Exhibit 10.5
INTELLECTUAL PROPERTY SECURITY AGREEMENT
THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (the “Agreement”), dated as of
February 29, 2008, is made by VERICHIP CORPORATION, a Delaware corporation
(“Chip”) and XMARK CORPORATION, a Canada corporation (“Mark”, together with
Chip, each a “Grantor” and collectively, “Grantors”), in favor of LV
Administrative Services, Inc., a Delaware corporation, as administrative and
collateral agent for the Purchasers (as defined in the Purchase Agreement
referred to below)(the “Agent”).
WHEREAS, pursuant to that certain Securities Purchase Agreement dated as of the
date hereof (as amended, restated, supplemented and/or otherwise modified from
time to time, the “Purchase Agreement”) by and among the Grantors, the
Purchasers party thereto from time to time and the Agent, the Purchasers have
agreed to provide financial accommodations to the Grantors;
WHEREAS, Creditor Parties are willing to enter into the Purchase Agreement, but
only upon the condition, among others, that Grantors shall have executed and
delivered to Agent this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Grantor hereby agrees as
follows:
Section 1. DEFINED TERMS.
(a) When used herein the following terms shall have the following meanings:
“Copyrights” means all copyrights arising under the laws of the United States,
any other country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished, all registrations and
recordings thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright
Office, and the right to obtain all renewals of any of the foregoing.
“Copyright Licenses” means all written agreements naming any Grantor as licensor
or licensee granting any right under any Copyright, including the grant of
rights to manufacture, distribute, exploit and sell materials derived from any
Copyright.
“Excluded Collateral” has the meaning ascribed to such term in the Master
Security Agreement.
“General Intangibles” shall have the meaning provided thereto in Section 9-102
of the UCC, as amended, restated or otherwise modified from time to time.
“Master Security Agreement” shall have the meaning provided thereto in Section 5
hereof.
“Obligations” shall have the meaning provided thereto in the Master Security
Agreement.

 

 

--------------------------------------------------------------------------------

 

“Patents” means (a) all letters patent of the United States, any other country
or any political subdivision thereof, and all reissues and extensions of such
letters patent, (b) all applications for letters patent of the United States or
any other county and all divisions, continuations and continuations-in-part
thereof, and (c) all rights to obtain any reissues or extensions of the
foregoing.
“Patent Licenses” means all agreements, whether written or oral, providing for
the grant by or to any Grantor of any right to manufacture, use or sell any
invention covered in whole or in part by a Patent.
“Trademarks” means (a) all trademarks, trade names, corporate names, business
names, fictitious business names, trade styles, services marks, logos and other
source or business identifiers, and all goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or political subdivision
thereof, or otherwise, and all common-law rights thereto, and (b) the right to
obtain all renewals thereof.
“Trademark Licenses” means, collectively, each agreement, whether written or
oral, providing for the grant by or to any Grantor of any right to use any
Trademark.
“UCC” shall have the meaning provided thereto in the Master Security Agreement.
(b) All capitalized terms used but not otherwise defined herein have the
meanings given to them in the Purchase Agreement.
Section 2. GRANT OF SECURITY INTEREST IN INTELLECTUAL PROPERTY COLLATERAL. To
secure the complete and timely payment of all the Obligations of the Grantors
now or hereafter existing from time to time, each Grantor hereby grants to
Agent, for the ratable benefit of the Creditor Parties, a continuing first
priority security interest in all of Grantor’s right, title and interest in, to
and under the following, whether presently existing or hereafter created or
acquired (collectively, the “Collateral”):
(a) all of its Patents and Patent Licenses to which it is a party including
those referred to on Schedule I hereto;
(b) all of its Trademarks and Trademark Licenses to which it is a party
including those referred to on Schedule II hereto;
(c) all of its Copyrights and Copyright Licenses to which it is a party
including those referred to on Schedule III hereto;
(d) all reissues, continuations or extensions of the foregoing;
(e) all goodwill of the business connected with the use of, and symbolized by,
each Patent, each Patent License, each Trademark, each Trademark License, each
Copyright and each Copyright License; and

 

2

--------------------------------------------------------------------------------

 

(f) all products and proceeds of the foregoing, including, without limitation,
any claim by Grantor against third parties for past, present or future (i)
infringement or dilution of any Patent or Patent licensed under any Patent
License, (ii) injury to the goodwill associated with any Patent or any Patent
licensed under any Patent License, (iii) infringement or dilution of any
Trademark or Trademark licensed under any Trademark License, (iv) injury to the
goodwill associated with any Trademark or any Trademark licensed under any
Trademark License, (v) infringement or dilution of any Copyright or Copyright
licensed under any Copyright License, and (vi) injury to the goodwill associated
with any Copyright or any Copyright licensed under any Copyright License.
Notwithstanding anything contained herein to the contrary, the Collateral shall
not include any Excluded Collateral.
Section 3. REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants
that such Grantor does not have any ownership interest in, or title to, any
Patent, Trademark or Copyright except as set forth in Schedule I, Schedule II,
Schedule III and Schedule IV, respectively, hereto. To the best of each
Grantor’s knowledge, each Grantor’s registered Patents, registered Trademarks
and registered Copyrights are valid and enforceable, are solely owned by such
Grantor and there is no pending or, to Grantor’s knowledge, threatened claim
that the use of any of them violates the rights of any third person. Subject to
any previously perfected security agreements previously recorded at the U.S.
Patent and Trademark Office, this Agreement is effective to create a valid and
continuing lien on and perfected security interests in favor of Agent, for the
ratable benefit of Creditor Parties, in all of each Grantor’s Patents,
Trademarks and Copyrights and such perfected security interests are enforceable
as such as against any and all creditors of, and purchasers from, such Grantor.
Upon filing of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office and the filing of appropriate financing
statements, all action necessary or desirable to protect and perfect Agent’s
Lien on each Grantor’s Patents, Trademarks and Copyrights shall have been duly
taken.
Section 4. COVENANTS. Each Grantor covenants and agrees with Agent that from and
after the date of this Agreement:
(a) Such Grantor shall notify Agent promptly if it knows or has reason to know
that any application or registration relating to any Collateral material to its
business may become abandoned (excluding those Trademarks listed on Schedule IV)
or dedicated, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, the United States Copyright
Office or any court) regarding such Grantor’s ownership of any Patent, Trademark
or Copyright, its right to register the same, or to keep and maintain the same.

 

3

--------------------------------------------------------------------------------

 

(b) In no event shall any Grantor, either directly or through any agent,
employee, licensee or designee, file an application for the registration of any
Patent, Trademark or Copyright with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency
without giving Agent prior written notice thereof, and, upon request of Agent,
the applicable Grantor shall execute and deliver a supplement hereto (in form
and substance satisfactory to Lender) to evidence Agent’s Lien on such Patent,
Trademark or Copyright, and the General Intangibles of such Grantor relating
thereto or represented thereby.
(c) Except for the Trademarks set forth on Schedule IV, with respect to each
Patent and Trademark material to the conduct of its business or operations, such
Grantor shall take all actions necessary or requested by Agent to maintain and
pursue each application, to obtain the relevant registration and to maintain the
registration of each of the Patents or Trademarks (now or hereafter existing),
including the filing of applications for renewal, affidavits of use, affidavits
of noncontestability and opposition and interference and cancellation
proceedings.
(d) In the event that any of the Collateral is infringed upon, or
misappropriated or diluted by a third party, such Grantor shall notify Agent
promptly after such Grantor learns thereof. Such Grantor shall, unless it shall
reasonably determine that such Collateral is in no way material to the conduct
of its business or operations, promptly sue for infringement, misappropriation
or dilution and to recover any and all damages for such infringement,
misappropriation or dilution, and shall take such other actions as Agent shall
reasonably deem appropriate under the circumstances to protect such Collateral.
Section 5. MASTER SECURITY AGREEMENT. The security interests granted pursuant to
this Agreement are granted in conjunction with the security interests granted to
Agent by Grantors pursuant to the Master Security Agreement. Each Grantor hereby
acknowledges and affirms that the rights and remedies of Agent with respect to
the security interest in the Collateral made and granted hereby are more fully
set forth in the Master Security Agreement, the terms and provisions of which
relating to the such right and remedies are incorporated by reference herein as
if fully set forth herein.
Section 6. REINSTATEMENT. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against any
Grantor for liquidation or reorganization, should any Grantor become insolvent
or make an assignment for the benefit of any creditor or creditors or should a
receiver or trustee be appointed for all or any significant part of any
Grantor’s assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.

 

4

--------------------------------------------------------------------------------

 

Section 7. INDEMNIFICATION. (A) Each Grantor assumes all responsibility and
liability arising from its use of the Patents, Trademarks and/or Copyrights and
each Grantor hereby indemnifies and holds each Creditor Party harmless from and
against any claim, suit, loss, damage or expense (including reasonable
attorneys’ fees) arising out of such Grantor’s operations of its business from
the use of the Patents, Trademarks and/or Copyrights. (B) In any suit,
proceeding or action brought by Agent under any Patent License, Trademark
License or Copyright License for any sum owing thereunder, or to enforce any
provisions of such license, each Grantor will indemnify and keep each Creditor
Party harmless from and against all expense, loss or damage suffered by reason
of any defense, set off, counterclaim, recoupment or reduction or liability
whatsoever of the obligee thereunder, arising out of (i) a breach by such
Grantor of any obligation thereunder or (ii) any other agreement, indebtedness
or liability at any time owing to or in favor of such obligee or its successors
from such Grantor (items (i) and (ii) are referred to collectively as “Affected
Obligations”), and all such Affected Obligations of such Grantor shall be and
remain enforceable against and only against such Grantor and shall not be
enforceable against any Creditor Party.
Section 8. NOTICES. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by any other party, or whenever any
of the parties desires to give and serve upon any other party any communication
with respect to this Agreement, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing and shall be
given in the manner, and deemed received, as provided for in the Purchase
Agreement.
Section 9. TERMINATION OF THIS AGREEMENT. Subject to Section 6 hereof, this
Agreement shall terminate upon payment of the Obligations under the Note in full
in immediately available funds.
Section 10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one instrument. It is understood and agreed that if facsimile copies
of this Agreement bearing facsimile signatures are exchanged between the parties
hereto, such copies shall in all respects have the same weight, force and legal
effect and shall be fully as valid, binding, and enforceable as if such signed
facsimile copies were original documents bearing original signature.
[Signature Page to Follow]

 

5

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, each Grantor has caused this Intellectual Property Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.

            VERICHIP CORPORATION
      By:   /s/ William J. Caragol         Name:   William J. Caragol       
Title:   President and Chief Financial Officer        XMARK CORPORATION
      By:   /s/ William J. Caragol         Name:   William J. Caragol       
Title:   Chief Financial Officer and Secretary     

          ACCEPTED and ACKNOWLEDGED by:    
 
        LV ADMINISTRATIVE SERVICES, INC.,
as Agent    
 
       
By:
  /s/ Scott Bluestein
 
Name: Scott Bluestein    
 
  Title: Authorized Signatory    

signature page to
intellectual property
security agreement

 

--------------------------------------------------------------------------------

 

SCHEDULE I
TO
INTELLECTUAL PROPERTY SECURITY AGREEMENT
I. GRANTOR PATENT REGISTRATIONS

          Patent   Reg. No.   Issue/Reg. Date Asset Security Tag   US Patent
No. 6,137,414   October 24, 2000 Fibre Optic Security and Communications Link  
Canadian Patent No. 2,055,266   March 14, 2000 Fibre Optic Security and
Communications Link   US Patent No. 5,374,921   December 20, 1994
Method of Detecting Objects Within Range of a Receiver
  US Patent No. 6,727,810   April 27, 2004 Multiple Conductor Security Tag   US
Patent No. 5,977,877   November 2, 1999 Tag and System for Patient Safety
Monitoring   US Patent No. 6,144,303   November 7, 2000 Tag and System for
Patient Safety Monitoring   Canadian Patent No. 2,260,577   July 23, 2002 Tag
System With Anti-Collision Features   US Patent No. 6,456,191   September 24,
2002 Tag System With Anti-Collision Features   Canadian Patent No. 2,266,337  
June 8, 2004 Transceiver Enclosure   US Design Patent No. D414,178  
September 21, 1999 Transceiver Enclosure   US Design Patent No. D417,667  
December 14, 1999 Associated Articles Identifying System   ATE 310296 (Austria)
  November 16, 2005 Associated Articles Identifying System   CH 1362335
(Switzerland)   November 16, 2005 Associated Articles Identifying System   DE
60115096 (Germany)   November 16, 2005 Associated Articles Identifying System  
ES 1362335 (Spain)   November 16, 2005 Associated Articles Identifying System  
FR 1362335 (France)   November 16, 2005 Associated Articles Identifying System  
GB 1362335 (United Kingdom)   November 16, 2005 Associated Articles Identifying
System   IE 1362335 (Ireland)   November 16, 2005 Associated Articles
Identifying System   IT 83335/BE06 (Italy)   November 16, 2005 Associated
Articles Identifying System   US Patent No. 6,977,586   December 20, 2005 Asset
Location System   US Patent No. 7,116,230   October 3, 2006
A Method of Detecting Objects Within Range of a Receiver
  Canadian Patent No. 2,299,053   February 5, 2008 Multiple Conductor Security
Tag   Canadian Patent No. 2,271,925   February 5, 2008

 

 

--------------------------------------------------------------------------------

 

II. GRANTOR PATENT APPLICATIONS

          Patent   Reg. No.   Date Asset Location System   Canadian Patent
Application
No. 2,473,983   July 14, 2004 An Asset Security Tag   Canadian Patent
Application No. 2,254,832   November 30, 1998
Associated Articles Identifying System
  Canadian Patent Application No. 2,436,798   February 13, 2001 Multiple
Conductor Security Tag   Canadian Patent Application No. 2,596,458   May 14,
1999

III. MATERIAL PATENT LICENSES

          Patent   Reg. No.   Date Tag for Use with Personal Monitoring
System(1)   US Patent No. 4,952,913   August 28, 1990 Tag for Use with Personal
Monitoring System(1)   US Patent No. 4,885,571   December 5, 1989 Tag for Use
with Personal Monitoring System(1)   Canadian Patent No. 1,299,660   April 28,
1992 Tag for Use with Personal Monitoring System(1)   New Zealand Patent No.
219,982   April 14, 1987 Programmable Channel Search Reader(2)   US Patent
No. 5,952,935   September 14, 1999 Syringe-Implantable Identification
Transponder(2)(3)   US Patent No. 5,211,129   May 18, 1993 Passive Integrated
Transponder with Unitary Antenna Core(2)   US Patent No. 6,400,338   June 4,
2002 US2002/0154065 A1(2)   Continuation of Passive Integrated Transponder with
Unitary Antenna Core    

  (1)  
BI Patent License Agreement dated as of March 6, 2000, as amended, between BI
Incorporated and Instantel Inc.
  (2)  
Amended and Restated Supply, License and Development Agreement dated
December 27, 2005, as amended, between VeriChip Corporation and Digital Angel
Corporation
  (3)  
Patent expires in April 2008.

 

2

--------------------------------------------------------------------------------

 

SCHEDULE II
TO
INTELLECTUAL PROPERTY SECURITY AGREEMENT
I. GRANTOR TRADEMARK REGISTRATIONS

              REG. NO.   MARK   COUNTRY   REG DATE  
2650018
  ASSETRAC   United States   12-Nov-2002
 
           
TMA596,013
  ASSETRAC   Canada   28-Nov-2003
 
           
1628968
  BLASTMATE   United States   25-Dec-1990
 
           
TMA347,303
  BLASTMATE   Canada   28-Oct-1988
 
           
1697379
  BLASTWARE   United States   30-Jun-1992
 
           
TMA364,522
  BLASTWARE   Canada   19-Jan-1990
 
           
2768516
  EXI   United States   30-Sep-2003
 
           
TMA552,196
  EXI   Canada   10-Oct-2001
 
           
2292993
  FINDIT   United States   16-Nov-1999
 
           
TMA465,572
  FINDIT   Canada   1-Nov-1996
 
           
2833540
  HEARTBEAT   United States   20-Apr-2004

 

3

--------------------------------------------------------------------------------

 

              REG. NO.   MARK   COUNTRY   REG DATE  
TMA582,108
  HEARTBEAT   Canada   22-May-2003
 
           
2390878
  HUGS   United States   3-Oct-2000
 
           
TMA518,570
  HUGS   Canada   22-Oct-1999
 
           
1637432
  INSTANTEL   United States   12-Mar-1991
 
           
TMA371,010
  INSTANTEL   Canada   20-Jul-1990
 
           
2833459
  KEEPIT   United States   20-Apr-2004
 
           
TMA580,218
  KEEPIT   Canada   30-Apr-2003
 
           
2844176
  KISSES   United States   25-May-2004
 
           
2,963,817
  MINIMATE   United States   28-Jun-2005
 
           
2901382
  MYCALL   United States   9-Nov-2004
 
           
TMA485,797
  MYCALL   Canada   19-Nov-1997
 
           
1816759
  ROAMALERT   United States   18-Jan-1994
 
           
TMA428,843
  WATCHMATE   Canada   17-Jun-1994  
1823615
  WATCHMATE   United States   22-Feb-1994

 

4

--------------------------------------------------------------------------------

 

              REG. NO.   MARK   COUNTRY   REG DATE  
2,940,393
  XMARK   United States   12-Apr-2005
 
           
TMA606103
  XMARK   Canada   24-Mar-2004
 
           
339.174
  VERIMED   Colombia   08/13/2007
 
           
003542271
  VERIMED   CTM (European Union)   04/05/2005
 
           
831309
  VERIMED   Mexico   04/20/2004
 
           
339.172
  VERIGUARD   Colombia   08/13/2007
 
           
003574233
  VERIGUARD   CTM (European Union)   12/08/2003
 
           
831307
  VERIGUARD   Mexico   04/20/2004
 
           
003574167
  VERIPAY   CTM (European Union)   12/08/2003
 
           
831308
  VERIPAY   Mexico   04/20/2004
 
           
648,478
  VERICHIP   Canada   09/20/2005
 
           
680.295
  VERICHIP   Chile   03/16/2004
 
           
3538381
  VERICHIP   China   01/07/2006

 

5

--------------------------------------------------------------------------------

 

              REG. NO.   MARK   COUNTRY   REG DATE  
319089
  VERICHIP   Colombia   07/12/2006
 
           
002912319
  VERICHIP   CTM (European Union)   04/24/2004
 
           
23971
  VERICHIP   Ecuador   06/24/2003
 
           
611263
  VERICHIP   Korea   03/14/2005
 
           
790076
  VERICHIP   Mexico   04/30/2003
 
           
288421
  VERICHIP   Russia   05/05/2005
 
           
519350
  VERICHIP   Switzerland   03/18/2004
 
           
01091002
  VERICHIP   Taiwan   04/01/2004
 
           
P-273400
  VERICHIP   Venezuela   09/04/2006
 
           
2,772,634
  GET CHIPPED   United States   10/07/2003
 
           
2,807,427
  VERIPASS   United States   01/20/2004
 
           
2,679,587
  ECO-LITE   United States   01/28/2003

 

6

--------------------------------------------------------------------------------

 

II. GRANTOR TRADEMARK APPLICATIONS

              APPLICATION           APPLICATION NUMBER   MARK   COUNTRY   DATE  
3394905
  INSTANTEL   EU   10/09/2003
 
           
826230733
  VERIMED   Brazil   12/09/2003
 
           
78/259979
  VERIMED   United States   06/09/2003
 
           
826059325
  VERIGUARD   Brazil   11/14/2003
 
           
78/598039
  VERIGUARD   United States   03/30/2005
 
           
826113800
  VERIPAY   Brazil   12/09/2003
 
           
78/260027
  VERIPAY   United States   06/09/2003
 
           
826059317
  VERIKID   Brazil   11/14/2003
 
           
78/309237
  VERIKID   United States   10/03/2003
 
           
2.425.463
  VERICHIP   Argentina   04/16/2003
 
           
825387060
  VERICHIP   Brazil   03/10/2003
 
           
2004-00069
  VERICHIP   South Africa   01/05/2004
 
           
78/099039
  VERICHIP   United States   12/19/2001
 
           
78/882482
  VERITRACE   United States   05/12/2006

III. MATERIAL TRADEMARK LICENSES – N/A

              REG. NO.   MARK   COUNTRY   REG. DATE
 
           

Trademark Assignment Agreement dated December 21, 2006 between Applied Digital
Solutions, Inc. and VeriChip Corporation

 

7

--------------------------------------------------------------------------------

 

SCHEDULE III
TO
INTELLECTUAL PROPERTY SECURITY AGREEMENT
I. GRANTOR COPYRIGHT REGISTRATIONS – N/A

          Copyright   Reg. No.   Date
 
       

II. GRANTOR COPYRIGHT APPLICATIONS – N/A

          Copyright   Reg. No.   Date
 
       

III. MATERIAL COPYRIGHT LICENSES – N/A

          Copyright   Reg. No.   Date
 
       

 

8

--------------------------------------------------------------------------------

 

SCHEDULE IV
TO
INTELLECTUAL PROPERTY SECURITY AGREEMENT
The following Trademarks have been abandoned by the Grantors:

          REG./APPLICATION NO.   MARK   COUNTRY
 
       
TMA568,111
  E-LINK ENABLED   Canada
 
       
TMA559,903
  ECO-LITE   Canada
 
       
TMA511,093
  PERCEPTIS   Canada
 
       
TMA664,993
  ROAM@HOME   Canada
 
       
TMA435,529
  BLASTER’S TOOL BOX   Canada
 
       
TMA447,659
  WATCHIT   Canada
 
       
77/204734
  EVITRACE   United States

 

9