Exhibit 10.5
SECURITY AGREEMENT
This is a Security Agreement (the “Security Agreement”) between National Credit
Report.com, LLC, a Florida limited liability company (“Debtor”), and the holder
of the Note (defined below) signatory hereto (the “Secured Party”), and is dated
as of June 4, 2009.
BACKGROUND
WHEREAS, Steel Vault Corporation, a Delaware corporation and the 100% owner of
Debtor (“Steel Vault”), has issued a Secured Convertible Promissory Note to the
Secured Party in the aggregate principal amount of $500,000.00 (the “Note”); and
WHEREAS, Steel Vault will contribute all or part of the proceeds from the Note
to Debtor, for use by Debtor for working capital purposes. In exchange for the
receipt of such proceeds, Debtor has agreement to enter into this Security
Agreement.
Accordingly, in consideration of the mutual covenants and agreements set forth
below, the parties agree as follows:
TERMS
1. Grant of Security Interest. For good and valuable consideration received, the
sufficiency of which is hereby acknowledged and agreed, in order to secure
payment of (collectively, the “Liabilities”): (a) the Note; (b) all costs and
expenses, including attorneys’ fees, incurred in collecting amounts due under
the Note following an Event of Default; (c) all costs and expenses, including
attorney’s fees, incurred in connection with realizing upon the value of the
security provided by this Security Agreement following an Event of Default; and
(d) all other liabilities and obligations of Debtor to the Secured Party,
however and whenever incurred or evidenced, whether primary, secondary, direct,
indirect, absolute, contingent, sole, joint, or several, arising prior to the
date of this Security Agreement or in connection herewith, or which may be
hereafter contracted or acquired, or incurred directly or indirectly in respect
thereof, and all extensions or renewals thereof; Debtor grants to the Secured
Party a lien and security interest in all of Debtor’s accounts receivable,
chattel paper, instruments, documents, inventory, equipment, general
intangibles, intellectual property, investment property, and all other tangible
and intangible property of Debtor, whether now owned or existing or hereafter
acquired or arising, wherever located, and all cash and non-cash proceeds and
products thereof (collectively, the “Collateral”). This security interest shall
also attach to all replacements and proceeds of the Collateral.
2. Assurances; Covenants. Debtor hereby agrees that:
a. Except for the security interest granted to the Secured Party by this
Security Agreement: (i) the Collateral is and will be free of all liens and
security interests of every kind and nature, except as may have been the result
of actions of the Secured Party; (ii) Debtor will not assign, transfer, sell,
convey, hypothecate, pledge, or in any other way dispose of or encumber the
Collateral while this Security Agreement is in effect; and (iii) Debtor will
warrant and defend the Collateral and the Secured Party’s security interest
against the claims and demands of all persons.

 

 

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b. Debtor will not, without the prior written consent of the Secured Party,
borrow from anyone on the security of the Collateral, or otherwise permit any
liens, encumbrances, security interests, or adverse claims against the
Collateral, and will not permit the Collateral to be levied upon under any legal
process.
c. Debtor authorizes the Secured Party to file financing statements, including
amendments or continuations thereof, describing the Collateral, and from time to
time at the request of the Secured Party, will execute such other documents, and
will do such other acts and things, all as the Secured Party may reasonably
request, to establish and maintain a valid perfected security interest in the
Collateral and to enable the Secured Party to enforce its rights and remedies
hereunder with respect to the Collateral.
3. Representations and Warranties. Debtor represents and warrants to the Secured
Party as follows:
a. Debtor is a limited liability company duly organized, validly existing, and
in good standing and active status under the laws of the state of Florida;
b. Debtor has all requisite power to own and operate its properties and to carry
on its business as now being conducted, and has all necessary rights to conduct
its business;
c. Debtor has the power, authority, and legal right to execute and deliver this
Security Agreement, and to perform its obligations hereunder, and has taken all
action necessary to authorize the execution, delivery, and performance of this
Security Agreement and to authorize the transactions contemplated hereby;
d. The execution, delivery, and performance by Debtor of this Security Agreement
will not (i) contravene, conflict with, result in the breach of, or constitute a
violation of or default under the organizational documents of Debtor, any
applicable law, rule, regulation, judgment, order, writ, injunction, or decree
of any court or governmental authority, or any agreement or instrument to which
Debtor is a party or by which Debtor or its property may be bound or affected,
or (ii) result in the creation of any lien, charge, or encumbrance upon any
property or assets of Debtor pursuant to any of the foregoing, except the liens
created by this Security Agreement;
e. This Security Agreement constitutes a legal, valid, and binding agreement
enforceable against Debtor and the Collateral in accordance with its terms and,
without limiting the foregoing, this Security Agreement grants the Secured Party
a valid, perfected security interest in the Collateral; and
f. Debtor is the owner of the Collateral free and clear of all liens,
encumbrances, security interests, and adverse claims whatsoever, except for the
security interest granted in this Security Agreement.

 

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4. Default. Each of the following shall, after receipt by Debtor of written
notice from the Secured Party and after a cure period of five (5) business days
with respect to Section 4a. below, and thirty (30) days with respect to
Sections 4b. through 4d. below, constitute an event of default under this
Security Agreement (each, an “Event of Default”):
a. The occurrence of a default under the Note, or a breach of the assurances set
forth in Section 2 of this Security Agreement, or any other Liability is not
paid when due (and such nonpayment continues beyond the expiration of any
applicable grace or cure period);
b. Any representation or warranty made by Debtor under this Security Agreement
or any report, certificate, financial statement, or other information provided
by Debtor to the Secured Party in connection herewith is false or misleading in
any material respect when made or deemed made; and
c. Debtor fails to fully and promptly perform when due any agreement or covenant
under this Security Agreement or any related document (and such failure
continues beyond the expiration of any applicable grace or cure period).
In the event that Debtor substantially cures such default within the applicable
cure period, such default shall not constitute an Event of Default.
5. Remedies upon the occurrence of an Event of a Default.
a. Upon the occurrence and continuance of an Event of Default under this
Security Agreement, the Secured Party will have the right at any time and from
time to time, without further notice or demand to Debtor to exercise the rights
and remedies upon default that are granted to a secured party under the Uniform
Commercial Code and/or that are otherwise available to the Secured Party under
this Security Agreement, the Note, or otherwise available to secured creditors
at law and/or in equity under applicable law, including without limitation:
(i) Enforce Debtor’s rights against account debtors and notify any and all
account debtors or other parties against which Debtor has a claim under the
Collateral that such Collateral has been assigned by Debtor and that the Secured
Party has a security interest therein and, if desired by the Secured Party, that
all payments should be made to the Secured Party;
(ii) Receive and endorse the name of Debtor upon any instruments of payment
(including payments made under any policy of insurance) that may come into the
possession of the Secured Party;
(iii) Sell, assign, demand, sue for, collect, compromise, or settle payment of
all or any part of the Collateral in the name of Debtor or in its own name, or
make any other disposition of the Collateral, or any part thereof, which
disposition may be for cash, credit, or any combination thereof, or make
exchanges, substitutions, surrenders, or discharges of any of the Collateral;

 

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(iv) Purchase all or any part of the Collateral at public or, if permitted by
law, private sale, and in lieu of actual payment of such purchase price, to set
off the amount of such price against the Liabilities; and
(v) Do all things that the Secured Party may reasonably deem necessary or
advisable to accomplish the purposes of this Security Agreement;
granting to the Secured Party, as the attorney-in-fact of Debtor, full power of
substitution and full power to do any and all things necessary to be done in and
about the premises as fully and effectually as Debtor might or could do but for
this appointment, and hereby ratifying all that said attorney-in-fact shall
lawfully do or cause to be done by virtue of this Security Agreement. This power
of attorney is coupled with an interest and shall be irrevocable until the
Liabilities have been paid in full.
b. Upon the occurrence and continuance of an Event of Default:
(i) the Secured Party may direct the disposition of the Collateral and any other
collateral for the Liabilities, in such order or manner as the Secured Party may
in its sole discretion determine;
(ii) the Secured Party shall have the right to enter and remain upon the
premises of Debtor, without any obligation to pay rent to Debtor or others, or
any other place or places where any of the Collateral is located or kept, and:
(1) remove Collateral therefrom, in order to maintain, sell, collect, and
liquidate the Collateral; or (2) use such premises, together with materials,
supplies, books, and records of Debtor, to maintain possession of and the
condition of the Collateral, and to prepare the Collateral for selling,
liquidating, or collecting.
(iii) the Secured Party may require Debtor, at Debtor’s expense, to assemble the
Collateral and make it available to the Secured Party at a place to be
designated by the Secured Party, which is reasonable and convenient to all
parties.
c. The net proceeds realized by the Secured Party upon a sale or other
disposition of the Collateral, or any part thereof, after deduction of the
expenses of retaking, holding, preparing for sale, selling or the like, and
reasonable attorneys’ fees and other expenses incurred by the Secured Party,
shall be applied to payment of (or held as a reserve against) the Liabilities,
whether or not then due, and in such order of application as the Secured Party
may from time to time elect.
6. Termination. This Security Agreement and the security interest granted
pursuant to this Security Agreement shall terminate when all the Liabilities
have been paid in full. Upon such termination, the Secured Party’s consent to
the filing by Debtor of all documents necessary to terminate all effective
financing statements in the Secured Party’s favor that are then on file or
recorded with respect to the Collateral described in this Security Agreement.
7. Right to Inspect. If Debtor is in default under this Security Agreement,
Debtor will permit representatives of the Secured Party to have full access to
all premises, properties, books, records, tax records, or documents of or
pertaining to the Collateral in order to enable the Secured Party to have access
to the Collateral and the premises, properties, books, records, tax records and
documents related thereto.

 

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8. Assignment. Neither this Security Agreement nor any of the rights, interests,
or obligations arising under this Security Agreement may be assigned by Debtor
without the prior written consent of the Secured Party.
9. Binding Effect. Subject to Section 8, this Security Agreement shall be
binding upon and inure to the benefit of the Secured Party, its respective
successors and assigns, and shall be binding upon Debtor and its successors and
assigns and shall bind all persons who become bound as a Debtor to this Security
Agreement.
10. Severability. Any provision of this Security Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction only, be
ineffective only to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Security Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction. If
any provision of this Security Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only as broad as is enforceable.
11. Titles. The titles and headings preceding the text of the sections of this
Security Agreement have been inserted solely for convenience of reference and do
not constitute a part of this Security Agreement or affect its meaning,
interpretation, or effect.
12. Waiver. The failure of any party to insist in any one or more instances upon
performance of any terms or conditions of this Security Agreement shall not be
construed as a waiver of future performance of any such term, covenant, or
condition, and the obligations of either party with respect to such term,
covenant, or condition shall continue in full force and effect.
13. Entire Agreement. This Security Agreement contains the final, complete, and
exclusive expression of the understanding of Debtor and the Secured Party with
respect to the transactions contemplated in this Security Agreement, and
supersedes any prior or other contemporaneous agreement or representation by or
among the parties related to the subject matter of this Security Agreement.
14. Amendment. This Security Agreement may not be amended, modified, or changed
in any respect and no waiver of any requirement hereof will be effective except
by an agreement in writing signed by Debtor and the Secured Party.

 

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15. Notices. All notices, requests, demands, claims and other communications
under this Security Agreement will be in writing. Any notice, request, demand,
claim or other communication under this Security Agreement shall be deemed duly
given if it is sent: (a) by personal delivery, or (b) by commercial delivery or
overnight courier service that requires a signature as evidence of delivery,
and, in each case, addressed to the intended recipient as set forth below, or to
any other or additional persons and addresses as the Parties may from time to
time designate in a writing delivered in a writing in accordance with this
Section 15:
If to the Secured Party:
As set forth below the signature of such Secured Party on the signature pages
hereof
If to Debtor:
National Credit Report.com, LLC
1690 South Congress Avenue, Suite 200
Delray Beach, Florida 33445
Attn: William J. Caragol
16. Governing Law/Venue. The validity, construction, enforcement, and
interpretation of this Security 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 Debtor and the Secured Party (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 Security 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.
17. Relationship. This Security Agreement does not create or evidence a
partnership or joint venture between Debtor and the Secured Party.
18. Interpretation. Neither this Security Agreement nor any uncertainty or
ambiguity in this Security Agreement shall be construed or resolved against any
party, whether under any rule of construction or otherwise. No party to this
Security Agreement shall be considered the draftsman. The parties acknowledge
and agree that this Security Agreement has been reviewed, negotiated, and
accepted by all the parties and their attorneys and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of the parties.

 

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19. Time. Time shall be of the essence with respect to all of the provisions of
this Security Agreement.
20. Counterparts. This Security Agreement may be executed (including by
facsimile transmission) in two or more counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument.
21. Enforcement of Security Agreement. The parties agree that irreparable damage
will occur if any of the provisions of this Security Agreement are not performed
in accordance with its specific terms or are otherwise breached. It is therefore
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Security Agreement and to specifically enforce the
terms and provisions of this Security Agreement in any court of the United
States or any state having jurisdiction, in addition to any other remedy to
which they are entitled.
22. Remedies Cumulative. The rights and remedies provided in this Security
Agreement are cumulative and not exclusive of any rights or remedies provided by
law, and the warranties, representations, covenants, and other provisions of
this Security Agreement shall be cumulative.
[The next page is the signature page.]

 

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IN WITNESS WHEREOF, the undersigned have executed this Security Agreement as of
the date and year first above written.

            NATIONAL CREDIT REPORT.COM, LLC
      By:   /s/ William J. Caragol               VERICHIP CORPORATION
      By:   /s/ Allison Tomek         Name:   Allison Tomek        Title:  
Secretary        Address for Notices:
1690 South Congress Avenue
Suite 200
Delray Beach, Florida 33445
Attn: William J. Caragol  

 

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