Document:

Filed by Bowne Pure Compliance

 

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published or unpublished, all registrations and recordings thereof, and all applications in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

 

9Filed by Bowne Pure Compliance

 

Exhibit 10.6

APPLIED DIGITAL SOLUTIONS, INC.

1690 South Congress Avenue, Suite 201

Delray Beach, Florida 33445

February 29, 2008

VeriChip Corporation

1690 South Congress Avenue, Suite 200

Delray Beach, FL 33445

Attention: President

Re: Agreement to Subordinate Loans and Repayment of Loans

Ladies and Gentlemen:

Reference is made to (a) the Commercial Loan Agreement dated as of December 27, 2005 by and
between VeriChip Corporation (the “Company”) and Applied Digital Solutions, Inc.
(“ADS”) (as amended, restated, modified and/or supplemented from time to time, the “ADS
Loan Agreement”); (b) the Third Amended and Restated Revolving Line of Credit Note Working
Capital dated as of February 8, 2007 from the Company in favor of ADS in the original principal
amount of $14,500,000 (as amended, restated, modified and/or supplemented from time to time, the
“ADS Note”); and (c) the Security Agreement dated as of December 27, 2005 by and between
the Company and ADS (as amended, restated, modified and/or supplemented from time to time, the
“ADS Security Agreement” and collectively with the ADS Loan Agreement, the ADS Note and all
other instruments, documents and agreements related to each of the foregoing, the “ADS Loan
Documents”). Capitalized terms used herein without definition shall have the meaning ascribed
thereto in the ADS Loan Agreement.

The Company has requested ADS (i) consent to the Company, and its wholly-owned subsidiary
Xmark Corporation, selling a Secured Term Note (the “Note Issuance”) to Valens Offshore SPV
II, Corp. (“Valens Offshore II and collectively with any assignees of any interest in such
Secured Term Note, the “Valens Entities”) and (ii) enter into a Subordination Agreement
with LV Administrative Services, Inc. (“LV”), as the administrative and collateral agent
for itself and the Valens Entities, in substantially the form attached hereto as Exhibit A
(the “Subordination Agreement”). In order to induce ADS to grant its consent to such Note
Issuance and to enter into the Subordination Agreement and in consideration therefor, the Company
has agreed to prepay a portion of the loan owing from the Company to ADS under the ADS Loan
Documents (the “ADS Indebtedness”) on the terms and conditions set forth below.

In consideration of the foregoing and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, ADS and the Company hereby agree to, and acknowledge,
the following:

 

 

 

1. ADS and the Company reaffirm that the ADS Security Agreement covers the Collateral (as such
term is defined in the ADS Security Agreement), and, for the avoidance of any doubt, the Company
reaffirms that that Collateral includes all of the Company’s right, title and interest which
presently exists or hereafter arises in, to and under all the Company’s now
owned and hereafter acquired ownership interests in any subsidiary; and all certificates,
options, rights or other distributions issued as an addition to, in substitution or in exchange
for, or on account of, such interests and all proceeds of the foregoing, now or hereafter owned or
acquired by the Company.  ADS and the Company affirm that this grant includes the Company’s 100%
equity interest in Xmark Corporation evidenced by Stock Certificate No. 1 for 10,265,178 shares of
common stock.  Upon repayment or termination of the financing provided to the Company by the Valens
Entities, certificates or other evidence of such interests shall be immediately returned to ADS.

2. Subject to receipt of an acknowledgment copy of this letter, duly executed by an authorized
officer of the Company, ADS hereby consents to the Note Issuance and agrees to execute and deliver
the Subordination Agreement to LV.

3. Contemporaneously with the Note Issuance, the Company shall pay (a) to ADS, $5,230,000 and
(b) to Valens Capital Management, LLC, on behalf of ADS, the sum of $70,000 to be credited against
certain fees payable to Valens Capital Management, LLC in connection with the Note Issuance. Upon
payment to ADS of the amount referenced in clause 3(a) above and Valens Capital Management, LLC’s
receipt of the amount referred to in clause 3(b) above, an amount equal to the sum of such amounts
shall be credited by ADS as a prepayment of the outstanding principal balance owing under the ADS
Loan Documents and shall constitute a payment made to reduce the Outstanding Principal Amount as
defined in, and for all purposes of, that certain Letter Agreement dated December 20, 2007 between
the Company and ADS, a copy of which is attached hereto as Exhibit B (the “December
2007 Letter Agreement”). Until 5:00 p.m. EST on October 30, 2008, the Company shall have the
right, exercisable in its sole discretion, to prepay in full the entire Outstanding Principal
Amount (as defined in the December 2007 Letter Agreement) to ADS by paying to ADS $10 million, less
the $500,000 paid pursuant to the December 2007 Letter Agreement, less $5,300,000 paid pursuant to
this letter, less other principal payments made to reduce the Outstanding Principal Amount between
the date of the December 2007 Letter Agreement and the date of such prepayment, plus any accrued
and unpaid interest between October 1, 2007 and the date of such prepayment. As a result of the
payment to ADS of the amount referenced in clause 3(a) above, the Company will not be required to
make any further debt service payments under the ADS Loan Documents until September 1, 2009.
Notwithstanding the foregoing and subject to the terms of the Subordination Agreement, ADS shall
have the right to exercise any and all rights and remedies it may have against the Company should
an Event of Default exist and be continuing under the ADS Loan Documents. Furthermore, ADS hereby
authorizes and directs the Company to pay $3,000,000 of the amount to be paid to ADS under clause
3(a) above directly as follows: (i) $1,866,376 to Laurus Master Fund, Ltd. (“Laurus”),
Valens U.S. SPV I, LLC (“Valens U.S.”), Valens Offshore SPV I, Ltd. (“Valens Offshore
I”) and PSource Structured Debt Limited (“PSource” and collectively with Laurus, Valens
U.S. and Valens Offshore II, the “Laurus Note Holders”) to be applied against certain
indebtedness owing by ADS to the Laurus Note Holders as evidenced by that certain Secured Term
Note, dated as of August 24, 2006, issued by ADS in favor of Laurus (as amended, modified, restated
and/or supplemented from time to time, the “2006 Laurus Note”) and all documents,
instruments and agreements related thereto (the “Laurus Indebtedness”), and (ii)
$1,133,624 to Kallina Corporation (“Kallina”), Valens U.S., Valens Offshore I, and Valens
Offshore II (“Valens Offshore II” and collectively with Kallina and Valens U.S. and Valens Offshore
I, the “Kallina Note Holders”), as evidenced by that certain Secured Term Note, dated
as of August 31, 2007, issued by ADS in favor of Kallina (as amended, modified, restated
and/or supplemented from time to time) and all documents, instruments and agreements related
thereto (the “Kallina Indebtedness”).

 

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4. Upon receipt by the Company of cash proceeds from any sale of Collateral in excess of
$8,100,000 (each a “Significant Liquidity Event”), the Company shall, concurrently with the
receipt of the cash proceeds from such Significant Liquidity Event, pay to ADS a portion of such
cash proceeds equal to the lesser of (a) the then outstanding ADS Indebtedness, as payable in
accordance with paragraph 3 above if paid prior to 5:00 p.m. EST on October 30, 2008, and (b) the
difference between (i) the total amount of such cash proceeds less (ii) the aggregate amount of all
of the then outstanding indebtedness and obligations owing by the Company to the Valens Entities in
connection with the Note Issuance (“Excess Amount”), to be applied against the ADS
Indebtedness, which shall be payable in accordance with paragraph 3 above if paid prior to 5:00
p.m. EST on October 30, 2008. The Company’s failure to repay the ADS Indebtedness with the Excess
Amount within five (5) business days of the date on which a Significant Liquidity Event occurs
shall constitute an Event of Default under the ADS Loan Agreement. Furthermore, ADS hereby
authorizes and directs the Company to pay such amounts to be paid by the Company to ADS pursuant to
this paragraph 4, up to the lesser of (a) the Excess Amount, (b) the aggregate amount of the then
outstanding Laurus Indebtedness and Kallina Indebtedness, and (c) $3,000,000, directly pro rata to
the Laurus Note Holders to be applied against the Laurus Indebtedness and to the Kallina Note
Holders to be applied against the Kallina Indebtedness.

5. The Company acknowledges that the Kallina Note Holders, the Laurus Note Holders, and their
affiliates, successors and assigns (collectively, “Intended Third Party Beneficiaries ”),
shall derive substantial benefit from the repayment of the ADS Indebtedness as provided for in
paragraphs 3 and 4 above and, with the Company’s consent and agreement, each are entitled to rely
upon the Company’s agreement set forth in paragraph 3 above as an intended third party beneficiary
thereof. As such, each Intended Third Party Beneficiary shall be able to exercise any and all
rights to enforce such provision that are available at law and/or in equity including, without
limitation, the right to bring an action to compel performance of such provision and/or to bring a
suit for damages resulting from Company’s failure to perform its obligations herein.

6. The Company agrees to amend that certain Third Amended And Restated Revolving Line Of
Credit Note Working Capital dated February 8, 2007 from the Company in favor of ADS to reduce the
grace period from 30 days to 5 business days.

7. If an Event of Default (as such term is defined in that certain Secured Term Note dated
February 28, 2008 in favor of the Valens Entities) occurs under the Note Issuance and such Event of
Default, continues unremedied for the greater of (i) the applicable cure period, or (ii) a period
of ten (10) days after the occurrence thereof, such Event of Default shall constitute an event of
default under the ADS Loan Documents.

8. This letter agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and assigns and shall be
governed by and construed in accordance with the laws of the State of New York.

 

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This letter agreement may be executed by the parties hereto in one or more counterparts, each
of which shall be deemed an original and all of which when taken together shall constitute one and
the same agreement. Any signature delivered by a party by facsimile or electronic transmission
shall be deemed to be an original signature hereto.

	 	 	 	 	 
	 	Very truly yours,

APPLIED DIGITAL SOLUTIONS, INC.

 	 
	 	By:  	/s/ Lorraine M. Breece
 	 
	 	 	Name:  	Lorraine M. Breece 	 
	 	 	Title:  	Senior Vice President and
Acting Chief Financial Officer 	 
	 

ACKNOWLEDGED AND AGREED TO

THIS 29th DAY OF FEBRUARY, 2008:

	 	 	 	 	 
	 	VERICHIP CORPORATION

 	 
	 	By:  	/s/ William J. Caragol
 	 
	 	 	Name:  	William J. Caragol 	 
	 	 	Title:  	President and Chief Financial Officer 	 
	 

signature page to

applied digital solutions side letter

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