INTELLECTUAL PROPERTY SECURITY AGREEMENT

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any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United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

(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.

(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.

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]

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.

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

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

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

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

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

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

SCHEDULE III
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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

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