Filed by Bowne Pure Compliance





Exhibit 10.2




ASSET PURCHASE AGREEMENT




THIS AGREEMENT made as of the 12th day of November, 2008 (the “Effective Date”), by
and among Destron Fearing Corporation, a Delaware corporation (“Seller”), Digital Angel
Corporation, a Delaware Corporation (“Digital Angel”), and VeriChip Corporation, a Delaware
corporation (“Buyer”).



RECITALS




WHEREAS, Seller is the wholly-owned subsidiary of Digital Angel and is the owner of certain
proprietary technologies, processes, and other assets relating to and used in the business of
manufacturing and selling radio-frequency and visual identification products;



WHEREAS, a component of Seller’s business includes the manufacture and sale of
human-implantable passive radio-frequency identification microchips (“Human RFID Product”), which
are exclusively sold to Buyer and components related thereto, including readers, transponders,
implanters, and packaging devices, and related services (the “Business”);



WHEREAS, Buyer develops, markets, and sells RFID systems used to identify, locate and protect
people, including the identification of people in medical emergencies, which systems use the Human
RFID Product, and components related thereto, including readers, transponders, implanters, and
packaging devices, and which future systems, products, components and services developed by or on
behalf of Buyer may use the Human RFID Product or portions thereof (“Human RFID Field”); and



WHEREAS, Seller desires to sell and deliver to Buyer, and Buyer desires to purchase and
receive from Seller all, right, title and interest in and to certain Seller’s assets used or useful
in connection with the operation of the Business in the Human RFID Field, so as to permit Buyer to
independently pursue the development and improvement of the Business in the Human RFID Field.




IT IS THEREFORE AGREED:



ARTICLE I.

ASSETS TO BE PURCHASED




1.1. Description of Assets. Upon the terms and subject to the conditions hereof, on
the Closing Date (as defined in Section 9.1) Seller shall sell, transfer, assign and deliver to
Buyer, and Buyer shall purchase from Seller, all of Seller’s right, title and interest in and to
all of Seller’s assets that are limited to the operation of the Business in the Human RFID Field,
excluding the Excluded Assets (as defined below), but including, without limitation, the following
assets (collectively referred to as the “Purchased Assets”) which shall be conveyed in the manner
described:




(a) The patents and patent applications, including divisions, continuations,
renewals, reissuances, and extensions of the foregoing (as applicable) listed on
Schedule 1.1(a) shall be transferred and assigned to Buyer (“the Assigned
Patents”), pursuant to an Assignment of Patent, annexed hereto as Schedule X,
and Seller and Digital Angel shall receive from Buyer a full and irrevocable covenant
not to sue for Seller’s or Digital Angel’s use of such patents and patent applications
as more fully described in Section 5.4 of this Agreement;


 


 









 






(b) The patents and patent applications, including divisions, continuations,
renewals, reissuances, and extensions of the foregoing (as applicable) listed on
Schedule 1.1(b) are used or usable by Seller in its business and shall be
retained by Seller for use in its business (“Retained Patents”), but Buyer shall receive
from Seller and Digital Angel a full and irrevocable covenant not to sue for Buyer’s use
of such patents and patent applications in its Business as more fully described in
Section 4.7 of this Agreement;




(c) The FDA classification decision issued to Seller on October 12, 2004 (“FDA
Decision”) for the Human RFID Product identified as 21 CFR §880.6300 as an “Implantable
Radiofrequency Transponder System for Patient Identification and Health Information,”
including all records and papers relating to such FDA Decision, shall be assigned and
delivered to Buyer;




(d) The goodwill, supplier relationships, licenses, permits, production documents,
technical specifications, assembly standards, and packaging instructions, relating to or
used in the manufacture and assembly of the Human RFID Product, applicable only to the
Human RFID Product, and other general intangibles of Seller relating to the Business,
shall be assigned and delivered to Buyer;




(e) All of Seller’s rights, obligations, and interest in that certain Glucose
Sensor Development Agreement among Seller, Buyer, and Receptors LLC dated as of January
1, 2008 shall be assigned to Buyer and Seller shall have no further rights relating
thereto, except that Buyer’s rights to sue are limited as set forth in the covenant not
to sue set forth in Section 5.4 of this Agreement;




(f) Copies of all papers and records (in paper or electronic format) primarily
relating to the Business, and all technical and descriptive materials primarily relating
to the Business, shall be delivered to Buyer;




(g) Copies of all manufacturing designs, design specifications (including design
logic and flowcharts) technical information, manufacturing instructions, schematic
designs, printed circuit board layouts, testing specifications, user guides, processes,
improvements, copyrights, mask works, design rights, and know-how relating to, used or
useful with respect to the Human RFID Products and components related thereto, including
the pocket readers, transponders, implanters, and packaging devices relating thereto, in
each case as used in the past and as currently used, (“Know-How”) shall be delivered to
Buyer; and


 


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(h) Seller shall, transfer all Know-How and technical expertise to Buyer relating
to the manufacture of the Human RFID Products and components related
thereto, including the pocket readers, transponders, implanters, and packaging
devices for sale in the Human RFID Field, and shall provide Buyer with training, support
and continued transfers of such Know-How and technical expertise, as more fully
described in Article 10 of this Agreement.



1.2. Excluded Assets. Notwithstanding anything in this Agreement to the contrary, all
of the assets owned by Seller relating to any business or venture of Seller that may also have
application to the Human RFID Field and related Business (excluding, however, the Purchased Assets
listed above) are retained by Seller and are not transferred by this Agreement (collectively, the
“Excluded Assets”); however, Seller agrees that the Buyer may use any intellectual property rights
of Seller (that exist as of the date of this Agreement) that are included in such Excluded Assets
that are necessary to the Business.



1.3. Certain Agreements. Upon Closing, the parties agree to terminate, assign, or
enter into certain agreements, as follows:




(a) FDA Decision Assignment. Seller shall assign the FDA Decision
regarding the Human RFID Product to Buyer through delivery of an assignment letter in a
form substantially similar to that set forth in Exhibit A to this Agreement, which
assignment letter shall be delivered by Seller to Buyer at Closing.




(b) 2006 Tax Allocation Agreement. Upon Closing, the 2006 Tax Allocation
Agreement dated as of December 21, 2006, between Buyer and Digital Angel, shall
immediately terminate and shall be of no further effect.




(c) Letter Agreements between Digital Angel and Buyer. Simultaneously with
the Closing, the Letter Agreement dated as of May 15, 2008, between Buyer and Digital
Angel, shall be terminated and shall have no further force or effect, except for
Sections 8(b) and 8(f) thereunder. Additionally, the Letter Agreement dated as of
December 17, 2007 between Buyer and Digital Angel, shall be terminated and shall have no
further force or effect.




(d) Resignation of Joseph J. Grillo. Simultaneously with the Closing,
Joseph J. Grillo, Digital Angel’s Chief Executive Officer and President, shall resign
from Buyer’s Board of Directors.




(e) Benefits Programs. Buyer’s participation in Digital Angel’s health and
other employee benefit plans and insurance programs, including medical, hospitalization,
dental, vision, disability and life, as well as Buyer’s participation in the Digital
Angel 401(k) Plan (the “DA Plan”), shall cease no later than January 1, 2009. Buyer and
Digital Angel shall take all action necessary to spin-off the assets of the DA Plan
attributable to employees of Buyer into a separate defined contribution plan (the
“Spun-Off Plan”), the terms of which will be substantially identical to the DA Plan, as
soon as practicable after Closing. No distribution of account balances shall be made to
any employees of Buyer solely as a result of the transactions contemplated by this
Agreement, including the cessation of Buyer’s status as a participating employer in the
DA Plan.


 


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(f) Amended and Restated Supply, License and Development Agreement. Upon
Closing, the Amended and Restated Supply, License, and Development Agreement dated as of
December 27, 2005 (as amended) between Seller and Buyer, including but not limited to
the letter agreement amendment dated December 17, 2007, shall immediately terminate and
have no further effect, and all obligations and claims of Buyer and Seller thereunder
shall be terminated and released. Notwithstanding the foregoing, Seller agrees that (i)
the product warranties under Sections 8(b) of the Amended and Restated Supply, License,
and Development Agreement shall continue to apply to products sold to Buyer under such
Agreement, subject to the limitations of Section 8(c), (d) and (e) thereof, and (ii) the
indemnification provisions of Section 8(f), (g) and (h) of the Amended and Restated
Supply, License, and Development Agreement shall survive through March 4, 2013 for
claims associated with the products purchased under the Amended and Restated Supply,
License, and Development Agreement.




(g) Glucose Sensor Development Agreement. Upon Closing, Seller shall
assign to Buyer and Buyer shall accept all of Seller’s rights, obligations, and interest
in that certain Glucose Sensor Development Agreement dated January 1, 2008 among Seller,
Buyer, and Receptors LLC (the “Glucose Sensor Development Agreement”).



ARTICLE II.

ASSUMPTION OF LIABILITIES AND OBLIGATIONS




2.1 Other than assuming Seller’s obligations to perform under applicable assigned agreements,
if any, Buyer shall have no responsibility or liability for any liabilities or other obligations of
Seller and Seller shall retain, and be responsible for paying, performing and discharging when due,
all liabilities of Seller, regardless of when incurred. Buyer is not, directly or indirectly,
assuming any debt, or liability of or claim against Seller of any kind whatsoever, whether known or
unknown, actual or contingent, matured or unmatured, currently existing or arising in the future.



ARTICLE III.

PURCHASE PRICE




3.1 Consideration. The aggregate consideration to be paid by Buyer to Seller for the
Purchased Assets, the agreement not to compete and Seller Covenant Not to Sue, and the assignment
of certain contracts, shall be Five Hundred Thousand Dollars ($500,000.00) payable in cash on the
Closing Date (the “Purchase Price”).



3.2 Allocation of Purchase Price. The manner in which the purchase price set forth in
Section 3.1 shall be allocated among the Assets shall be as set forth in Schedule 3.2
attached hereto. Seller and Buyer agree that the purchase price allocation set forth in
Schedule 3.2 has been determined in good faith and at arm’s length, and that neither party
shall take a position in reporting income taxes which is inconsistent with such allocation.



3.3 Transfer Taxes. Seller shall pay any sales, use, excise or other transfer taxes
imposed upon Seller by applicable law in connection with the transfer of the Assets. To the
extent permitted by applicable law, the parties hereto shall cooperate in minimizing any
sales, use, excise or other transfer taxes.


 


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ARTICLE IV.

COVENANTS, REPRESENTATIONS AND WARRANTIES

OF SELLER AND/OR DIGITAL ANGEL




As an inducement to Buyer to enter into and perform its obligations under this Agreement,
Seller and Digital Angel, as applicable, hereby represent, warrant and covenant to Buyer as
follows:



4.1. Organization; Enforceability. Each of Seller and Digital Angel is a corporation
duly organized, validly existing and in good standing under the laws of the State of Delaware. The
execution and delivery of this Agreement, and consummation of the transactions contemplated herein,
have been duly and validly authorized by the Board of Directors of Seller and by the Board of
Directors of Digital Angel. This Agreement will, upon execution and delivery, be a legal, valid
and binding obligation of both Seller and Digital Angel, enforceable against Seller and Digital
Angel in accordance with its terms, except as may be limited by bankruptcy, insolvency or other
laws affecting creditors’ rights generally.



4.2. No Breach or Default. Except as set forth in Schedule 4.2, the execution
and delivery of this Agreement, and the consummation of the transactions herein provided will not:




(a) Result in the breach of any of the terms or conditions of, or constitute a
default under, or in any manner release Seller from any obligations under, or accelerate
any mortgage, note, bond, contract, indenture, agreement, license or other instrument or
obligation of any kind or nature to which Seller is now a party or by which any of its
properties or assets may be bound or affected;




(b) Violate any order, writ, injunction or decree of any court, administrative
agency or governmental body or require the approval, consent or permission of any
governmental body or agency which has not been heretofore obtained; or




(c) Violate any provision of the Certificate of Incorporation or Bylaws of Seller.



4.3. Bankruptcy and Insolvency. No petition in bankruptcy (voluntary or otherwise),
assignment for the benefit of creditors or petition seeking reorganization or arrangement or other
action under federal or state bankruptcy laws is pending on behalf of or against Seller.



4.4. Title to Assets. Except as set forth in Schedule 4.2, all of the
Purchased Assets are owned by Seller. On the Closing Date, Seller will convey to Buyer good and
marketable title to all of the Purchased Assets, free and clear of all leases, security interests,
liens, encumbrances on title, mortgages, pledges, conditional sale and other title-retention
agreements, covenants, restrictions, easements, reservations and other burdens or charges of title
every kind and nature (collectively, “Liens”).


 


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4.5. Intellectual Property.




(a) Except as set forth on Schedule 4.2, as of the Closing Date, Seller is
the owner of all right, title and interest in and to each of the Assigned Patents and
each such Assigned Patent is free and clear of any Liens.




(b) To the Knowledge of Seller and Digital Angel, the use, operation or other
exploitation of the Purchased Assets transferred to Buyer hereunder by Seller prior to
the date hereof does not infringe or misappropriate any of the intellectual property
rights of any other person or entity, and Seller has not received written notice from
any person or entity claiming that such Purchased Assets infringes or misappropriates
any of the intellectual property rights of any person or entity. To the Knowledge of
Seller and Digital Angel, the use, operation or other exploitation of the Purchased
Assets in the Human RFID Field does not infringe or misappropriate any of the
intellectual property rights of any other person or entity. Seller has not licensed from
any third party any intellectual property rights that would be necessary for Buyer’s
manufacture, sale and exploitation of the Human RFID Products sold by Buyer as of the
date of this Agreement. The term “Knowledge” as used in this Agreement shall mean the
actual knowledge of Joseph Grillo, Lorraine Breece, Patricia Petersen, Randy Geissler,
and Ezequiel Mejia.




(c) To Seller’s and Digital Angel’s Knowledge, no person or entity is infringing
upon the Assigned Patents in the Human RFID Field.




(d) To the Knowledge of Seller and Digital Angel, none of the Assigned Patents is
subject to any proceeding or outstanding decree, order, judgment or settlement agreement
or stipulation that restricts in any manner the use, transfer or licensing thereof by
Seller or may affect the validity, use (as contemplated by this Agreement) or
enforceability of such Assigned Patents.




(e) To the Knowledge of Seller and Digital Angel, the Know-How is not subject to
any proceeding or outstanding decree, order, judgment or settlement agreement or
stipulation that restricts in any manner the use, transfer or licensing thereof by
Seller or may affect the use (as contemplated by this Agreement) of such Know-How (as
contemplated by this Agreement).



4.6. Litigation and Governmental Action. There are no suits, actions or claims,
legal, administrative or arbitration proceedings pending or, to Seller’s or Digital Angel’s
Knowledge, threatened against Seller or Digital Angel, or to which Seller or Digital Angel is a
party (whether or not covered by insurance) which in any manner relate to or affect the Purchased
Assets. To Seller’s and Digital Angel’s Knowledge, no claims or suits will arise as a direct or
indirect result of this transaction. To Seller’s and Digital Angel’s Knowledge, there is not
outstanding any notice, order, writ, injunction or decree of any court, governmental agency or
arbitration tribunal relating to or affecting the Purchased Assets.


 


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4.7. Seller Covenant Not To Sue. As inducement for the purchase of the Purchased
Assets by Buyer, Seller and Digital Angel each agrees to the provisions set forth in this Section
4.7.




(a) Definitions. For purposes of this Section 4.7, the
following definitions apply:




(i) “Affiliate” means any person or entity controlled by, under common
control with, or which controls, another person or entity.




(ii) “Buyer Parties” means Buyer, and any and all manufacturers, suppliers,
distributors, sellers, sublicensees, purchasers, contractors, or users of
any component, equipment, or product manufactured or sold by or for Buyer
for use in the Human RFID Field, or any services relating to the Human RFID
Field, and including Buyer’s successors and assigns.




(iii) “Improvements” means any invention, discovery or development,
modification, derivative work, enhancement or improvement to the Subject
Technology, created by or on behalf of any Buyer Party, Seller or Digital
Angel for use with, or otherwise useful with respect to, the Subject
Technology, that exist as of the date of this Agreement.




(iv) “Know-How” means the trade secrets and business know-how of Seller,
relating to devices and processes which are useful in the Human RFID Field,
including specifically the past, present and future information and Know-How
(as defined in section 1.1(g) above) used or useful in the manufacture of
the Human RFID Product, components related thereto, including readers,
transponders, implanters, and packaging devices, and related services, and
under any other intellectual property owned by Seller or its Affiliates that
is, or could be, used for human applications whether or not covered in the
Retained Patents, that exist as of the date of this Agreement.




(v) “Licensed Territory” means the world.




(vi) “Subject Technology” means the Retained Patents, the Know-How, any
copyrights related to the Know-How, and all Improvements, that exist as of
the date of this Agreement.




(b) Covenant Not to Sue.




(i) Each of Digital Angel and Seller on its own behalf and on behalf of all
of its Affiliates, irrevocably relinquishes to Buyer, waives with respect to
Buyer and agrees to not assert against any Buyer Party at any time after the
Closing Date, any and all claims Seller or Digital Angel may have, now or in
the future, whether arising at law or equity (including rights of
accounting, notice of transfer or disclosure and sharing of profits,


 


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but excluding only the rights and obligations expressly set forth in this
Agreement), relating to or arising out of the Subject Technology, arising
from the manufacture, use, sale, offer for sale, importation, modification
or improvement of any product or service in the Human RFID Field, including,
without limitation, claims for patent and copyright infringement.




(ii) Each of Digital Angel and Seller, on its own behalf and on behalf of
all of its Affiliates, covenants not to sue any Buyer Party in connection
with any Improvements, Digital Angel and Seller acknowledging that Buyer
Parties may copy, make derivative works of, sublicense, distribute and
publicly perform any of the Subject Technology including any Improvements
thereto, subject only to the obligations of Section 10.2 below.




(iii) Each of Digital Angel and Seller irrevocably covenants to require (i)
any transferee, assignee or successor to any of the Subject Technology and
(ii) any exclusive licensee of any of the Subject Technology to agree that
it will be bound by the covenant not to assert claims against the Buyer
Parties set forth in this Section 4.7, and that it will require any of its
transferees, assignees or successors to agree to be bound by such covenant.




(c) Additional Warranties.




(i) To the Knowledge of Seller and Digital Angel, Seller hereby represents
and warrants to Buyer that it is the lawful owner of all proprietary rights
in and to the Subject Technology (excluding Improvements made by Buyer).




(ii) To the Knowledge of Seller and Digital Angel, Seller knows of no third
party intellectual property rights, or any intellectual property rights held
by any of its Affiliates, which would be infringed by Buyer’s use of the
Subject Technology in the Human RFID Field. Seller has not licensed the
Subject Technology to any third party for use in the Human RFID Field.




(d) Term and Termination. The term applicable to this Section 4.7 shall
begin on the Effective Date and shall continue until the expiration of all of the
rights under the Subject Technology. No termination or expiration of the Agreement
shall cause this Section 4.7 to terminate.




(e) Assignment. Seller shall not assign or license the Retained Patents or
the Know-How to any assignee or licensee whose business includes the manufacture or
sale of Human RFID Product.  Buyer may transfer, assign and sublicense any of the
rights privileges, obligations, or benefits conferred by this Section 4.7
except to any entity whose business would be competitive with Seller’s or Digital
Angel’s.


 


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4.8 Additional Seller Covenants. Seller, on behalf of itself, its Affiliates, and its
successors and assigns covenants and agrees that it shall not transfer, assign, sublicense or
otherwise grant to any third party, rights to use any of the rights under the Retained Patents or
Know-How in the Human RFID Field.



4.9 Glucose Sensor Development Agreement. To the Knowledge of Seller and Digital
Angel, Seller has not breached or defaulted on its obligations under the Glucose Sensor Development
Agreement, and has received no notice of any breach or default under such agreement. Seller will
continue to hold in confidence and shall not use any confidential information received in
connection with the Glucose Sensor Development Agreement.



4.10 Know-How. Seller hereby grants to Buyer a license to use the Know-How. Buyer
shall have the right to copy, make derivative works of, improve, modify, sublicense, and distribute
the Know-How.



4.11 Chip Storage. Seller currently is storing approximately 13,000 chips that are
owned by Buyer. Buyer agrees to take possession of such chips no later than December 31, 2009.
Upon the request of Buyer, Seller will re-sterilize and repackage the chips for a new five year
life at Buyer’s expense.



4.12 No Knowledge of Invalidity. The Seller has no Knowledge of information,
materials, facts, or circumstances that would constitute prior art or that would render any of the
Assigned Patents invalid or unenforceable. To the Knowledge of Seller and Digital Angel, neither
the Seller, Digital Angel nor any of their affiliates has misrepresented, or failed to disclose, or
knows of any misrepresentation or failure to disclose, any fact or circumstances in any application
for the Assigned Patents that would constitute fraud or a misrepresentation with respect to the
application or that would otherwise, as a matter of law, cause any Assigned Patents to be rendered
unenforceable.



4.13 Infringement Claims. To the Knowledge of Seller and Digital Angel, the Seller
has the sole and exclusive right to bring actions for management or unauthorized use of the
Assigned Patents and Retained Patents (including the right to seek past and future damages).



4.14 No Disputes. There are no contracts or material disputes between the Seller and
any third party with respect to the Assigned Patents, Retained Patent and Know-How under which
there is any material dispute regarding the scope of the contract or regarding performance under
the contract.



4.15 Access To Patent/Intellectual Property Counsel. Seller and Digital Angel agree
that Buyer shall have access to, and may engage as counsel to Buyer, the patent and intellectual
property counsel engaged by either of them, and each agrees to execute any conflict waiver
reasonably requested by such counsel, excluding, however, any engagement directly adverse to Seller
or Digital Angel.


 


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ARTICLE V.

REPRESENTATIONS AND WARRANTIES OF BUYER




As an inducement to Seller to enter into and perform its obligations under this Agreement,
Buyer hereby represents, warrants and covenants to Seller as follows:



5.1. Organization; Enforceability. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The execution and delivery
of this Agreement, and consummation of the transactions contemplated herein, have been duly and
validly authorized by the Board of Directors of Buyer. This Agreement will, upon execution and
delivery, be a legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as may be limited by bankruptcy, insolvency or other laws
affecting creditors’ rights generally.



5.2. No Breach or Default. The execution and delivery of this Agreement, and the
consummation of the transactions herein provided will not:




(a) Result in the breach of any of the terms or conditions of, or constitute a
default under, or in any manner release Buyer from any obligations under, or accelerate
any mortgage, note, bond, contract, indenture, agreement, license or other instrument or
obligation of any kind or nature to which Buyer is now a party or by which any of its
properties or assets may be bound or affected;




(b) Violate any order, writ, injunction or decree of any court, administrative
agency or governmental body or require the approval, consent or permission of any
governmental body or agency which has not been heretofore obtained; or




(c) Violate any provision of the Certificate of Incorporation or Bylaws of Buyer.



5.3. Bankruptcy and Insolvency. No petition in bankruptcy (voluntary or otherwise),
assignment for the benefit of creditors or petition seeking reorganization or arrangement or other
action under federal or state bankruptcy laws is pending on behalf of or against Buyer.



5.4 Buyer’s Covenant Not to Sue. For the life of the Assigned Patents, Buyer agrees
and covenants not to bring any legal or administrative proceeding whatsoever against Seller or
Digital Angel for any and all past, present, or future claims of infringement of the Assigned
Patents arising from the manufacture, use, sale, offer for sale or import of any product in the
animal applications field, which such product, but for the covenant not to sue granted herein,
would directly infringe, induce infringement of, or contribute to the infringement of a viable
claim of the Assigned Patents (the “Buyer Covenant Not to Sue”). This Buyer Covenant Not to Sue
does not grant to Seller a license, implied license or any other right to any of the Assigned
Patents.


 


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ARTICLE 6.

AS IS, WHERE IS




6.1 Except for the representations and warranties of Seller and Digital Angel expressly set
forth in this Agreement, Buyer agrees that the Purchased Assets are being acquired “as is, where
is” at Closing, and in their condition at Closing “with all faults,” and that buyer is relying on
its own examination of the Purchased Assets.  Without limiting the generality of the foregoing and
except for the representations and warranties expressly set forth in this Agreement, Buyer
understands and agrees that Seller and Digital Angel expressly disclaim any representations or
warranties as to the title, condition, value or quality of the Purchased Assets, and any
representation or warranty of merchantability, usage, suitability or fitness for any particular
purpose with respect to the Purchased Assets or any part thereof, or as to the workmanship thereof
or the absence of any defects therein, whether latent or patent.  Except for the representations
and warranties of Seller and Digital Angel expressly set forth in this Agreement, Buyer further
agrees that no information or material provided by or communication made by Seller or Digital
Angel, or by any representative of either Seller or Digital Angel, will constitute, create or
otherwise cause to exist any representation or warranty.



ARTICLE 7.

CONDITIONS PRECEDENT TO BUYER’S OBLIGATIONS




Unless waived by Buyer, the obligations of Buyer under this Agreement with respect to the
Closing are subject to the fulfillment of each of the following conditions precedent:



7.1 Seller’s Closing Documents. Seller shall have executed (as appropriate) and
delivered to Buyer all of the documents to be provided by it pursuant to Article 9 hereof which are
to be delivered to Buyer.



7.2 Authorization. Seller shall have provided evidence that execution of the
Agreement and consummation of all transactions contemplated herein have been duly authorized.



7.3 Conveyance Instruments. Warranty bills of sale and other sufficient instruments
of conveyance and transfer as shall be effective to vest in Buyer all of Seller’s title to and
interest in the Purchased Assets.



ARTICLE 8.

CONDITIONS PRECEDENT TO SELLER’S OBLIGATIONS




Unless waived by Seller, the obligations of Seller under this Agreement with respect to the
Closing are subject to the fulfillment of each of the following conditions precedent:




8.1 Cash Payment. Buyer shall have delivered the Purchase Price to Seller.



8.2 Buyer’s Closing Documents. Buyer shall have executed (as appropriate) and
delivered to Seller all of the documents to be provided by it pursuant to Article 9 hereof which
are to be delivered to Seller.


 


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8.3 Authorization. Buyer shall have provided evidence that execution of the Agreement
and consummation of all transactions contemplated herein have been duly authorized.



8.4 Lenders’ Consent. Seller shall have received the consent of its lenders for the
transactions contemplated hereby, including the agreement to release the security interests held by
lenders in the Purchased Assets immediately upon payment by Buyer of the Purchase Price.



8.5 Sale of VeriChip Shares. Digital Angel shall have executed and closed on a
transaction to sell all of the common stock of Buyer (VeriChip Corporation) owned by Digital Angel.



ARTICLE 9.

CLOSING




9.1 Closing. The consummation of the purchase and sale of the Purchased Assets and
the related transactions and deliveries provided for herein (“Closing”) shall take place upon
satisfaction of all conditions set forth in Sections 7 and 8 of this Agreement (“Closing Date”) on
November 12, 2008 or such other date as the parties may mutually agree.



9.2 Documents to be Delivered by Seller. At the Closing, the following instruments
and documents shall be delivered or provided to Buyer by Seller:




(a) Warranty bills of sale and other sufficient instruments of conveyance and transfer as
shall be effective to vest in Buyer all of Seller’s title and interest in the Purchased Assets;




(b) Assignment of the FDA Approval to Buyer; and




(c) Assignment of Patents.



9.3 Documents to be Delivered by Buyer. At the Closing, the following instruments and
documents shall be delivered or provided by Buyer to the party or parties indicated:




(a) Purchase Price.


 


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ARTICLE 10.

TRANSFER OF KNOW-HOW AND CONFIDENTIAL INFORMATION 




10.1 Know-How Transfer. Seller agrees to provide to Buyer 40 hours (or such greater
number of hours as the parties may mutually agree in writing) of access to one or more of Seller’s
technical consultants who is skilled and knowledgeable regarding the Human RFID Products between
the Effective Date and December 31, 2009 (the “Know-How Transfer Period”), to teach and explain to
Buyer all vendors, supplier, and technical information necessary to manufacture all components
including, without limitation, the pocket readers, transponders, implanters, and packaging
necessary to manufacture products for the Human RFID Field that are
compatible to and replicate the Business (“Confidential Information”). Seller shall not be
obligated to retain any employees of Seller during the Know-How Transfer Period. Seller further
agrees that Buyer may, after March 10, 2009, enter into a direct consulting or other arrangement
with Ezequiel Mejia for additional services. Buyer is granted a right and an irrevocable license
to use, copy, modify, make derivative works of, sublicense, distribute any and all such
Confidential Information in the manufacturing, developing, improving, selling and marketing of
Human RFID Products in the Human RFID Field, subject to the conditions detailed below in Section
10.2.



10.2 Confidentiality. Each party agrees to keep the Confidential Information
confidential. Each party shall limit disclosure of the Confidential Information to its employees,
directors, officers, consultants, contractors, attorneys, advisors and agents who otherwise have a
need to know the Confidential Information in connection with its business and provided that are
advised of and agree to the obligations contained in this Section 10.2. Each party shall use at
least the same degree of care in handling the Confidential Information as it uses with regard to
its other confidential information, and, at a minimum, shall use reasonable care to protect the
Confidential Information. The obligations of this Section 10.2 are continuing in nature and shall
survive termination or expiration of this Agreement.



ARTICLE 11.

POST-CLOSING OBLIGATIONS OF THE PARTIES





On and after the Closing Date:



11.1 Each party shall execute all certificates, instruments and other documents and take all
actions reasonably requested by the other party to effectuate the purposes of this Agreement and to
consummate and evidence the consummation of the transactions herein provided for. From time to time
at or after the Closing Date, at the request of Buyer, Seller and Digital Angel each will execute
and deliver such other instruments of conveyance, assignment, transfer and delivery and take such
actions as Buyer reasonably may request in order to (i) effectuate the release of any liens, claims
or encumbrances on any of the Purchased Assets, and to record the release of any such liens, claims
or encumbrances in the offices in which any such liens have been filed, and (ii) effectuate the
transfer of the Purchased Assets that constitute intellectual property, including the filing of the
transfer with the U.S. Patent Office.



11.2 Seller shall take all actions reasonably necessary or appropriate to put the Buyer in
immediate actual possession and operating control of all of the Purchased Assets.



11.3 Seller and Digital Angel, jointly and severally, will indemnify and hold Buyer harmless
from any damage, loss, liability or expense (including, without limitation, reasonable expenses of
investigation, reasonable attorneys’ fees and other reasonable legal costs and expenses) arising
out of any breach of a representation or warranty or covenant made by Seller or Digital Angel in
this Agreement, in any exhibit or schedule attached to this Agreement, or in any agreement,
instrument, or document provided to Buyer by or on behalf of Seller in connection with the
transactions contemplated hereby. Buyer will indemnify and hold Seller and Digital Angel harmless
from any damage, loss, liability or expense (including, without limitation, reasonable expenses of
investigation, reasonable attorneys’ fees and other reasonable legal costs
and expenses) arising out of any breach of a representation or warranty or covenant made by Buyer
in this Agreement, in any exhibit or schedule attached to this Agreement, or in any agreement,
instrument, or document provided to Seller by or on behalf of Buyer in connection with the
transactions contemplated hereby. The indemnification obligations under this Section 11.3 shall
survive execution of this Agreement for a period of two (2) years. The maximum liability of Seller
and Digital Angel or Buyer under this Section 11.3 shall be $250,000.


 


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ARTICLE 12.

NON-COMPETITION




12.1 Non-Competition.  During the period beginning on the Closing Date and ending five
(5) years later (the “Non-Compete Period”), (i) the Buyer and its successors and assigns
shall not engage (whether as an owner, operator, manager, employee, officer, director, consultant,
advisor, representative or otherwise), directly or indirectly anywhere in any business competitive
with Seller and/or Seller’s business operations (as presently conducted by the Closing Date), and
(ii) the Seller, Digital Angel, and their respective successors and assigns shall not engage
(whether as an owner, operator, manager, employee, officer, director, consultant, advisor,
representative or otherwise), directly or indirectly anywhere in any business competitive with
Buyer and/or Buyer’s business operations (as conducted prior to May 15, 2008) or grant to any third
party a license to use the Retained Patents in the Human RFID Field. The Buyer, the Seller and
Digital Angel each expressly acknowledge and agree that each and every restriction imposed by this
Section 12.1 is reasonable with respect to subject matter and time period.



12.2 Injunctive Relief; Enforcement.  Each the Buyer and Seller acknowledges and
agrees that in the event of a breach of any of the provisions of this Article 12, monetary damages
shall not constitute a sufficient remedy.  Consequently, in the event of any such breach, the
non-breaching party and/or its respective successors or assigns may, in addition to other rights
and remedies existing in their favor, apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive or other relief in order to enforce or prevent any
violations of the provisions hereof, in each case without the requirement of posting a bond or
providing actual damages.  If the final judgment of a court of competent jurisdiction declares that
any term or provision of this Article 12 is invalid or unenforceable, each of Buyer and Seller
agree that the court making the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or area of the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a term or provision that
is valid and enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.


 


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ARTICLE 13.

TERMINATION




13.1 Termination. Subject to Section 4.7(d), this Agreement may be terminated and
the transactions contemplated hereby abandoned at any time prior to the Closing:




(a) by mutual written consent of Buyer and Seller;




(b) by Buyer or Seller if (i) there shall be a final non-appealable
order of a federal or state court in effect preventing consummation of the
transactions contemplated hereby; or (ii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
transactions contemplated by this Agreement by any governmental entity that
would make consummation of the transactions contemplated by this Agreement
illegal;




(c) by Buyer if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any material
representation, warranty, covenant or agreement contained in this Agreement on
the part of Seller and such breach has not been cured within ten (10) calendar
days after written notice to Seller; or




(d) by Seller if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any material
representation, warranty, covenant or agreement contained in this Agreement on
the part of any Buyer and such breach has not been cured within ten (10)
calendar days after written notice to Buyer.



ARTICLE 14.

WAIVERS; AMENDMENTS; ASSIGNMENT; SUCCESSORS AND ASSIGNS




14.1 Effect of Waiver. Any waiver of any term or condition of this Agreement, or of
the breach of any covenant, representation or warranty contained herein, in any one instance, shall
not operate as or be deemed to be or construed as a further or continuing waiver of any other
breach of such term, condition, covenant, representation or warranty, nor shall any failure at any
time or times to enforce or require performance of any provision hereof operate as a waiver of or
affect in any manner such party’s right at a later time to enforce or require performance of such
provision or of any other provision hereof.



14.2 Modification of Agreement. This Agreement may not be amended, nor shall any
waiver, change, modification, consent or discharge be effected, except by an instrument in writing
executed by or on behalf of the party against whom enforcement of any amendment, waiver, change,
modification, consent or discharge is sought.



14.3 Assignment; Successors and Assigns. Except as otherwise specifically set forth
in this Agreement, this Agreement shall not be assignable by any party without the prior written
consent of the other; notwithstanding the foregoing, this Agreement may be transferred by the Buyer
in connection with a merger, consolidation, or the sale of substantially all of its assets. This
Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement is not intended and shall not be
construed to create any rights in or to be enforceable in any part by persons other than the
parties hereto.


 


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ARTICLE 15.

MISCELLANEOUS PROVISIONS




15.1 Severability. If any provision of this Agreement shall be held or deemed to be,
or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in any
jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of
any provision with any constitution or statute or rule of public policy or for any other reason,
such circumstance shall not have the effect of rendering the provision or provisions in question
invalid, inoperative or unenforceable in any other jurisdiction or in any other case or
circumstance or of rendering any other provision or provisions herein contained invalid,
inoperative or unenforceable to the extent that such other provisions are not themselves actually
in conflict with such constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid, inoperative or
unenforceable provision had never been contained herein and such provision reformed so that it
would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or
in such case.



15.2 Binding Effect. The Covenants Not to Sue set forth in Sections 4.7 and 5.4
above inure to the benefit of, and are binding on, the successors, transferees, and/or assignees of
(a) the parties, (b) substantially the entire business of each of the parties, and (c) any of the
Assigned Patents or Retained Patents.



15.3 Additional Third-Party Beneficiaries. The Covenants Not to Sue set forth in
Sections 4.7 and 5.4 above inure to the benefit of the customers, distributors, dealers and users,
officers, agents, employees, and/or other authorized representatives of the parties hereto.



15.4 Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument, and in pleading or proving any provision of this Agreement it shall not be necessary to
produce more than one such counterpart.



15.5 Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if sent by facsimile or delivered
via certified or registered mail, or recognized courier, delivery confirmation or return receipt
requested:



	 	 	 	 	 	 	 
	 

	 	(a)
	 	If to Seller, to:
	 	DESTRON FEARING CORPORATION
	 

	 	 	 	 	 	490 Villaume Avenue 
	 

	 	 	 	 	 	South St. Paul, Minnesota 55075-2443
	 

	 	 	 	 	 	Attention: President
	 

	 	 	 	 	 	Facsimile: 651-455-0217
	 
	 	 	 	 	 	 
	 

	 	 	 	with a copy to:
	 	Digital Angel Corporation
	 

	 	 	 	 	 	Attention: General Counsel
	 

	 	 	 	 	 	Facsimile: 561-431-8562






 


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	 	(b)
	 	If to Buyer, to:
	 	VERICHIP CORPORATION
	 

	 	 	 	 	 	1690 South Congress Avenue, Suite 200 
	 

	 	 	 	 	 	Delray Beach, Florida 33445
	 

	 	 	 	 	 	Attention: William J. Caragol
	 

	 	 	 	 	 	Facsimile: 561-805-8001
	 
	 	 	 	 	 	 
	 

	 	 	 	with a copy to:
	 	Holland & Knight LLP
	 

	 	 	 	 	 	One East Broward Boulevard, Suite 1300
	 

	 	 	 	 	 	Fort Lauderdale, Florida 33301
	 

	 	 	 	 	 	Attention: Tammy Knight, Esq.
	 

	 	 	 	 	 	Facsimile: 954-463-2030






or to such other person(s) and address(es) as either party shall have specified in writing to the
other.



15.6 Entire Agreement. Seller and Buyer agree that this Agreement and its Exhibit
and Schedules and the other contracts and deeds referenced in and required by this Agreement,
constitute the entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior understandings and agreements with respect thereto.



15.7 Governing Law and Venue. This Agreement shall be governed by and construed and
enforced in accordance with the law (other than the law governing conflict of law questions) of the
State of New York. Any action to enforce the terms of this Agreement shall be brought in a court
of competent jurisdiction located in New York, New York.



15.8 Captions and Headings. Captions and Section headings used herein are for
convenience only and are not a part of this Agreement and shall not be used in construing it.



15.9 Time of the Essence. Time shall be of the essence of this Agreement and of
every part hereof.



15.10 Expenses. Each of the parties shall pay all costs and expenses incurred or to
be incurred by it in negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement.



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SIGNATURE PAGE FOLLOWS]






 


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IN WITNESS WHEREOF, Seller, Digital Angel and Buyer have caused this Agreement to be duly
executed as of the date first above written.



	 	 	 	 	 
	 	SELLER:



DESTRON FEARING CORPORATION

 	 
	 	By:  	/s/ Joseph Grillo
 	 
	 	 	Joseph Grillo 	 
	 	 	 	 
	 	DIGITAL ANGEL CORPORATION

 	 
	 	By:  	/s/ Joseph Grillo
 	 
	 	 	Joseph Grillo 	 
	 	 	 	 
	 	BUYER:



VERICHIP CORPORATION

 	 
	 	By:  	/s/ William J. Caragol
 	 
	 	 	William J. Caragol 	 
	 	 	 	 




 


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