Document:

exv10w2

Exhibit 10.2

Applied Digital Solutions

1690 South Congress Avenue, Suite 201

Delray Beach, FL 33445

May 15, 2008

VeriChip Corporation

1690 South Congress Avenue, Suite 200

Delray Beach, FL 33445

Gentlemen:

     This letter agreement (this “Letter Agreement”) confirms certain agreements between
Applied Digital Solutions, Inc. doing business as Digital Angel, a Delaware corporation
(“Stockholder”) and VeriChip Corporation, a Delaware corporation (the “Company”)
with respect to the matters described herein.

     The Company has informed Stockholder that, subject to certain conditions including, but not
limited to, the approval of a majority of the outstanding common stock of the Company’s
stockholders, the Company will sell to The Stanley Works, a Connecticut corporation (the
“Purchaser”), all of the outstanding capital stock of Xmark Corporation, a corporation
governed under the laws of Canada and a wholly-owned subsidiary of the Company (the “Xmark
Transaction”) pursuant to that certain Stock Purchase Agreement, dated as of May 15, 2008,
between the Company and the Purchaser, a true and correct copy of which is attached hereto as
Exhibit A (the “Stock Purchase Agreement”).

     The consummation of the Xmark Transaction constitutes an Event of Default (as defined in the
Commercial Loan Agreement) by the Company of that certain (i) Commercial Loan Agreement dated
December 27, 2005, as amended, between the Company and the Stockholder (the “Commercial Loan
Agreement”), (ii) Security Agreement dated December 27, 2005, as amended, between the Company
and the Stockholder, and (iii) Third Amended and Restated Revolving Line of Credit Note dated as of
February 8, 2007, as amended, from the Stockholder in favor of the Company (collectively, the
“Loan Transaction Documents”).

     In addition, the Company has informed Stockholder that, as a condition to entering into the
Stock Purchase Agreement, Purchaser has required that Stockholder enter into a Voting Agreement, by
and between the Stockholder and the Purchaser (the “Voting Agreement”) and a Guarantee, by
the Stockholder in favor of the Purchaser (the “Guarantee”).

     In consideration of Stockholder (i) granting its consent to the Xmark Transaction under the
Loan Transaction Documents and (ii) entering into the Voting Agreement and the Guarantee, and for
other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged,
and intending to be legally bound hereby, the parties hereto do hereby agree as

 

 

follows, the Stockholder and the Company (each, a “Party,” and together, the
“Parties”) acknowledge and agree as follows:

     1. Consent.

     (a) Upon satisfaction by the Company of all of the provisions hereof, the Stockholder shall
thereupon be deemed to have consented to the Xmark Transaction and that the consummation of the
Xmark Transaction shall thereupon not constitute an Event of Default under the Loan Transaction
Documents.

     (b) The Company shall have complied with paragraph numbered 4 of that certain Letter Agreement
regarding Agreement to Subordinate Loans and Repayment of Loans dated February 29, 2008 from the
Stockholder to, and acknowledged by, the Company, a true and correct copy of which is attached
hereto as Exhibit B (the “Digital Angel Letter Agreement”), including, without
limitation, paying such portion of the Excess Amount (as defined in the Digital Angel Letter
Agreement) as required, pursuant to the Digital Angel Letter Agreement, to be paid 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 (as such terms are defined in the
Digital Angel Letter Agreement).

     2. Board of Directors.

     (a) From and after the date of the closing of the Xmark Transaction (the “Xmark Closing
Date”), the Stockholder shall be entitled to designate up to three (3) members of the Company’s
Board of Directors (the “Board Designees”), all of which shall be independent with the
exception of Mr. Joseph J. Grillo. Notwithstanding the foregoing, if prior to the Xmark Closing
Date, the Company, in the reasonable judgment of Stockholder, has breached any of its obligations
under this Letter Agreement, the Stockholder shall be entitled to designate up to three (3) Board
Designees from the date of the breach. Upon any breach, the Stockholder will provide written
notice of such breach to the Company and the Company shall have five (5) days to cure such breach
from its receipt of such notice before Stockholder may designate its Board Designees. The
Stockholder presently intends to nominate Mr. Joseph J. Grillo, the President and Chief Executive
Officer of the Stockholder, as its one designee from and after the Xmark Closing Date, and the
Company hereby agrees to have Mr. Grillo serve as Chairman of the Board of Directors. The
Stockholder does not have any current intentions to nominate any additional Board Designees.

     (b) If any Board Designee shall be elected or appointed as a member of the Board of Directors
but shall thereafter cease to serve as a member of the Board of Directors (whether as a result of
his or her death or resignation or for any other reason) prior to the expiration of his or her term
of office, the Stockholder shall have the right to designate another person to fill the resulting
vacancy in the Board of Directors. The Company shall use its best efforts and take all action
within its power to cause each Board Designee to be elected or appointed to serve as a member of
the Board of Directors as promptly as practicable after the date upon which he or she has been so
designated. Without limiting the generality of the foregoing, the Company shall take

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any of the following actions if required in order to effect the election or appointment of a
Board Designee:

     (i) If there exists a vacancy on the Board of Directors, the Company shall take all
necessary action within its power to cause such vacancy to be filled through the appointment
of such Board Designee. If no such vacancy exists, the Company shall solicit and use its
best efforts to obtain the resignation of one or more members of the Board of Directors so
as to allow for the appointment of such Board Designee.

     (ii) If the Board of Directors is authorized by law to increase the number of members
of the Board of Directors without approval of the stockholders of the Company, the Company
shall take all necessary action within its power to increase the size of the Board of
Directors and cause each newly created directorship to be filled by the appointment of a
Board Designee.

     (iii) The Company shall nominate such Board Designee for election as a member of the
Board of Directors at the next meeting of the stockholders at which members of the Board of
Directors are to be elected and, in connection therewith, shall (w) name such Board
Designee as a nominee of management in the form of proxy sent by management to the
stockholders of the Company prior to such meeting, (x) include all required information
regarding such Board Designee in the proxy statement sent by management of the Company to
the stockholders of the Company prior to such meeting (which information shall, upon
request, be furnished to management by the Stockholder), (y) recommend to the stockholders
of the Company the election of such Board Designee and (z) vote in favor of such Board
Designee all legally effective proxies received from stockholders of the Company that
authorize or direct any officer or director of the Company, as proxy holder, to vote in the
election of directors for such Board Designee or which grant to any officer or director of
the Company the power to exercise his or her discretion in voting in the election of
directors.

     (c) The Company hereby agrees to limit the number of directors on its Board of Directors to
seven (7) directors as a maximum and shall maintain that minimum number of directors as is
necessary to prevent Stockholder’s Board Designees from constituting a majority of directors at any
time.

     3. Dividend. Promptly after the Xmark Closing Date, and in accordance with the Second
Amended and Restated Certificate of Incorporation of the Company, the Amended and Restated By-Laws
of the Company and all applicable laws, the Company shall pay a special dividend to all of its
stockholders in an aggregate amount of not less than $15,000,000. The Company hereby confirms that
after payment of the special dividend, the Company believes it will have sufficient assets to carry
on its business and to provide for future liabilities and sufficient surplus under applicable
Delaware law with which to pay the special dividend. In addition, promptly after the release of
the Escrow Amount (as defined in the Stock Purchase Agreement), the Company shall pay a second
special dividend to all of its stockholders, reflecting the release of the Escrow Amount and any
other amounts from the sale of the

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Company’s VeriMed business or the Company’s other assets (the date of the payment of the
second dividend, the “Second Dividend Date”).

     4. Employee Matters.

     (a) The Company has today entered into that certain Separation Agreement by and between the
Company and Scott R. Silverman (the “Silverman Separation Agreement”), a true and correct
copy of which is attached hereto as Exhibit C, and such agreement shall continue in full
force and effect and shall not be modified, rescinded or amended without the prior written consent
of the Stockholder.

     (b) Other than as provided under the Silverman Separation Agreement and as set forth in the
letter provided by the Company to Stockholder on the date hereto (the “Side Letter”), there
are no agreements, written or oral, regarding any special payment, bonus, incentive payment,
success fee, retention payment, consulting, management, finder, broker or similar fee or other
payment (collectively “Bonus Arrangements”) related to the Xmark Transaction, the potential
sale of the VeriMed business or the other assets of the Company or the other transactions
contemplated herein. From the date hereof until the Second Dividend Date, the Company agrees (i)
to adhere to and make no changes to the Company’s existing employment agreements and arrangements,
including those set forth in the Side Letter, and (ii) not to enter into or adopt any Bonus
Arrangements, in each case, without the prior written consent of the Stockholder.

     5. Access. From the date hereof until the Second Dividend Date, the Company will
permit Stockholder and its designated representatives to access such information relating to the
Company, including financial information, as Stockholder may reasonably request. Without limiting
the generality of the foregoing, such information shall include the items set forth on Exhibit
D. The Company shall make its officers available during normal business hours to meet with
Stockholder’s designated representative to discuss such information upon the reasonable request of
Stockholder.

     6. Insurance. Prior to the Xmark Closing Date, the Company will use commercially
reasonably efforts to procure prepaid “tail” policies at no less than current limits on (i) the
Company’s existing directors’ and officers’ liability insurance policy and (ii) the Company’s
existing general and products liability insurance policy. The Stockholder will be named as an
additional insured on such coverage. The Company and the Stockholder will cooperate and consult
regarding the purchase of this coverage, including consulting on such matters as the appropriate
limits and correct insureds and such other matters as the Parties shall mutually agree.

     7. Representations and Warranties. Each Party represents and warrants to the other
Party as follows:

          (a) It has all requisite power, legal capacity and authority to execute, deliver and perform
its obligations under this Letter Agreement.

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          (b) This Letter Agreement has been duly and validly authorized, executed and delivered by it,
and constitutes a valid and binding obligation of it, enforceable against it in accordance with its
terms except to the extent that enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors’ rights generally.

          (c) The execution, delivery and performance of this Letter Agreement by it does not (i)
violate, conflict with, or constitute a breach of or default under its organizational documents, if
any, or any material agreement to which it is a Party or by which it is bound or (ii) violate any
law, regulation, order, writ, judgment, injunction or decree applicable to it.

          (d) It is not a Party to any proxy, voting trust or other agreement which is inconsistent with
or conflicts with any provision of this Letter Agreement or the rights of any Party hereunder.

          (e) The consummation by the Party of the transactions contemplated by this Letter Agreement
have been duly and validly authorized by all necessary corporate, partnership or other action on
the part of the Party.

     8. Miscellaneous.

     (a) Each Party will pay its own costs and expenses in connection with the transactions
contemplated herein, except that, upon the Xmark Closing Date, the Company will pay to the
Stockholder (i) $250,000 as consideration for the execution of the Guarantee and (ii) the
Stockholder’s actual expenses (the “Transaction Expenses”) incurred or reasonably expected
to be incurred by Stockholder in connection with the transactions described in this Letter
Agreement, which Transaction Expenses shall not exceed $250,000 in the aggregate.

     (b) This Letter Agreement shall be governed by the law of the State of Florida, excluding its
conflict and choice of law principles. No modification or waiver of the terms of this Agreement
shall be effective unless it appears in a writing signed by the Parties.

     (c) This Letter Agreement shall terminate upon the Second Dividend Date; provided,
however, that if the Stock Purchase Agreement is terminated in accordance with Section 7.1
of the Stock Purchase Agreement, this Letter Agreement shall terminate on such earlier date of
termination, and the obligations of the Parties under this Letter Agreement shall terminate, except
for the obligations of each Party under Section 8 (provided that in Section 8(a) the Company shall
pay only the Transaction Expenses to Stockholder).

     (d) This Letter Agreement and the Side Letter constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, between the Parties with respect to
the subject matter hereof. This Letter Agreement is not intended to confer on any person other
than the Parties hereto any rights or remedies hereunder.

     (e) The Parties shall be entitled to enforce its rights under this Letter Agreement
specifically, to recover damages by reason of any breach of any provision of this Letter Agreement
and to exercise all other rights existing in their favor. The Parties agree and

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acknowledge that money damages may not be an adequate remedy for any breach of the provisions
of this Letter Agreement, and that either party may in its sole discretion apply to any court of
law or equity of competent jurisdiction for specific performance and/or injunctive relief (without
posting a bond or other security) in order to enforce or prevent any violation of the provisions of
this Letter Agreement.

     (f) The Company agrees to notify Stockholder within one (1) business day of its receipt of a
Claim Notice (as defined in Section 8.2(a) of the Stock Purchase Agreement) relating to a matter
covered by Section 8.1(a)(iii) of the Stock Purchase Agreement.  In the event of a Third-Party
Claim (as defined in Section 8.2(a) of the Stock Purchase Agreement) against Stanley for claims
arising under Section 8.1(a)(iii) of the Stock Purchase Agreement, the Company agrees not to settle
or compromise any such claim without Stockholder’s prior written consent (which shall not be
unreasonably withheld or delayed).  In the event of a Third-Party Claim against Stanley for claims
arising under Section 8.1(a)(iii) of the Stock Purchase Agreement, the Company further agrees to
assume control of the defense as is provided for under Section 8.2(b) of the Stock Purchase
Agreement. The Company shall keep Stockholder fully informed on a current basis regarding all
developments in respect of any such Third-Party Claim and shall consult with Stockholder in
connection with the defense of the claim.  Stockholder may also participate, at its own expense and
through legal counsel of its choice, in any such Proceeding (as defined in the Stock Purchase
Agreement) related to such Third-Party Claim. On or after the Cut-Off Date (as defined in the
Stock Purchase Agreement) and upon the request of Stockholder, the Company will assign its rights
under any provision of the Stock Purchase Agreement, including under Section 8.2 of the Agreement.
The Company shall pay when due all amounts required to be paid to Purchaser under Section
8.1(a)(iii) of the Stock Purchase Agreement. If the Company fails to pay when due any such amounts
required to be paid to Purchaser under Section 8.1(a)(iii) of the Stock Purchase Agreement, and
Stockholder pays such amounts to Purchaser, all such amounts paid by Stockholder shall be
considered a debt obligation of the Company to Stockholder, to be paid upon demand of Stockholder.

(g) This Letter Agreement may be executed in one or more counterpartes, each of which shall be
deemed an original, but all of which shall constitute one and the same instrument. Furthermore,
signatures delivered via facsimile transmission shall have the same force and effect as the
original thereof.

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     If the foregoing correctly reflects your understanding of our agreement, please so indicate by
signing and returning a copy of this letter to us today.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	APPLIED DIGITAL SOLUTIONS, INC.:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Joseph J. Grillo 	 	 
	 

	 	Name:
	 	 
Joseph J. Grillo
	 	 
	 

	 	Title:
	 	 
CEO
	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 
	AGREED AND ACCEPTED

As of the date first written above:	 	 
	 
	 	 	 	 
	VERICHIP CORPORATION:	 	 
	 
	 	 	 	 
	By:
	 	/s/ Scott R. Silverman 	 	 
	Name:

	 	 
Scott R. Silverman
	 	 
	Title:

	 	 
Chairman and CEOexv10w3

Exhibit 10.3

SEPARATION AGREEMENT 

     This Separation Agreement (the “Agreement”) is entered into by and between the parties to this
Agreement (hereinafter each a “Party” and, together, the “Parties”), VERICHIP CORPORATION, a
Delaware corporation (hereinafter “VeriChip”) and SCOTT R. SILVERMAN (hereinafter “Silverman”).

RECITALS

	 	A.	 	WHEREAS, VeriChip employed Silverman as its Chairman and Chief Executive
Officer, effective December 5, 2006, pursuant to that certain Employment and
Non-Compete Agreement dated December 5, 2006, between VeriChip and Silverman
(hereinafter the “Employment Agreement”);
	 
	 	B.	 	WHEREAS, VeriChip intends to sell all of the outstanding capital stock of Xmark
Corporation to The Stanley Works (hereinafter the “Xmark Transaction”);
	 
	 	C.	 	WHEREAS, as of the date of the closing of the Xmark Transaction (hereinafter
the “Xmark Closing Date”), VeriChip has advised Silverman that his services will no
longer be required and that his Employment Agreement will be terminated without cause;
and
	 
	 	D.	 	WHEREAS, the Parties desire to agree upon provisions for the termination of
their employment relationship, and provide for the termination of all duties,
responsibilities, and compensation requirements of the Parties.

     NOW, THEREFORE, in consideration of the promises and mutual obligations set forth in this
Agreement, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as
follows:

Section I. Compensation and Benefits.

     A. Termination Payment. If the Xmark Closing Date is on or prior to July 8, 2008,
Silverman will receive a payment (hereinafter the “Termination Amount”) in the amount of Four
Million, Two Hundred and Eighty-Two Thousand, Six Hundred and Eleven Dollars and Twenty Cents
($4,282,611.20) from VeriChip in full and final satisfaction of the obligations imposed and amounts
due Silverman pursuant to the terms of the Employment Agreement, including payment of an amount
corresponding to the value of the Fringe Benefits (as defined in the Employment Agreement) through
December 31, 2011. VeriChip will deduct from the Termination Amount all taxes and other deductions
which are required to be deducted or withheld under any provision of any federal, state or local
law in force and effect at the time payment is made. The Termination Amount, after all required
deductions and withholdings, will be paid to Silverman on the Xmark Closing Date.

          If the Xmark Closing Date is after July 8, 2008 but on or prior to December 31, 2008,
the Termination Amount will be adjusted downward to reflect the lower amount of salary actually
paid and benefits due to Silverman under the terms of the Employment Agreement, in

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accordance with the following formula. Specifically, Silverman will be due, in addition to
the costs associated with maintaining certain of his benefits (i.e., automobile lease payments,
health insurance, disability insurance, reimbursement for physical examinations and related
expenses, and annual membership dues for Silverman’s membership at a private club) through
December 31, 2011, the sum of (i) any and all earned but unpaid base salary and earned but unpaid
incentive bonus compensation as of the Xmark Closing Date; (ii) the greater of (A) his base salary
from the Xmark Closing Date through December 31, 2011, or (B) two (2) times his base salary; and
(iii) seventy-five (75%) percent of the bonus paid by VeriChip to Silverman in 2007, which amount
shall be interpolated from the Xmark Closing Date through December 31, 2011.

     B. Transaction Bonus Payment. In addition to the compensation set forth in Section
IA above, Silverman will also receive a bonus payment (hereinafter the “Transaction Bonus”) for the
completion of the Xmark Transaction in the amount of One Million and Two Hundred Thousand Dollars
and Zero Cents ($1,200,000.00). The Transaction Bonus, after all required deductions and
withholdings, will be paid to Silverman as follows: $1,080,000 will be paid to Silverman on the
Xmark Closing Date (the “Initial Transaction Bonus Payment”) and the remaining $120,000 will be
paid to Silverman on the date the escrow arrangement in connection with the Xmark Transaction is
terminated, which date shall not be any earlier than January 1, 2009 or later than December 31,
2009 (the “Final Transaction Bonus Payment”).

     C. Success Fee and Assumption of Liabilities Bonus Payment. In the event that (i) the
portion of VeriChip’s business that markets, distributes and sells implantable microchips is sold
in its entirety (hereinafter the “VeriMed Business”), (ii) all of the stock of VeriChip is sold, or
(iii) if the public company is used for a strategic transaction, e.g., a reverse merger (any of
which scenarios (i), (ii) or (iii) above are hereinafter referred to as the “VeriChip
Transaction”), on or before July 15, 2008, or if a binding letter of intent, indication of interest
or purchase agreement for the VeriChip Transaction is entered into on or before July 15, 2008,
Silverman will receive twenty-five percent (25%) of the Total Transaction Value, exclusive of
amounts paid to other financial advisors or finders (hereinafter the “Success Fee”). For purposes
of this Agreement, the Total Transaction Value will mean the value of all cash, securities,
promissory notes or other evidences of indebtedness, and other property or other assets paid,
payable or received, including debt, liabilities, and obligations which are assumed, in connection
with the VeriChip Transaction.

     Additionally, in the event that the purchaser of the VeriMed Business assumes all of the
liabilities of the VeriMed Business, Silverman will receive a one-time assumption of liabilities
bonus in the amount of Five Hundred Thousand Dollars ($500,000.00) (hereinafter the “Assumption of
Liabilities Bonus”).

     The Success Fee and Assumption of Liabilities Bonus, if appropriate, will be payable to
Silverman in the same form of consideration as is paid by the purchaser to VeriChip for the
VeriChip Transaction, or, at the discretion of the Board of Directors of VeriChip, the cash
equivalent thereof. If all of the liabilities of the VeriMed Business are assumed in exchange for
certain assets or rights of VeriChip, then, in such case, Silverman will receive the Assumption of
Liabilities Bonus in cash. If no cash, securities, or other property or assets are paid or
received in connection with a strategic transaction using the public company, Silverman will
instead

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receive twenty-five percent (25%) of the “actual value” received by VeriChip’s stockholders.
The “actual value” received by VeriChip’s stockholders will be measured by determining the fair
market value of the property or assets contributed by the private company multiplied by the total
percentage of stock held by all of the VeriChip stockholders following the strategic transaction.
If VeriChip and Silverman are unable to mutually agree on the fair market value, then such value
will be determined by submission of the question to a reputable appraisal firm with experience
valuing assets or property of the nature of the subject consideration acceptable to VeriChip and
Silverman (the fees and expenses of whom shall be borne equally by VeriChip and Silverman).

     The Success Fee and Assumption of Liabilities Bonus, if appropriate, will be paid on the date
of the closing of the VeriChip Transaction.

     The Success Fee, if appropriate, will not be payable by VeriChip in the event that Silverman,
either directly or indirectly, on behalf of any other person, firm, limited liability company,
partnership or corporation, as an owner, employee, creditor, consultant, option holder or
otherwise, purchases or acquires, or has the option to purchase or acquire, through merger or
otherwise, the VeriMed Business, the stock of VeriChip, or to enter into a strategic transaction
using the public company; provided, however, Silverman may own up to five percent
(5%) of the outstanding voting shares of any publicly held company (but without otherwise
participating in the business activities of such company) without otherwise violating the
provisions of this Section IC. The restriction in the previous sentence does not apply to the
Assumption of Liabilities Bonus.

     D. Vesting of Stock Options. All of Silverman’s outstanding stock options, restricted
stock and any other equity awards under the Employment Agreement or otherwise will automatically
vest on the Xmark Closing Date.

     E. Discharge of Obligations. The payments and benefits referred to in this Section I
will discharge all obligations of VeriChip to Silverman for wages, damages of any kind, benefits,
bonuses, vacation pay, sick pay, severance pay, costs, or any other expectation of remuneration or
benefit on the part of Silverman, as set forth in the Employment Agreement. Silverman acknowledges
that payments and benefits constitute good and valuable consideration for the various commitments
undertaken and releases provided by Silverman in this Agreement.

     F. Termination of Employment Agreement. On the Xmark Closing Date, the Employment
Agreement shall terminate and have no further force or effect. Silverman shall be entitled to keep
the computer and electronic communications equipment used by him in connection with his employment
with VeriChip; provided that all VeriChip and/or Xmark files or information on such equipment is
the property of VeriChip and shall be returned to VeriChip upon the Xmark Closing Date.

Section II. Resignation, Cooperation and Delivery of Waiver and Release

     A. Resignation. Effective upon the Xmark Closing Date, Silverman acknowledges that
his employment is being terminated without cause, thereby terminating as of that date all further
obligations of VeriChip to Silverman, of whatever kind and nature, including all forms of
compensation and benefits that otherwise might have been owed to Silverman due to his holding

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any employment or position with VeriChip, except those that are expressly identified in this
Agreement. Effective upon the Xmark Closing Date, Silverman hereby resigns from his positions as
an officer and a director of VeriChip and any subsidiary of VeriChip, and Silverman agrees to
complete, execute and submit any documentation necessary to resign such positions. Through the
Xmark Closing Date, Silverman will perform such duties as are assigned to him by VeriChip.
Silverman’s resignation, as well as his obligations to complete, execute and submit any
documentation necessary to resign such positions, are a condition precedent to any obligation of
VeriChip to pay Silverman any amounts due under Section I.

     If applicable, from the Xmark Closing Date until the earlier of (i) July 15, 2008 or (ii) the
closing of a VeriMed Transaction, Silverman will be a non-paid consultant of VeriChip. During this
period, VeriChip will reimburse Silverman for all normal and customary travel and meal expenses
incurred by him while pursuing the sale of the VeriMed Business.

     B. Cooperation. Even after the date of Silverman’s separation from VeriChip (the
“Separation Date”), Silverman acknowledges that he may have knowledge of information relating to
business and corporate matters, as well as other matters that would be relevant to VeriChip’s
ongoing business interests. After the Separation Date, and in consideration for compensation
provided to Silverman herein, Silverman agrees to cooperate fully with VeriChip and with VeriChip’s
counsel in connection with certain business matters, including, but not limited to, (i) any present
or future actual or threatened litigation, administrative proceeding or indemnification claim
involving VeriChip or its agents, employees, successors or assigns and relating to events or
conduct occurring (or claimed to have occurred) during the period of Silverman’s employment with
VeriChip, (ii) the sale of the VeriMed Business and/or the public company, (iii) the sale of
additional assets of VeriChip, (iv) the restructuring of VeriChip, (v) the distribution of
dividends to VeriChip’s stockholders, (vi) possible other transactions involving VeriChip following
the Xmark Closing Date, (vii) the satisfaction of any of VeriChip’s liabilities existing on the
Xmark Closing Date, or, to the extent Silverman is reasonably knowledgeable, arising thereafter,
and (viii) any further dividend or distribution to VeriChip’s stockholders. This cooperation shall
include, but not be limited to, (a) making himself reasonably available for interviews and
discussions with VeriChip’s counsel or VeriChip’s employee(s) or representative(s) with regard to
business issues and/or litigation matters, as well as for depositions and trial testimony, (b)
making himself reasonably available and cooperating in the preparation of, and for, any marketing
presentations, business meetings, agreements and related documentation, depositions or trial
testimony, as and to the extent that VeriChip or VeriChip’s counsel reasonably requests, (c)
refraining from intentionally impeding in any way VeriChip’s participation in meetings,
negotiations, dealings, business transactions or related matters, or VeriChip’s prosecution or
defense of any litigation, administrative proceeding or indemnification claim, and (d) cooperating
fully in any meetings, negotiations, dealings, business transactions or related matters in
connection with the VeriChip Transaction, as well as the development and presentation of VeriChip’s
prosecution or defense of any litigation, administrative proceeding or indemnification claim.
Silverman will be reimbursed by VeriChip for his reasonable travel and meal expenses incurred in
connection with such cooperation. Silverman agrees not to unreasonably withhold his availability
for such cooperation.

     C. Delivery of Waiver/Release. Silverman hereby makes the following promises:

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          1. Upon the signing of the purchase agreement in connection with the Xmark Transaction,
Silverman agrees that he hereby waives any rights he has to recover any severance payment, change
of control payment, bonus or success fee under any other agreement or plan of VeriChip, except for
those provided in this Agreement. Silverman acknowledges that this Agreement supersedes any
entitlement he may have had to any payments or benefits under any VeriChip employee benefit plan or
any severance or change in control plans, including the VeriChip Corporation Executive Management
Change in Control Plan, dated March 2, 2007 (the “CIC Plan”), or any other provisions in the
Employment Agreement.

          2. Simultaneous with, and as a condition to the payment of (i) the Termination Amount and the
Initial Transaction Bonus Payment, (ii) the Success Fee and any Assumption of Liabilities Bonus,
and (iii) the Final Transaction Bonus Payment, Silverman hereby agrees as follows:

(a) Silverman, on behalf of himself and each of his personal and legal
representatives, heirs, devisees, executors, successors and assigns, hereby
acknowledges full and complete satisfaction of, and fully and forever waives,
releases, acquits, and discharges VeriChip and/or any of its past or present
members, officers, directors, affiliates (including Applied Digital Solutions, Inc.
d/b/a Digital Angel), employees, stockholders, associates, owners, partners,
accountants, representatives, lawyers, agents, parents, subsidiaries, predecessors,
successors and assigns, and each of such entities’ members, officers, directors,
affiliates, employees, stockholders, associates, owners, partners, accountants,
representatives, lawyers and agents, and their respective parents, subsidiaries,
predecessors, successors, assigns, estates, personal representatives, beneficiaries
and heirs, and all persons acting by, through, under, or in concert with them, or
any of them, whether or not they are specifically referred to therein (hereinafter
collectively referred to as the “Released Parties”), from any and all claims, causes
of action, grievances, demands, rights, liabilities, damages of any kind,
obligations, costs, expenses, liabilities, and debts, of every kind and nature
whatsoever, whether based on statute, tort, contract, common law, equity, or other
theory of recovery, whether known or unknown, suspected or unsuspected, or fixed or
contingent, which Silverman holds or at any time previously held against VeriChip
arising out of or relating to Silverman’s employment with VeriChip, under the terms
set forth within the Employment Agreement, or separation from employment, or ever
had, presently has or may hereinafter have against the Released Parties, or any of
them, for any reason whatsoever, including, but not limited to, any claims in his
capacity as an officer, director or stockholder of VeriChip, or as a current or
former employee, officer, director or stockholder of any of the Released Parties,
with the exception of claims challenging the validity of, or alleging breaches of,
this Agreement. The general release contemplated within this Section IIC2
specifically includes, but is not limited to, any and all claims:

i. Arising under, based upon, or in any way related to Silverman’s
employment with VeriChip, incidents occurring during Silverman’s employment
with VeriChip, the termination of Silverman’s employment

5

 

with VeriChip, Silverman’s service as an officer or director of VeriChip,
Silverman’s capacity as a VeriChip stockholder; and/or

ii. Arising under, based upon, or in any way related to TITLE VII OF THE
CIVIL RIGHTS ACT OF 1964, as amended, THE CIVIL RIGHTS ACT OF 1991, 42 U.S.C.
§1981, THE AMERICANS WITH DISABILITIES ACT, THE REHABILITATION ACT, THE
FAMILY AND MEDICAL LEAVE ACT, THE FAIR LABOR STANDARDS ACT, THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF
1967, THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, THE EQUAL PAY ACT,
THE NATIONAL LABOR RELATIONS ACT, THE WORKER ADJUSTMENT AND RETRAINING
NOTIFICATION ACT, THE ELECTRIC SERVICE CUSTOMER CHOICE AND RATE RELIEF LAW OF
1997, and any other federal, state, county, or local common law, statute,
rule, ordinance, decision, order, policy, or regulation prohibiting
employment discrimination, harassment and/or retaliation, providing for the
payment of wages or benefits, or otherwise creating rights or claims for
employees, including, but not limited to, any and all claims alleging breach
of public policy, the implied obligation of good faith and fair dealing, or
any express, implied, oral or written contract, handbook, manual, policy
statement or employment practice, or claims alleging misrepresentation,
defamation, libel, slander, interference with contractual relations,
intentional or negligent infliction of emotional distress, invasion of
privacy, false imprisonment, assault, battery, fraud, negligence, or wrongful
discharge.

(b) Silverman hereby agrees not to sue or pursue any claim or action against
VeriChip with respect to any cause of action released in this Section IIC2.
Silverman agrees that, if any such claim referenced herein is filed, pursued or
otherwise prosecuted, Silverman waives his right to relief from such claim,
including the right to damages, attorneys’ fees, costs, and any and all other
relief, whether legal or equitable, sought in connection with such claim. Silverman
further agrees that, if he, or anyone on his behalf, files, pursues or otherwise
prosecutes any such claim, Silverman shall be liable for the payment of all damages
and costs, including attorneys’ fees, incurred by VeriChip in connection with such
claim, and VeriChip shall no longer be obligated to make any termination payment or
other payments not already made to Silverman.

(c) Silverman hereby waives, and acknowledges that the general release contained in
this Section IIC2 supersedes, any entitlement he may have had to any payments or
benefits under any VeriChip employee benefit plan, including, but not limited to,
the CIC Plan, or any severance or change-in-control plans or provisions in the
Employment Agreement. “Employee benefit plan” means each deferred compensation and
each incentive compensation, bonus, stock purchase, stock option and other equity
compensation plan, program, agreement or

6

 

arrangement; each severance or termination pay, medical, surgical, hospitalization,
life insurance and other “welfare” plan, fund or program (within the meaning of
Section 3(1) of Title I of the Employee Retirement Income Security Act of 1974
(“ERISA”); each profit-sharing, stock bonus or other “pension” plan, fund or program
(within the meaning of Section 3(2) of Title I of ERISA); each employment,
termination, severance or success fee agreement; and each other employee benefit
plan, fund, program, agreement or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed to by VeriChip, or to
which VeriChip is party, whether written or oral, for the benefit of Silverman.

(d) Silverman represents and warrants to the Released Parties that there has been no
assignment or other transfer of any interest in any claim by Silverman that
Silverman may have against the Released Parties or any of them.

(e) Silverman hereby agrees that the general release contained in this Section IIC2
is intended to cover all matters related to Silverman’s employment with VeriChip,
including, without limitation, any and all payments under the Employment Agreement
and the CIC Plan, including any severance payment, change of control payment, bonus
or success fee under any other agreement or plan of VeriChip, except for those
provided in this Agreement.

(f) No reference within the general release contained in this Section IIC2 to any
specific claim, statute or obligation is intended to limit the scope of the general
release, and, notwithstanding any such reference, the general release contained in
this Section IIC2 will be effective as a full and final bar to all claims that are
released herein.

(g) VeriChip expressly acknowledges that the foregoing releases do not release
VeriChip of any obligations to pay the amounts due to Silverman under Section I.

          3. Silverman acknowledges that the performance of his obligations under this Agreement,
including, but not limited to, his agreement to the terms of the general release contained in this
Section IIC2, is an express condition precedent to VeriChip’s obligations to pay any amounts due to
Silverman under Section I.

Section III. Confidentiality and Competition Restrictions.

     A. Confidentiality. Silverman acknowledges and agrees that he remains bound by the
following terms:

          1.  Silverman recognizes and acknowledges that all information pertaining to the terms of his
employment with VeriChip or to the affairs; business; results of operations; accounting methods,
practices and procedures; shareholders; acquisition candidates; financial condition; clients;
customers or other relationships of VeriChip or any of its affiliates (“Information”) is
confidential and is a unique and valuable asset of VeriChip or any of its

7

 

affiliates. Access to and knowledge of the Information is essential to the performance of
Silverman’s employment duties. Silverman will not, during the term of his employment or
thereafter, except to the extent reasonably necessary in performance of his employment duties, give
to any person, firm, association, corporation, or governmental agency any Information, except as
may be required by law. Silverman will not make use of the Information for his own purposes or for
the benefit of any person or organization other than VeriChip or any of its affiliates. Silverman
will also use his best efforts to prevent the disclosure of this Information by others. All
records, memoranda, etc. relating to the business of VeriChip or its affiliates, whether made by
Silverman or otherwise coming into his possession, are confidential and will remain the property of
VeriChip or its affiliates.

          2. Silverman will, with reasonable notice, furnish information as may be in his possession and
fully cooperate with VeriChip and its affiliates as may be required in connection with any claims
or legal action in which VeriChip or any of its affiliates is or may become a party.

     B. Competition Restrictions. Silverman acknowledges and agrees that he remains bound
by the following terms.

          1.  During the term of his employment and for a two (2) year period after the Xmark Closing
Date (the “Restriction Period”), Silverman agrees that, without prior express written approval
from the Board of Directors of VeriChip, he shall not compete with VeriChip and its affiliates by
directly or indirectly engaging in VeriChip’s business within the radio-frequency identification
technology market space or by engaging in any business comparable to that of VeriChip or its
affiliates, either directly or indirectly, as an individual, partner, member, corporation, limited
liability company, limited liability partnership, officer of a corporation or in any other
capacity whatsoever at any location at which VeriChip or its affiliates conducts business
and/or provides any services. If the VeriMed Business is not sold or transferred to a
third party, or if the VeriMed Business is sold or transferred to Silverman or an affiliate of
Silverman, this competition restriction, only insofar as it applies to the VeriMed Business, will
become null and void.

          2. Silverman acknowledges that the restrictions contained in Sections IIIB1, IIIB2, IIIB3,
IIIB4 and IIIB5, in view of the nature of the activities in which VeriChip and its affiliates are
engaged, are reasonable and necessary in order to protect the legitimate interests of VeriChip and
its affiliates, and that any violation thereof would result in irreparable injuries to VeriChip
and/or its affiliate(s), as the case may be. Silverman, therefore acknowledges that, in the event
of the violation of any of these restrictions, VeriChip shall be entitled to obtain from any court
of competent jurisdiction preliminary and permanent injunctive relief, as well as attorney’s fees
and costs, damages and an equitable accounting of all earnings, profits and other benefits arising
from such violation, which rights shall be cumulative, and in addition to any other rights or
remedies to which VeriChip may be entitled.

          3. Silverman agrees that the restrictions contained in Sections IIIB1, IIIB2, IIIB3, IIIB4 and
IIIB5 represent an essential element of Silverman’s compensation during the term of his employment,
and, but for Silverman’s agreement to comply with such restrictions, VeriChip would not have
employed Silverman.

8

 

          4. If any of the restrictions set forth in Sections IIIB1, IIIB2, IIIB3, IIIB4 and IIIB5
should, for any reason, be adjudged invalid or unreasonable in any proceeding, then the validity or
enforceability of the remainder of such restrictions shall not be adversely affected. If the
Restriction Period or the area specified in Sections IIIB1, IIIB2, IIIB3, IIIB4 and IIIB5 shall be
adjudged unreasonable in any proceeding, then the Restriction Period shall be reduced by such
number of months, or the area shall be reduced by the elimination of such portion thereof, or both,
so that such restrictions may be enforced in such area and for such period of time as is adjudged
to be reasonable. If Silverman violates any of the restrictions contained in Sections IIIB1, IIIB2,
IIIB3, IIIB4 and IIIB5, the Restriction Period shall not run in favor of Silverman from the time of
commencement of any such violation until such time as such violation shall be cured by Silverman to
the satisfaction of VeriChip.

          5. Except as otherwise set forth herein, the terms of this Section III shall survive
indefinitely. Silverman acknowledges that he can be gainfully employed and still comply with the
terms of Sections IIIB1, IIIB2, IIIB3, IIIB4 and IIIB5 and that compliance with such terms is not
unduly inconvenient to him.

Section IV. Miscellaneous.

     A. Taxes. VeriChip agrees to work with Silverman and the tax consultant(s) of his
choosing to structure the payments contemplated in this Agreement in a manner that is favorable to
Silverman, provided that such structuring has a neutral impact on VeriChip. Notwithstanding the
foregoing, VeriChip will deduct from the payments described herein all taxes and other deductions
which are required to be deducted or withheld under any provision of any federal, state or local
law in force and effect at the time payment is made.

     B. Attorney Review; Time for Execution; Revocation; Acknowledgements. VeriChip hereby
advises Silverman to consult with an attorney prior to executing this Agreement. Each Party will
bear all attorneys’ fees and costs arising from the actions of its own counsel in connection with
the review and execution of this Agreement. Silverman will have twenty-one (21) days from the date
of the presentation of this Agreement to consider whether to sign it. Silverman may revoke the
Agreement, thereby nullifying the Agreement and all of its terms, by notifying VeriChip through the
delivery of written notice of revocation by U.S. Mail to William J. Caragol, VeriChip’s designated
agent for this purpose, at any time within seven (7) days after executing the Agreement. In the
event Silverman exercises his right to revoke this Agreement, this Agreement will become null and
void and VeriChip will have no obligation to make the payments or furnish the other consideration
recited above, or any other obligation under this Agreement.

     Silverman expressly agrees, acknowledges and understands that: (a) the consideration set forth
in Section I above is, in part, consideration that he is not otherwise entitled to and is given in
exchange for the release contained in Section II above and for the other promises contained in this
Agreement; (b) he is waiving any and all rights or claims arising under the Age Discrimination in
Employment Act; (c) he has been, and is hereby, advised by VeriChip to consult with an attorney
prior to executing this Agreement; (d) he has been given a period of at least twenty-one (21) days
within which to consider this Agreement; (e) this Agreement does not become effective or
enforceable until the seven (7) day revocation period described above has

9

 

elapsed, with no revocation having occurred, and then the Agreement will be considered
effective retroactive to the date of execution by Silverman; (f) he may revoke this Agreement at
any time within seven (7) days after execution; (g) he will not be entitled to any payments or
benefits under this Agreement in the event of a revocation; (h) he has had a full opportunity to
read and consider this Agreement; and (i) he has knowingly and voluntarily entered into this
Agreement, and fully understands and agrees to all of its terms.

     C. Remedies. The Parties respectively acknowledge that the other Party would be
greatly injured by, and have no adequate remedy at law for, breach of obligations contained in
Section III above. Accordingly, the Parties agree that, wherever such breach occurs or is
threatened, the other Party may, in addition to all other remedies available to it, enjoin the
Party committing such breach or threatened breach (together with all persons acting with such
Party) from such breach or threatened breach. Each Party shall bear and pay its own court costs,
attorneys’ fees and other expenses in enforcing such Party’s rights under this Agreement.

     D. Governing Law and Venue. The internal substantive laws of the State of Florida,
excluding its conflict and choice of law principles, shall govern all questions related to the
execution, construction, validity, interpretation and performance of this Agreement and to all
other issues and claims arising under or related to it. Any action to enforce the terms of this
Agreement shall be brought in a court of competent jurisdiction located in West Palm Beach,
Florida.

     E. Severability. The provisions of this Agreement are fully severable. Therefore, if
any provision of this Agreement is for any reason determined to be invalid or unenforceable, such
invalidity or unenforceability will not affect the validity or enforceability of any of the
remaining provisions. Furthermore, any invalid or unenforceable provisions will be modified or
restricted to the extent, and in the manner, necessary to render the same valid and enforceable,
or, if such provision cannot under any circumstances be modified or restricted, it will be excised
from the Agreement without affecting the validity or enforceability of any of the remaining
provisions.

     F. Entire Agreement. This Agreement sets forth the entire agreement between the
Parties and supersedes any prior agreements between the Parties pertaining to the subject matter of
this Agreement, including the Employment Agreement.

     G. No Representations. The Parties acknowledge that, except as set forth herein, no
representations of any kind or character have been made by any other Party or the Party’s agents,
representatives, or attorneys to induce the execution of this Agreement. It is further understood
and agreed that Silverman has not relied upon any advice whatsoever from VeriChip or VeriChip’s
attorneys in agreeing to enter into this Agreement.

     H. No Modification and Waiver. No modification or waiver of the terms of this
Agreement shall be effective unless it appears in a writing signed by the Parties.

     I. Interpretation of Agreement. The language of all parts in this Agreement shall be
construed as a whole, according to fair meaning, and not strictly for or against any Party
notwithstanding any later-claimed ambiguities.

10

 

     J. Successors and Assigns. This Agreement will be binding upon, and will inure to the
benefit of, Silverman and his personal and legal representatives, heirs, devisees, executors,
successors, and assigns, and VeriChip and its successors and assigns.

     K. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the same instrument.
Furthermore, signatures delivered via facsimile transmission shall have the same force and effect
as the originals thereof, except that any Party has the right to insist on receipt of the original
signature of the other Party before complying with its own obligations under this Agreement.

     L. Notification. Notice to be given under this Agreement shall be given to:

If to VeriChip:

William J. Caragol

President and Chief Financial Officer

VeriChip Corporation

1690 South Congress Avenue, Suite 200

Delray Beach, Florida 33445

with a copy to:

Holland & Knight LLP

One East Broward Boulevard, Suite 1300

Fort Lauderdale, Florida 33301

Attention: Tammy Knight, Esq.

If to Silverman:

Scott R. Silverman

at his home address in Delray Beach, Florida

     M. Agreement is Knowing and Voluntary. Silverman understands and agrees that:
Silverman has had a reasonable time within which to consider this Agreement before executing it;
has carefully read and fully understands all of the provisions of this Agreement; knowingly and
willingly agrees to all of the terms set forth in this Agreement; knowingly and voluntarily intends
to be bound by same; and was advised, and is hereby advised in writing, to consider the terms of
this Agreement and consult with an attorney of Silverman’s choice prior to executing this
Agreement.

     N. Agreement May Become Null and Void. If applicable, this Agreement shall become
null and void and have no further force or effect upon the earlier to occur of (i) the purchase
agreement in connection with the Xmark Transaction not being executed by the parties thereto by May
20, 2008 or (ii) the Xmark Closing Date not occurring on or prior to December 31, 2008, under
either of which circumstances the terms of the Employment Agreement shall remain in full force and
effect without modification.

11

 

     O. Irrevocable Offer. VeriChip hereby acknowledges and agrees that, by its execution
and delivery of this Agreement, VeriChip has made an irrevocable offer to pay Silverman certain
types and amounts of compensation, pursuant to the terms and conditions of this Agreement, which
offer may not be withdrawn or revoked by VeriChip until after the end of the day that is twenty-one
(21) days after the date on which VeriChip executes this Agreement. If this Agreement is not
signed on or before the end of the day that is twenty-one (21) days after the date on which
VeriChip executes this Agreement, VeriChip shall be free to revoke its offer.

[remainder of page intentionally left blank; signature page follows]

12

 

     IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date(s) identified
below.

     PLEASE READ CAREFULLY. BY SIGNING THIS AGREEMENT, THE PARTIES ACKNOWLEDGE AND AGREE THAT THEY
HAVE CAREFULLY READ AND FULLY UNDERSTAND THIS AGREEMENT AND UNDERSTAND THE RIGHTS THEY ARE WAIVING
BY SIGNING THIS AGREEMENT. THE PARTIES ARE ENTERING INTO THIS AGREEMENT KNOWINGLY AND VOLUNTARILY,
AND SIGN IT OF THEIR OWN FREE ACT AND DEED.

	 	 	 	 	 	 	 	 	 	 	 
	VERICHIP CORPORATION:	 	 	 	SCOTT R. SILVERMAN:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ William J. Caragol 	 	 	 	/s/ Scott R. Silverman 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Date: May 15, 2008	 	 
	Name:	 	William J. Caragol 	 	 	 	 	 	 
	 

	 	 	 

	 	 	 	 	 	 
	Title:	 	President and CFO 	 	 	 	 	 	 
	 

	 	 	 

	 	 	 	 	 	 
	Date:    May 15, 2008	 	 	 	 	 	 

13

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