NEITHER THIS
NOTE NOR THE STOCK INTO WHICH THIS NOTE IS CONVERTIBLE
(COLLECTIVELY, THE “SECURITIES”) HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, OR AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SUCH ACT.
SECURED CONVERTIBLE PROMISSORY
NOTE
FOR VALUE RECEIVED, Steel Vault Corporation, a
Delaware corporation located at 1690 South Congress Avenue,
Suite 200, Delray Beach, Florida 33445 (the
“Borrower”), promises to pay to VeriChip Corporation, a
Delaware Corporation, or any subsequent holder upon a permitted
assignment of this Note (the “Lender”), located at 1690
South Congress Avenue, Suite 200, Delray Beach, Florida 33445,
or at such other location designated by the Lender, the principal
amount of FIVE HUNDRED THOUSAND U.S. DOLLARS (U.S.$500,000.00) (the
“Principal Amount”), upon the terms and conditions
specified below. Notwithstanding the foregoing, no payment of
principal or interest shall be required to the extent that such
principal and interest has been converted into equity securities of
the Borrower pursuant to the terms hereof.
1. Repayment
or Conversion .
(a) Repayment . Unless the
Principal Amount and all accrued but unpaid interest thereon is
converted pursuant to the provisions of Section 1(b) below, the
entire unpaid Principal Amount under this Note and all accrued and
unpaid interest thereon shall be due and payable on the earlier to
occur of the following (the “Maturity
Date”):
(i) on or
before June 4, 2011;
(ii) ON DEMAND of the Lender, which demand
may be made at any time on or after June 4, 2010, in which
case Borrower will have ninety days to pay the unpaid Principal
Amount and all accrued and unpaid interest thereon; or
(iii) within ten days after a Change in
Control of Borrower (as defined in Borrower’s 2009 Stock
Incentive Plan).
(i) By Lender . Lender shall have
the right, at any time, in its sole discretion to convert all of
the unpaid Principal Amount and accrued and unpaid interest thereon
into that number of shares of the Borrower’s common stock
(the “Conversion Shares”) determined as follows (the
“Conversion Formula”):
The unpaid
Principal Amount and accrued and unpaid interest on the date of
conversion divided by the Price (as defined below) rounded upward
to the nearest whole share, subject to equitable adjustment for any
stock split, combination, recapitalization, reorganization or other
similar event. For example, if Lender elects to convert this Note
into shares of Borrower’s common stock on July 1, 2009
and the unpaid Principal Amount and accrued and unpaid interest on
such date is $50,000, Borrower shall issue 166,667 Conversion
Shares to Lender.
(ii) By Borrower . Borrower shall
not have the right to convert any of the unpaid Principal Amount or
accrued and unpaid interest thereon at any time or otherwise effect
a conversion hereunder.
(iii) In the event that Lender elects to
effect a conversion hereunder, Lender shall deliver to Borrower the
original of this Note, and Borrower shall deliver to Lender a
certificate representing the Conversion Shares into which this Note
was converted.
(iv) For
purposes herein, “Price” means $0.30.
2. Prepayment . This Note may be
prepaid in whole (the entire unpaid Principal Amount under this
Note and all accrued and unpaid interest) without penalty at any
time, provided that Borrower provides Lender with at least ten days
prior written notice during which time the Lender may elect to
effect a conversion under Section 1(b).
3. Interest . This Note shall
accrue interest at a rate equal to twelve percent (12%) per annum,
payable on the first anniversary of the Note and thereafter payable
on September 4, 2010, December 4, 2010, March 4,
2011 and June 4, 2011.
4. Events of Default . The entire
unpaid Principal Amount and all accrued and unpaid interest shall
become immediately due and payable upon (i) admission by the
Borrower of its inability to pay its debts generally as they become
due or otherwise acknowledges its insolvency, (ii) the filing
of a petition in bankruptcy by the Borrower, (iii) the
execution by the Borrower of a general assignment for the benefit
of creditors, (iv) the filing against the Borrower of a
petition in bankruptcy or a petition for relief under the
provisions of the federal bankruptcy code or another state or
federal law for the relief of debtors and the continuation of such
petition without dismissal for a period of ninety (90) days or
more, or (v) in the event that the Principal Amount and all
accrued and unpaid interest thereon shall not have been paid in
full on or before the Maturity Date.
5. Collection . If action is
instituted to collect this Note, the Borrower promises to pay to
the Lender all reasonable costs and expenses (including reasonable
attorneys’ fees) incurred in connection with such
action.
6. Security . This Note and the
obligations hereunder are secured by that certain security
agreement of even date herewith in the form attach
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