
4, 2009 (the “Effective Date”), is made and entered into between Steel Vault Corporation, a
Delaware corporation (the “Company”), and VeriChip Corporation, a Delaware corporation (the
“Investor”).
This Agreement sets forth the terms under which the Investor will purchase from the Company
(i) a Secured Convertible Promissory Note in the principal amount of five hundred thousand dollars
($500,000.00) in the form attached hereto as Appendix A (the “Note”), and (ii) a Warrant to
purchase common stock, par value $0.01 per share, of the Company (the “Common Stock”), in the form
attached hereto as Appendix B (the “Warrant,” and together with the Note hereafter
collectively referred to as, the “Securities”), for a purchase price of five hundred thousand
dollars ($500,000.00) (the “Purchase Price”) as set forth below.
The Securities are part of an offering of securities made by the Company to various investors,
pursuant to which the Company will issue and sell to the investors and the investors will purchase,
for a minimum of $500,000 and a maximum of $700,000 in the aggregate, Secured Convertible
Promissory Notes (the “Offering Notes”) and Warrants to purchase Common Stock (the “Offering”).
NOTICE TO INVESTOR: THE SECURITIES PURCHASED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES MAY BE NOT OFFERED,
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT
OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR EXEMPTION THEREFROM. FURTHER RESTRICTIONS ON
TRANSFERABILITY OF THE SECURITIES ARE CONTAINED IN THIS AGREEMENT.
1. Subscription. Subject to the terms of this Agreement, the Investor hereby
subscribes for the Securities, and the Investor’s delivery of this Agreement will be accompanied by
payment of the Purchase Price for the Securities subscribed for hereunder, payable in United States
Dollars, as set forth in the instructions attached hereto as Exhibit A. This Agreement is
not enforceable by the Investor unless it has been accepted by the Company, and the Investor
acknowledges and agrees that the Company reserves the right to reject any subscription for any
reason.
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2. Representations and Warranties of Investor. The Investor is making the following
representations, warranties and agreements with the intent that they be relied upon in determining
the Investor’s suitability to purchase the Securities, and the Investor agrees that such
representations, warranties and agreements shall survive the date of this Agreement and the
Investor’s purchase of the Securities. The Investor hereby represents and warrants to, and agrees
with, the Company, and each of its officers, directors, persons who control the Company and
affiliates of the foregoing, as follows:
2.1 The Investor is (i) if a natural person, at least twenty-one (21) years of age, and (ii) a
bona fide permanent resident of and is domiciled in the state shown in the address line of the
Investor’s signature page to this Agreement, and has no present intention of becoming a resident of
any other state or jurisdiction. The Investor is, and on each date on which the Investor continues
to own restricted securities from the Offering will be, an “Accredited Investor” as defined in Rule
501(a) under the Securities Act. In general, an “Accredited Investor” is deemed to be an
institution with assets in excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with his or her spouse.
2.2 The Investor acknowledges careful review of this Agreement and all exhibits and appendices
hereto and hereby represents that: (i) the Company has provided the Investor during the course of
this transaction with all information regarding the Company that the Investor has requested and
(ii) the Investor has been afforded access to and the opportunity to ask questions of and receive
answers from duly authorized officers of the Company concerning the Company, the terms and
conditions of the Offering of the Securities, and any additional information that the Investor has
requested. The Investor acknowledges that it has access to the periodic reports, proxy statements
and other information that the Company has filed, or will in the future file with the SEC until the
termination of the Offering (the “SEC Filings”), without charge at the Public Reference Room of the
SEC, 000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000 or on the Internet at xxxx://xxx.xxx.xxx. The
Investor acknowledges that it has read the section entitled “Risk Factors” in the Company’s Annual
Report on Form 10-K filed with the SEC on December 24, 2008.
2.3 The Investor has such knowledge and experience in financial and business matters that the
Investor is capable of evaluating the merits and risks of an investment in the Securities and of
making an informed investment decision, and is not utilizing any other person to be the Investor’s
representative in connection with evaluating such merits and risks. The Investor’s overall
commitment to investments that are not readily marketable is not disproportionate to the Investor’s
net worth, and an investment in the Securities will not cause such overall commitment to become
excessive.
2.4 The Investor is acquiring the Securities for the Investor’s own account, for investment
purposes only, and not with a view toward the resale, resyndication, distribution, subdivision or
fractionalization thereof, and has no present intention of selling or transferring or otherwise
distributing the same. The Investor at the present time and in the foreseeable future (i) has no
need for liquidity in this investment, (ii) has the ability to bear the economic risk of this
investment, (iii) can afford a complete loss of this investment, (iv) can hold the Securities for
an indefinite period of time, and (v) this investment constitutes an appropriate investment for and
is not in violation of any investment restrictions (whether by statute, contract or otherwise)
binding upon the Investor.
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2.5 In making an investment in the Securities, the Investor acknowledges that no oral
representations or warranties have been made to the Investor. In making the decision to invest in
the Securities, the Investor has relied solely on the information in the SEC Filings. The Investor
has been advised that no person is authorized to give any information or make any statement not
contained in the SEC Filings, and that any information or statement not contained therein must not
be relied upon as having been authorized by the Company, its officers, directors, affiliates or
persons who control the Company.
2.6 The Investor is not relying on the Company or any of its employees, agents, or advisors
with respect to the legal, tax, economic and related considerations of an investment in the
Securities. The Investor has consulted such legal, financial and tax advisers as have been
necessary to evaluate the merits and risks of this investment.
2.7 The Investor agrees that the Securities (including any interest therein) will not be sold
or otherwise disposed of by the Investor unless either (i) the sale or other disposition will be
pursuant to a registration statement under the 1933 Act, and any applicable securities laws of any
state or other jurisdiction or (ii) the Investor shall have notified the Company in writing of any
desire on the part of the Investor to sell or dispose of all or part of the such Securities and of
the manner and terms of the proposed transaction, and the Company shall have been advised in
writing by counsel acceptable to it that no registration of such Securities under the 1933 Act, or
the rules and regulations then in effect thereunder, or any applicable state securities laws, is
required in connection with the proposed sale or other disposition. Except as provided in Section 5
hereof, the Investor acknowledges that the Company is under no obligation whatsoever in connection
with any such registration or exemption.
2.8 The Investor understands and agrees that all certificates evidencing ownership of the
Securities, or any replacement thereof, shall bear an appropriate legend to the effect that the
securities evidenced by such certificate or instruments have not been registered under the 1933 Act
and setting forth or referring to the restrictions on transferability and sale of the securities.
2.9 All information provided by the Investor to the Company is true and correct in all
respects as of the date hereof, and if there should be any material change in such information
either prior to the Company accepting the Investor’s subscription or thereafter, the Investor will
immediately furnish such revised or corrected information to the Company.
2.10 The Investor understands that no federal or state agency has passed on or made any
recommendation or endorsement of the Securities and that the Company is relying on the truth and
accuracy of the representations warranties and agreements made by the Investor in Offering the
Securities for sale to the Investor without having first registered the same under the 0000 Xxx.
2.11 The Investor acknowledges that there have been no representations, guarantees or
warranties made to the Investor by the Company, its officers, directors, controlling persons,
agents or employees or any other person, expressly or by implication, with respect to the amount of
or type of consideration, profit or loss (including tax benefits) to be realized, if any, as a
result of the Investor’s investment.
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2.12 The Investor is unaware of, is in no way relying on, and did not become aware of the
Offering of the Securities through or as a result of, any form of general solicitation or general
advertising including, without limitation, any article, notice, advertisement or other
communication published in any newspaper, magazine or similar media or broadcast over television or
radio, or electronic mail over the Internet, and is not subscribing for Securities and did not
become aware of the Offering of the Securities through or as a result of any seminar or meeting to
which the Investor was invited by, or any solicitation of a subscription by, a person not
previously known to the Investor in connection with investments in securities generally.
2.13 The Investor acknowledges that the purchase of the Securities involves a high degree of
risk in that (i) the Company may need additional capital but has no assurance of additional
necessary capital, (ii) an investment in the Company is highly speculative and only investors who
can afford the loss of their entire investment should consider investing in the Company and the
Securities, (iii) an investor may not be able to liquidate its investment, (iv) transferability of
the Securities is extremely limited, (v) an investor could sustain the loss of its entire
investment, and (vi) the Company is and will be subject to numerous other risks and uncertainties,
including without limitation, significant and material risks relating to the business and
operations of the Company, and the industries and markets in which the Company competes, all as
more fully set forth in the SEC Filings.
2.14 The Investor agrees that:
(i) the subscription hereunder is irrevocable, and that this Agreement and any agreements of
the Investor hereunder shall survive the death or disability of the Investor and shall be binding
upon and inure to the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives and assigns. If the Investor is more than one person, the
obligations of the Investor hereunder shall be joint and several and the agreements,
representations, warranties and acknowledgments herein contained shall be deemed to be made by and
be binding upon each such Investor and the Investor’s heirs, executors, administrators, successors,
legal representatives and assigns;
(ii) this subscription may be accepted or rejected, in whole or in part, by the Company,
without giving any reason therefore; and
(iii) in the event the Offering of Securities is oversubscribed, the Company may, in its sole
discretion, reject certain subscriptions or allocate Securities among subscribers, or a combination
thereof based upon the number shares owned by such subscriber in relation to the total number of
shares owned by all subscribers whose subscriptions have been accepted by the Company (as
determined prior to the purchase of any Securities).
2.15 If the Investor is a partnership, corporation, trust or other entity, such partnership,
corporation, trust or other entity further represents and warrants that: (i) it was not formed for
the purpose of investing in the Company, (ii) it is authorized and otherwise duly qualified to
purchase and hold the Securities, (iii) this Agreement has been duly and validly authorized,
executed and delivered and constitutes the legal, binding and enforceable obligation of the
undersigned, and (iv) the execution and delivery of this Agreement will not result in any
violation of, or be in conflict with, or constitute default under, the organizational documents of
such entity, any agreement or instrument to which such entity is a party or by which such entity or
its respective properties are bound, or any judgment, decree, order or, to its knowledge, any
statute, rule or regulation applicable to such entity.
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2.16 If the Investor is not a United States person, the Investor hereby represents and
warrants that it or he has satisfied itself as to the full observance of the laws of its
jurisdiction in connection with any invitation to subscribe for the Securities or any use of this
Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the
Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and (iv) the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer
of the Securities. The Investor’s subscription and payment for, and its or his continued
beneficial ownership of the Securities, will not violate any applicable securities or other laws of
the Investor’s jurisdiction.
3. Indemnification. The Investor agrees to indemnify and hold harmless the Company and
its directors and officers, their affiliates or anyone acting on behalf of the Company from and
against any and all damages, losses, costs and expenses (including reasonable attorneys’ fees) that
they may incur by reason of the failure of Investor to fulfill any of the terms or conditions of
this Agreement, or by reason of any breach of the representations and warranties made by the
Investor herein, or in any document provided by the Investor to the Company.
4. Transferability. The Investor agrees that the Investor shall not transfer or assign
this Agreement or any interest herein, and any such transfer or assignment purported to be made
shall be null and void and of no effect.
5. Registration Rights.
5.1 The Company agrees to file a registration statement (the “Registration Statement”)
covering the public resale of all the shares of Common Stock issuable (i) pursuant to conversion of
the Note (the “Conversion Shares”) and (ii) pursuant to exercise of the Warrant (together with the
Conversion Shares, the “Registrable Shares”) not later than the ninetieth (90) day following the
day the Company has received written notice that the holder or holders of 50% or more of the Common
Stock issuable pursuant to the conversion of the Offering Notes elect to convert all or part of the
Offering Notes issued to such investors in the Offering, and the Company agrees to use commercially
reasonable efforts to cause the Registration Statement to be declared effective by the United
States Securities and Exchange Commission (the “SEC”) as soon as practicable thereafter. The
Company will use commercially reasonable efforts to keep the Registration Statement continuously
effective under the Securities Act of 1933, as amended (the “1933 Act”), (x) for an Investor who is
not an affiliate, as defined in Rule 144 promulgated by the SEC pursuant to the 1933 Act (an
“Affiliate”), of the Company, until the date that is one year after the date that the Registration
Statement is declared effective by the SEC or such earlier date when all Registrable Shares may be
sold pursuant to an exemption from registration
pursuant to Rule 144 promulgated by the SEC pursuant to the 1933 Act, and (y) for an Investor
who is an Affiliate of the Company, until the date that the Investor has ceased to be an Affiliate
of the Company for three months and can sell all Registrable Shares pursuant to Rule 144(b)(1)
promulgated by the SEC pursuant to the 1933 Act.
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5.2 The Investor agrees to:
(i) timely furnish to the Company in writing such information regarding itself and the
intended method of disposition of the Registrable Shares as the Company shall reasonably request in
order to effect the registration thereof or to comply with applicable law;
(ii) to the extent required by applicable law, deliver a preliminary and definitive
prospectus to the purchaser of the Registrable Shares sold under any Registration Statement;
(iii) notify the Company when it has sold all of the Registrable Shares held by it;
(iv) notify the Company promptly in the event that any information supplied by the Investor
in writing for inclusion in such Registration Statement or related prospectus is untrue or omits to
state a material fact required to be stated therein or necessary to make such information not
misleading in light of the circumstances then existing; immediately discontinue any sale or other
disposition of the Registrable Shares pursuant to such Registration Statement until the filing of
an amendment or supplement to such prospectus as may be necessary so that such prospectus does not
contain an untrue statement of material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of the circumstances
then existing; and provide the Company with updates on such information as may be appropriate to
make such amendment or supplement effective for such purpose;
(v) otherwise use commercially reasonable efforts to assist the Company and the underwriters,
if any, in the preparation of documentation reasonably necessary or desirable to effectuate the
resale of the Registrable Shares pursuant to any Registration Statement filed in accordance
herewith;
(vi) upon receipt of a notice from the Company of the occurrence of a Discontinuation Event
(as defined below), the Investor will and the Investor agrees to discontinue forthwith any
disposition of such Registrable Shares under the applicable Registration Statement until the
Investor’s receipt of the copies of the supplemented prospectus and/or amended Registration
Statement or until it is advised in writing by the Company that the use of the applicable
prospectus may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by reference in such
prospectus or Registration Statement. The Company may provide appropriate stop orders to enforce
the provisions of this paragraph.
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(vii) For purposes of this Agreement, a “Discontinuation Event” shall mean (a) when the SEC
notifies the Company whether there will be a “review” of such Registration Statement and whenever
the SEC comments in writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to the Investor); (b) any request by the
SEC or any other Federal or state governmental authority for amendments or
supplements to such Registration Statement or prospectus or for additional information; (c)
the issuance by the SEC of any stop order suspending the effectiveness of such Registration
Statement covering any or all of the Registrable Shares or the initiation of any proceedings for
that purpose; (d) the receipt by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Registrable Shares for sale in any
jurisdiction, or the initiation or threatening of any proceeding for such purpose; and/or (e) the
occurrence of any event or passage of time that makes the financial statements included in such
Registration Statement ineligible for inclusion therein or any statement made in such Registration
Statement or prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such Registration
Statement, prospectus or other documents so that, in the case of such Registration Statement or
prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading.
6. General Provisions.
6.1 Other than the Mutual Non-Disclosure Agreement entered into between the Company and the
Investor, this Agreement and the exhibits and appendices attached hereto constitute the entire
agreement between the parties and supersede and cancel any other agreements, or representations or
communications, whether oral or written, between the parties relating to the transactions
contemplated herein or the subject matter hereof.
6.2 This Agreement may be executed in more than one counterpart which shall, in the aggregate,
be deemed to be the original instrument and agreement between the parties, and copies signed and
transmitted electronically in a form readable by the recipient or by facsimile are as binding as if
the original was signed in person.
6.3 Any and all notices or other communications required or permitted by this Agreement or by
law to be served on or given to any party hereto by any other party hereto shall be, unless
otherwise required by law, in writing and deemed duly served and given when actually received
either when delivered by facsimile or when delivered by hand, by recognized express delivery
services or via the United States mail, certified or registered, return, receipt requested, postage
prepaid, addressed to the Company at its principal offices at 0000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx
000, Xxxxxx Xxxxx, Xxxxxxx 00000, and to the Investor at its address as set forth on the signature
page to this Agreement or otherwise transmitted to the Company from time to time.
6.4 No term hereof may be changed, waived, discharged or terminate orally, but only by an
instrument in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
6.5 The headings in this Agreement are for the purposes and convenience of reference only and
shall not be deemed to constitute a part hereof.
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6.6 The validity, construction, enforcement, and interpretation of this Agreement are governed
by the laws of the State of Florida and the federal laws of the United States of America, excluding
the laws of those jurisdictions pertaining to resolution of conflicts with laws of other
jurisdictions. The Company and Investor (a) consent to the personal jurisdiction of the state and
federal courts having jurisdiction in Palm Beach County, Florida, (b) stipulate that the proper,
exclusive, and convenient venue for any legal proceeding arising out of this Agreement is Palm
Beach County, Florida, for state court proceedings, and the Southern District of Florida, for
federal district court proceedings, and (c) waive any defense, whether asserted by a motion or
pleading, that Palm Beach County, Florida, or the Southern District of Florida, is an improper or
inconvenient venue.
6.7 The benefits of this Agreement shall inure, and the obligations of this Agreement shall be
binding upon, the personal representatives, heirs, legatees, permitted successors and assigns of
the parties hereto.
6.8 The Investor agrees that the Investor may not cancel, terminate, or revoke this Agreement
or any agreement of the Investor made hereunder.
6.9 Except as otherwise provided in this Agreement, each party to this Agreement shall pay any
and all fees and expenses that such party may incur in connection with the negotiation, execution
and closing of the transactions contemplated by this Agreement.
(Signatures start on next page)
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IN WITNESS WHEREOF, the Investor has executed this Agreement on the date indicated below.
| VERICHIP CORPORATION | ||||
By:
|
/s/ Xxxxx X. Xxxxxxxxx | |||
| Name: | Xxxxx X. Xxxxxxxxx | |||
| Title: | Chairman | |||
| Date Signed: June 4, 2009 | ||||
| 1690 South Congress Avenue, Suite 200 | ||||
| Address | ||||
| Xxxxxx Xxxxx, Xxxxxxx 00000 | ||||
City
|
State Zip | |||
| (000) 000-0000 | ||||
| Business Telephone | ||||
| (000) 000-0000 | ||||
| Business Fax | ||||
| 06-1637809 | ||||
| Employer Identification Number | ||||
| * | If the Investor is a corporation, partnership, trust or other entity, or is otherwise acting as a
fiduciary, the name and capacity (title) of the individual executing this Agreement on the
Investor’s behalf should be printed or typed below the signature. |
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PLEASE SUPPLY THE FOLLOWING INFORMATION:
Manner in which title is to be held; (Check one)
| Individual Ownership | Partnership* | |||||
| Individual Retirement Account | Trust * | |||||
| Qualified Retirement Plan | X | Corporation* | ||||
| Other: | Limited Liability Company* | |||||
| (Please indicate) | ||||||
| * | In the case of a partnership, state names of all partners and attach a copy of the
partnership agreement. In the case of a corporation, attach a copy of the articles of
incorporation together with the resolution of the board of directors authorizing this
investment. In the case of a limited liability company, attach a copy of the articles of
organization and operating agreement and a copy of any required member or manager resolutions
authorizing this investment. In the case of a trust, attach a copy of the trust agreement. |
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ACCEPTANCE
Steel Vault Corporation hereby accepts and agrees to be bound by the foregoing subscription
subject to the terms and conditions hereof as of the date indicated below.
STEEL VAULT CORPORATION |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxxx | |||
| Title: | CEO | |||
| Date Signed: June 4, 2009 | ||||
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