DEFA14A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 15, 2008

APPLIED DIGITAL SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	0-26020	43-1641533
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1690 SOUTH CONGRESS AVENUE, SUITE 201 DELRAY BEACH, FLORIDA	33445
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: 561-276-0477

(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

þ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01 Entry Into a Material Definitive Agreement.

          On May 15, 2008, VeriChip Corporation (NASDAQ: CHIP) (“VeriChip”), the approximately 49% owned subsidiary of Applied Digital Solutions, Inc. d/b/a Digital Angel (the “Company”), entered into a definitive agreement (the “Stock Purchase Agreement”) to sell its wholly-owned subsidiary Xmark Corporation to The Stanley Works (NYSE: SWK) for $45 million in cash (the “Transaction”).

          In conjunction with VeriChip’s entering into the Stock Purchase Agreement, the Company entered into three agreements with The Stanley Works:

• A Voting Agreement (the “Voting Agreement”) in which the Company has granted an irrevocable proxy in favor of the Transaction and against any alternative proposal. The Voting Agreement limits the Company’s ability to transfer shares of stock it holds in VeriChip or vote for any alternative deal during the period prior to the consummation of the Transaction and, in some cases, for a period of 7.5 months afterward.

• A Guarantee (the “Guarantee”) in favor of The Stanley Works in which the Company will hold The Stanley Works harmless from certain liabilities under the Stock Purchase Agreement.

• A Non-Competition Agreement (the “Non-Competition Agreement”) in which the Company has agreed that it will not compete in the businesses in which Xmark Corporation is currently operating for 3 years following the consummation of the Transaction. The Company does not operate in any of these businesses today. The Non-Competition Agreement will terminate upon a Change in Control Effective Date (as defined in the Non-Competition Agreement).

          On May 15, 2008, the Company also entered into a letter agreement (the “Intercompany Letter Agreement”) with VeriChip, in which the Company and VeriChip agreed, among other things, that (i) the Company will be permitted to name up to 3 designees to the Board of Directors of VeriChip after the closing of the Transaction, or earlier, if VeriChip breaches any provision of the Intercompany Letter Agreement, all of which shall be independent with the exception of Joseph J. Grillo, the Company’s President and Chief Executive Officer; (ii) VeriChip will pay up to $250,000 of the Company’s expenses related to the Transaction and will pay to the Company a Guarantee Fee of $250,000; (iii) VeriChip will limit all bonus payments to those currently scheduled, with any changes or new payments to be pre-approved by the Company; (iv) Scott Silverman, the Chairman of the Board and Chief Executive Officer of VeriChip, will enter into a separation agreement with VeriChip and Mr. Grillo is expected to join the VeriChip Board as Chairman of the Board; and (v) the Company will have access to VeriChip’s financial information. The Intercompany Letter Agreement provides that the Stock Purchase Agreement and the transactions contemplated thereby do not constitute an event of default under the (i) Commercial Loan Agreement dated December 27, 2005, as amended, between the Company and VeriChip, (ii) Security Agreement dated December 27, 2005, as amended, between the Company and VeriChip, and (iii) Third Amended and Restated Revolving Line of Credit Note dated as of February 8, 2007, as amended, from VeriChip in favor of the Company.

          On the same date, the Company entered into a Consent and Waiver Agreement (the “Consent and Waiver Agreement”) with its lenders, Laurus Master Fund, Ltd., Kallina Corporation, Valens U.S. SPV I, LLC, Valens Offshore SPV I, Ltd., Valens Offshore SPV II, Corp., and PSource Structured Debt Limited (the “Lenders”), in which the Lenders gave their consent to the Company’s entrance into the Guarantee and the Voting Agreement. The Consent

and Waiver Agreement sets forth changes to the Company’s term loan agreements with the Lenders and also provides that the Company will prepay a portion of its debt held by the Lenders from the proceeds of the Transaction.

     The foregoing descriptions of the Voting Agreement, the Guarantee, the Non-Competition Agreement, the Intercompany Letter Agreement and the Consent and Waiver Agreement do not purport to be complete and are qualified in their entirety by reference to the complete text of the Voting Agreement, the Guarantee, the Non-Competition Agreement, the Intercompany Letter Agreement and the Consent and Waiver Agreement, copies of which are filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

Proxy Statement

     VeriChip plans to file with the Securities and Exchange Commission (“SEC”) and mail to its stockholders a proxy statement in connection with the special meeting of stockholders to be called to approve the Xmark transaction. The proxy statement will contain important information about VeriChip, the transaction and related matters. Investors and stockholders are urged to read the proxy statement carefully when it is available. Investors and stockholders will be able to obtain free copies of the proxy statement and other documents filed with the SEC by VeriChip through the web site maintained by the SEC at www.sec.gov. In addition, investors and stockholders will be able to obtain free copies of the proxy statement from VeriChip by contacting Kay E. Langsford, at 1690 Congress Avenue, Suite 200, Delray Beach, Florida 33445.

Participants in the Solicitation

     The Company may be deemed, under SEC rules, to be a participant in the solicitation of proxies from VeriChip’s stockholders with respect to the proposed Xmark transaction. More detailed information regarding the identity of potential participants, and their direct or indirect interests, by securities, holdings or otherwise, will be set forth in the proxy statement to be filed with the SEC in connection with the proposed Xmark transaction.

ITEM 7.01 Regulation FD Disclosure.

     On May 15, 2008, the Company issued a press release regarding the Stock Purchase Agreement. The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

     The information in Item 7.01 of this Current Report on Form 8-K and Exhibit 99.1 is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in Item 7.01 of this Current Report and Exhibit 99.1 shall not be incorporated by reference into any filing under the Securities Exchange Act of 1934 or the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.

ITEM 9.01 Financial Statements and Exhibits.

(d) Exhibits

10.1	Voting Agreement, by and between the Company and The Stanley Works, dated as of May 15, 2008.
10.2	Guarantee, by the Company in favor of The Stanley Works, dated as of May 15, 2008.
10.3	Non-Competition Agreement, by and between the Company and The Stanley Works, dated as of May 15, 2008.
10.4	Intercompany Letter Agreement, by and between the Company and VeriChip, dated as of May 15, 2008.
10.5	Consent and Waiver Agreement, by and among Laurus Master Fund, Ltd., Kallina Corporation, Valens U.S. SPV I, LLC, Valens Offshore SPV I, Ltd., Valens Offshore SPV II, Corp., PSource Structured Debt Limited, and the Company, dated as of May 15, 2008.
99.1	Press Release of the Company dated May 15, 2008.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	APPLIED DIGITAL SOLUTIONS, INC.
Date: May 15, 2008	By:	/s/ Lorraine M. Breece
		Name:	Lorraine M. Breece
		Title:	Senior Vice President and Chief Financial Officer

INDEX TO EXHIBITS

Exhibit Number		Description
	10.1	Voting Agreement, by and between the Company and The Stanley Works, dated as of May 15, 2008.
	10.2	Guarantee, by the Company in favor of The Stanley Works, dated as of May 15, 2008.
	10.3	Non-Competition Agreement, by and between the Company and The Stanley Works, dated as of May 15, 2008.
	10.4	Intercompany Letter Agreement, by and between the Company and VeriChip, dated as of May 15, 2008.
	10.5	Consent and Waiver Agreement, by and among Laurus Master Fund, Ltd., Kallina Corporation, Valens U.S. SPV I, LLC, Valens Offshore SPV I, Ltd., Valens Offshore SPV II, Corp., PSource Structured Debt Limited, and the Company, dated as of May 15, 2008.
	99.1	Press Release of the Company dated May 15, 2008.

EX-10.1

Exhibit 10.1

EXECUTION VERSION

VOTING AGREEMENT

          This VOTING AGREEMENT, dated as of May 15, 2008 (this “Agreement”), is made by and between Applied Digital Solutions, Inc., a Delaware Corporation (“Applied Digital”) and The Stanley Works, a Connecticut corporation (“Purchaser”).

RECITALS

          WHEREAS, concurrently with the execution and delivery of this Agreement, VeriChip Corporation, a Delaware corporation (“Seller”), and Purchaser are entering into a Stock Purchase Agreement, dated as of the date hereof (as amended from time to time, the “Purchase Agreement”), which provides, among other things, for Purchaser to acquire 100% of the outstanding capital stock of X-Mark Corporation (the “Company”), a corporation governed under the laws of Canada and a wholly owned subsidiary of Seller (the transactions contemplated by the Purchase Agreement and this Agreement, the “Transactions”);

          WHEREAS, as a condition to entering into the Purchase Agreement, Purchaser has required that Applied Digital enter into this Agreement, and Applied Digital desires to enter into this Agreement to induce Purchaser to enter into the Purchase Agreement; and

          WHEREAS, as of the date hereof, Applied Digital is the legal, record and Beneficial Owner (as defined below) of 5,355,556 shares of common stock, par value $0.01 per share, of Seller (“Shares”) (together with such additional Shares as they become Beneficially Owned by Applied Digital after the date hereof, the “Owned Shares”), which Shares are all issued and outstanding and represent 48.6% of the outstanding Shares and voting power of the outstanding capital stock of Seller.

          NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows:

     1. Certain Definitions. Capitalized terms used but not defined in this Agreement shall have the meanings given to such terms in the Purchase Agreement. In addition, for purposes of this Agreement:

          “Affiliate” shall have the meaning set forth in the Purchase Agreement, except that, for purposes of this Agreement, with respect to Applied Digital, “Affiliate” shall not include Seller or any of the Persons that are directly or indirectly controlled by Seller.

          “Agreement” shall have the meaning set forth in the opening paragraph.

          “Applied Digital” shall have the meaning set forth in the opening paragraph.

          “Beneficially Owned” or “Beneficial Ownership” shall have the meaning given to such term in Rule 13d-3 under the Exchange Act. “Beneficial Owner” shall mean, with respect to any securities, a Person who has Beneficial Ownership of such securities.

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          “Company” shall have the meaning set forth in the recitals.

          “Currently Owned Shares” shall have the meaning set forth in Section 7(c).

          “Owned Shares” shall have the meaning set forth in the recitals.

          “Pledge” shall mean the pledge of Company Shares by Applied Digital under (i) the Amended and Restated Stock Pledge Agreement, dated as of December 28, 2007, among Applied Digital, Laurus Master Fund, Ltd., Valens Offshore SPV I, Ltd., Valens U.S. SPV I, LLC, PSource Structured Debt Limited and Computer Equity Corporation, as amended, modified, restated and/or superseded from time to time and (ii) the Amended and Restated Stock Pledge Agreement dated as of December 28, 2007 among Applied Digital, Kallina Corporation, Valens U.S. SPV I, LLC, Valens Offshore SPV I, Ltd., Valens Offshore SPV II, Corp., PSource Structured Debt Limited, Computer Equity Corporation, Digital Angel Corporation and Digital Angel Technology Corporation, as amended, modified, restated and/or superseded from time to time.

          “Purchase Agreement” shall have the meaning set forth in the recitals.

          “Purchaser” shall have the meaning set forth in the opening paragraph.

          “Recommendation Change” means if (i) the Board of Directors of Seller has received a Takeover Proposal that such Board determines, in good faith by resolution duly adopted, constitutes a Superior Proposal and (ii) the Board determines (after receiving the advice of its outside counsel) in good faith by resolution duly adopted that it is reasonably necessary to withdraw or modify the Board Recommendation to comply with its fiduciary duties to the stockholders of Seller under applicable Law.

          “Seller” shall have the meaning set forth in the recitals.

          “Shares” shall have the meaning set forth in the recitals.

          “Transactions” shall have the meaning set forth in the recitals.

          “Transfer” shall mean, with respect to a security, the sale, transfer, pledge, hypothecation, encumbrance, assignment or disposition of such security, rights relating thereto or the Beneficial Ownership of such security or rights relating thereto, the offer to make such a sale, transfer, pledge, hypothecation, encumbrance, assignment or disposition, and each option, agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing. As a verb, “Transfer” shall have a correlative meaning.

     2. No Disposition or Solicitation.

          (a) Except as set forth in Section 5 of this Agreement, Applied Digital undertakes that Applied Digital shall not, except as provided under the Pledge, (i) Transfer or agree to Transfer any Owned Shares or (ii) grant or agree to grant any proxy or power-of-

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attorney with respect to any Owned Shares. The restrictions in this Section 5 shall remain valid until this Agreement terminates pursuant to Section 9 hereof.

          (b) Applied Digital undertakes that, in its capacity as a stockholder of the Company and except as contemplated by Section 10, Applied Digital shall not, and shall cause its investment bankers, financial advisors, attorneys, accountants and other advisors, agents and representatives not to, directly or indirectly solicit, initiate, facilitate or encourage any inquiries or proposals from, discuss or negotiate with, or provide any non-public information to, any Person relating to, or otherwise facilitate, any Takeover Proposal. Notwithstanding the foregoing, if the Board of Directors of Seller determines, after consultation with outside counsel, in good faith by resolution duly adopted that an unsolicited written Takeover Proposal received after the date hereof other than in breach of Section 5.4 of the Purchase Agreement leads to or is reasonably likely to lead to a Superior Proposal and the Board of Directors of Seller determines that it is reasonably necessary to take the actions described in clauses (A) and (B) of Section 5.4(a) of the Purchase Agreement to comply with its fiduciary duties to the stockholders of Seller under applicable Law, Applied Digital (and its investment bankers, financial advisors, attorneys, accountants and other advisors, agents and representatives) shall be entitled (for so long as, to the knowledge of Applied Digital, such Takeover Proposal remains outstanding and such determination of the Board of Directions of Seller remains applicable and has not been reversed by a subsequent determination) to participate in discussions and negotiations with the Person making such Takeover Proposal (and its representatives). Applied Digital shall keep Purchaser reasonably apprised on a reasonably prompt basis as to the status of any such discussions and/or negotiations and shall promptly (within 48 hours) provide to Purchaser copies of any material written communications delivered or received by Applied Digital in connection with such discussions and/or negotiations.

     3. Stockholder Vote. Applied Digital undertakes that (a) unless there shall have been a Recommendation Change, at such time as the Seller conducts a meeting of, or otherwise seeks a vote or consent of, its stockholders for the purpose of approving the Purchase Agreement and/or any of the Transactions contemplated thereby, Applied Digital shall vote, or provide a consent with respect to, all then-outstanding Shares Beneficially Owned by Applied Digital in favor of the Purchase Agreement and the Transactions and (b) Applied Digital shall (at each meeting of stockholders and in connection with each consent solicitation) vote all then-outstanding Shares Beneficially Owned by Applied Digital against, and not provide consents to, (i) any and all Takeover Proposals, and (ii) any and all actions that would reasonably be expected to delay, prevent or frustrate the Transactions or the transactions contemplated by this Agreement or the satisfaction of any of the conditions set forth in Article VI of the Purchase Agreement. Without limiting the foregoing and subject to Section 9 hereto, it is understood that except as and to the extent set forth in clause (a) above, the obligations under this Section 3 shall not be affected by any Adverse Recommendation Change or other recommendation or position of the Seller’s Board of Directors.

     4. Reasonable Efforts to Cooperate.

          (a) Applied Digital hereby consents to the publication and disclosure in the Proxy Statement (and, as and to the extent otherwise required by securities Laws or the SEC or

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securities authorities, any other documents or communications provided by Seller, Purchaser or the Company to any Governmental Entity or to securityholders of the Seller) of Applied Digital’s identity and Beneficial Ownership of the Owned Shares and the nature of Applied Digital’s commitments, arrangements and understandings under and relating to this Agreement and, if deemed appropriate by Seller, a copy of this Agreement. Applied Digital will promptly provide any information reasonably requested by the Company, Seller or Purchaser for any regulatory application or filing made or approval sought in connection with the Transactions (including filings with the SEC).

     5. Irrevocable Proxy.

          (a) In furtherance of the agreements contained in Section 3 of this Agreement, Applied Digital hereby irrevocably grants to, and appoints, each of Purchaser and each of the executive officers of Purchaser, in their respective capacities as officers of Purchaser, as the case may be, and any individual who shall hereafter succeed to any such office of Purchaser, and each of them individually, Applied Digital’s proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of Applied Digital, to vote all Shares Beneficially Owned by Applied Digital that are outstanding from time to time, to grant or withhold a consent or approval in respect of such Shares and to execute and deliver a proxy to vote such Shares, in each case solely to the extent and in the manner specified in Section 3 and subject to the exceptions set forth in Section 3. It being understood that the proxy granted pursuant to this Section 5 shall be solely with regard to the approval of the Purchase Agreement and the transactions contemplated thereby and the other matters set forth in Section 3, and any other matter to be voted on by Applied Digital as a stockholder of the Seller shall not be subject to the proxy granted herein.

          (b) Applied Digital represents and warrants to Purchaser that, except for the proxy given in connection with the Pledge, all proxies heretofore given in respect of the Owned Shares are not irrevocable and that all such proxies have been properly revoked or are no longer in effect as of the date hereof.

          (c) Applied Digital hereby affirms that the irrevocable proxy set forth in this Section 5 is given by Applied Digital in connection with, and in consideration of, the execution of the Purchase Agreement by Purchaser, and that such irrevocable proxy is given to secure the performance of the duties of Applied Digital under this Agreement. Applied Digital hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 9, may under no circumstances be revoked. Subject to the rights of the pledgees under the Pledge, such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 212 of the Delaware General Corporation Law.

          (d) The proxy granted in this Section 5 shall remain valid until this Agreement terminates pursuant to Section 9 hereof.

     6. Further Action. If any further action is necessary or desirable to carry out the purposes of this Agreement, Applied Digital shall, and shall cause its Affiliates to, take all such action reasonably requested by Purchaser except as otherwise contemplated by Section 10.

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     7. Representations and Warranties of Applied Digital. Applied Digital represents and warrants to Purchaser as follows:

          (a) Applied Digital has all necessary power and authority and legal capacity to execute and deliver this Agreement and perform its obligations hereunder. The execution, delivery and performance of this Agreement by Applied Digital and the consummation by Applied Digital of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Applied Digital and no further proceedings or actions on the part of Applied Digital are necessary to authorize the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby.

          (b) This Agreement has been duly and validly executed and delivered by Applied Digital and, assuming it has been duly and validly authorized, executed and delivered by Purchaser, constitutes the valid and binding agreement of Applied Digital, enforceable against Applied Digital in accordance with its terms, except to the extent that enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditor’s rights generally and (ii) general principles of equity.

          (c) As of the date hereof, Applied Digital is the sole Beneficial Owner of 5,355,556 Owned Shares (the “Currently Owned Shares”). Applied Digital has legal, good and marketable title (which may include holding in nominee or “street” name) to all of the Currently Owned Shares, free and clear of all liens, claims, options, proxies, voting agreements and security interests (other than as created by this Agreement, the Pledge, the agreements listed in Schedule A and the restrictions on Transfer under applicable securities Laws). The Currently Owned Shares constitute all of the capital stock of Seller that is Beneficially Owned by Applied Digital as of the date hereof.

          (d) The execution and delivery of this Agreement by Applied Digital does not and the performance of this Agreement by Applied Digital will not (i) conflict with, result in any violation of, require any consent under or constitute a default (whether with notice or lapse of time or both) under any mortgage, bond, indenture, agreement, instrument or obligation to which Applied Digital is a party or by which Applied Digital or any of its properties (including the Owned Shares) is bound, (ii) conflict with, result in any violation of, require any consent under or constitute a default (whether with notice or lapse of time or both) under Applied Digital’s constituent documents, (iii) violate any judgment, order, injunction, decree or award of any court, administrative agency or other Governmental Entity that is binding on Applied Digital or any of its properties or (iv) constitute a violation by Applied Digital of any Law applicable to Applied Digital, except in the case of clause (i) for any conflict with the Pledge and for any consent that has previously been obtained and except for any violation, conflict or consent in clause (i), (iii) and (iv) as would not reasonably be expected to materially impair the ability of Applied Digital to perform its obligations hereunder or to consummate the transactions contemplated herein on a timely basis.

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          (e) Applied Digital understands and acknowledges that Purchaser is entering into the Purchase Agreement in reliance upon Applied Digital’s execution, delivery and performance of this Agreement.

     8. Representations and Warranties of Purchaser. Purchaser represents and warrants to Applied Digital as follows:

          (a) Purchaser has all necessary power and authority and legal capacity to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Purchaser and no further proceedings or actions on the part of Purchaser are necessary to authorize the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby.

          (b) This Agreement has been duly and validly executed and delivered by Purchaser and, assuming it has been duly and validly authorized, executed and delivered by Applied Digital, constitutes the valid and binding agreement of Purchaser, enforceable against Purchaser in accordance with its terms, except to the extent that enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditor’s rights generally and (ii) general principles of equity.

          (c) The execution and delivery of this Agreement by Purchaser does not and the performance of this Agreement by Purchaser will not (i) conflict with, result in any violation of, require any consent under or constitute a default (whether with notice or lapse of time or both) under any mortgage, bond, indenture, agreement, instrument or obligation to which Purchaser is a party or by which Purchaser or any of its properties is bound (or any of the constituent documents of Purchaser), (ii) violate any judgment, order, injunction, decree or award of any court, administrative agency or other Governmental Entity that is binding on Purchaser or any of its properties or (iii) constitute a violation by Purchaser of any Law applicable to Purchaser, except for any violation, conflict or consent in clause (i), (ii) and (iii) as would not reasonably be expected to materially impair the ability of Purchaser to perform its obligations hereunder or to consummate the transactions contemplated herein on a timely basis.

     9. Termination. This Agreement shall terminate upon the earliest of (a) the Closing Date, (b) in the event that the Purchase Agreement is validly terminated pursuant to Section 7.1(b)(iii), 7.1(c)(ii), 7.1(c)(iv) or 7.1(d)(ii), the date that is seven months and fifteen days after the date of such termination, (c) in the event that the Purchase Agreement is validly terminated pursuant to Section 7.1(b)(i) or Section 7.1(c)(i) and after the date of the Purchase Agreement but prior to the date of such termination a Takeover Proposal or a communication relating to a potential Takeover Proposal shall have been made known to Seller (or any director or officer of Seller) or shall have been made directly to Seller’s stockholders generally or any Person shall have publicly announced an interest in making or an intention (whether or not conditional) to make a Takeover Proposal, the date that is seven months and fifteen days after the date of such termination, (d) in the event that the Purchase Agreement is validly terminated in accordance

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with its terms other than pursuant to those sections listed in clause (b) or (c) above, concurrently with the termination of the Purchase Agreement and (e) the date of amendment of the Purchase Agreement, unless such amendment has been previously agreed to in writing by Applied Digital. Any such termination of this Agreement shall be without prejudice to liabilities arising hereunder before such termination of this Agreement.

     10. Stockholder Capacity. Notwithstanding anything herein to the contrary, Applied Digital has entered into this Agreement solely in Applied Digital’s capacity as the Beneficial Owner of Shares and nothing herein shall limit or affect any actions taken or omitted to be taken at any time by any Affiliate of Applied Digital that is an officer or director of the Seller in his or her capacity as such and any such actions taken or omitted to be taken by such Person shall not be deemed to constitute a breach of this Agreement.

     11. Miscellaneous.

          (a) Entire Agreement; No Third Party Beneficiaries. This Agreement, (a) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and thereof and (b) is not intended to confer upon any Person other than the parties hereto and thereto any rights or remedies hereunder.

          (b) Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses.

          (c) Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be transferred by either party (whether by operation of law or otherwise) without the prior written consent of the other party, provided, however, that Purchaser may transfer any of its rights and obligations to any Affiliate of Purchaser, but no such assignment shall relieve Purchaser of its obligations hereunder. Any transfer of any rights, interests or obligations hereunder in violation of this Section shall be null and void.

          (d) Amendment and Modification. This Agreement may be amended, modified and supplemented in any and all respects, but only by a written instrument signed by all of the parties hereto expressly stating that such instrument is intended to amend, modify or supplement this Agreement.

          (e) Extension; Waiver. At any time prior to the Closing Date, either party hereto may extend the time for the performance of any of the obligations or other acts of the other party. Any agreement on the part of a party to any such extension shall be valid only if set forth in an instrument in writing signed by or on behalf of such party. The failure of either party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights.

          (f) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if mailed, delivered personally, telecopied (which is

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confirmed) or sent by an overnight courier service, such as Federal Express, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

If to Applied Digital, to:

Applied Digital Solutions, Inc.
1690 South Congress Ave., #201
Delray Beach, FL 33445
Attention: Lorraine Breece
Facsimile: 561-805-8001

with a copy to:

Baker Botts L.L.P.
2001 Ross Avenue
Dallas, Texas 75225

Attention: Sarah M. Rechter
Facsimile: 214-661-4419

If to Purchaser, to:

The Stanley Works
1000 Stanley Drive
New Britain, Connecticut 06053
Attention: Corporate Secretary
Facsimile: 860-827-3911

with a copy to:

Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
Attention: Ethan Klingsberg
Facsimile: 212-225-3999

          (g) Severability. Any term or provision of this Agreement that is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction or other authority declares that any term or provision hereof is invalid, void or unenforceable, the parties agree that the court making such determination shall have the power to reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or

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provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.

          (h) Specific Performance. In addition to any remedies available at law or otherwise, each party shall be entitled to equitable relief, including specific performance, in the event of any breach or threatened breach of this Agreement.

          (i) Governing Law; Jurisdiction.

          (1) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law thereof.

          (2) To the fullest extent permitted by applicable Law, each party hereto (i) agrees that any claim, action or proceeding by such party seeking any relief whatsoever arising out of, or in connection with, this Agreement or the transactions contemplated hereby shall be brought only in the United States District Court for the Southern District of New York or any New York State court, in each case, located in the Borough of Manhattan and not in any other State or Federal court in the United States of America or any court in any other country, (ii) agrees to submit to the exclusive jurisdiction of such courts located in the Borough of Manhattan for purposes of all legal proceedings arising out of, or in connection with, this Agreement or the transactions contemplated hereby, (iii) waives and agrees not to assert any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court or any claim that any such proceeding brought in such a court has been brought in an inconvenient forum, (iv) agrees that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 11(f) (Notices) or any other manner as may be permitted by Law shall be valid and sufficient service thereof and (v) agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Law.

          (j) Descriptive Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

          (k) Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties.

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          IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed as of the day and year first above written.

Applied Digital Solutions, Inc.
By:	/s/ Joseph J. Grillo
	Name:	Joseph J. Grillo
	Title:	President and CEO
The Stanley Works
By:	/s/ John F. Lundgren
	Name:	John F. Lundgren
	Title:	Chairman and CEO

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EX-10.2

Exhibit 10.2

EXECUTION VERSION

[Applied Digital Letterhead]

May 15, 2008

The Stanley Works
1000 Stanley Drive
New Britain, Connecticut 06053
Attention: Corporate Secretary

Ladies and Gentlemen:

          Reference is made to that certain Stock Purchase Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”), dated as of the date hereof, by and among The Stanley Works (the “Beneficiary”) and VeriChip Corporation (the “Seller”). Capitalized terms used but not defined in this guarantee (this “Guarantee”) are used as defined in the Agreement.

1.	To induce the Beneficiary to enter into the Agreement, the undersigned (the “Guarantor”) hereby agrees to cause the Seller to comply with its obligations under Section 8.1(a)(iii) of the Agreement to the extent such obligations relate to Third-Party Claims (the “Obligations”), and shall be directly liable from and after the Closing, as a primary obligor, to the Beneficiary for the amount of any Obligations that are not completely paid by the Seller when due. This is an unconditional guarantee of payment and not of collectibility. It is understood that each of the obligations of Seller under the Agreement (other than under Section 8.1(a)(iii) of the Agreement) shall not, by itself or themselves, constitute a liability under Section 8.1(a)(iii), although it is possible that the existence of a liability that is indemnifiable under Section 8.1(a)(iii) may arise from the same set of facts that give rise to a breach of a representation, warranty or covenant under the Agreement.
2.	The Guarantor hereby waives notice of acceptance of this Guarantee and notice of any Obligations, and waives presentment, demand for payment, protest, notice of dishonor or non-payment with respect to any of the Obligations or any suit or the taking of other action by Beneficiary against, and any other notice to, the Seller, the Guarantor or others (other than as required by the Agreement). The Beneficiary shall have the right to proceed first and directly against the Guarantor under this Guarantee without proceeding against any other Person or exhausting any other remedies that it may have and without resorting to any other security held by it.
3.	The Beneficiary may at any time and from time to time without notice to or consent of the Guarantor and without impairing or releasing the obligations of the Guarantor hereunder: (1) agree with the Seller to make any change in the terms of any obligation or liability of the Seller to the Beneficiary, (2) take or fail to take any action of any kind in respect of any security for any obligation or liability of the Seller to the Beneficiary, (3) exercise or refrain from exercising any rights against the Seller or others, or (4) compromise or subordinate any obligation or liability of the Seller to the Beneficiary including any security therefor; provided, however, that Beneficiary and Seller may not make any change to Section 8.1(a)(iii) of the Agreement, or any change to the scope of this Guarantee without the prior written consent of the Guarantor. All suretyship defenses are hereby waived by the Guarantor (except as set forth clauses (a) or (b) in the next paragraph).
4.	The Guarantor’s obligations under this Guarantee are absolute, irrevocable and unconditional and shall not be affected by the validity or enforceability of any Obligation or any instrument

	evidencing any Obligation, or by the validity, enforceability, perfection or existence of any collateral therefor or by any other circumstance relating to any Obligation that might otherwise constitute a legal or equitable discharge of or defense of a guarantor or surety (other than as a result of the payment of the Obligations), provided that (a) the Guarantor may interpose any counterclaim or setoff that the Seller is or would have been entitled to interpose, except for so long as, and to the extent, such counterclaim or setoff has already reduced the amount of the Obligations or (b) the Guarantor may interpose any defense that the Seller is or would have been entitled to interpose (other than any defense arising by reason of any disability, incapacity, bankruptcy or insolvency of the Seller, including by reason of any lack of authorization of the Obligations by the Seller). The Guarantor agrees that this Guarantee shall be reinstated if at any time payment, or any part thereof, of any of the Obligations, or interest thereon is rescinded or must otherwise be restored or returned by the Beneficiary upon the bankruptcy, insolvency, dissolution or reorganization of the Seller.
5.	The Guarantor agrees to pay all reasonable out-of-pocket expenses incurred by the Beneficiary (including the reasonable fees and expenses of counsel), to the extent incurred after demand under this Guarantee has been made and not timely honored, in connection with a breach of this Guarantee by the Guarantor.
6.	The Guarantor hereby represents as follows:

a.	The Guarantor has full power and authority to execute and deliver this Guarantee.
b.	No action on the part of the Guarantor is required to authorize the execution and delivery of this Guarantee (other than such actions that have been taken prior to the date hereof). The execution, delivery and performance of this Guarantee do not contravene the organizational documents of the Guarantor, any Law or any contractual restriction binding on the Guarantor or the Guarantor’s assets.
c.	No actions by, notices to, filings with, consents, licenses, clearances, authorizations, and approvals of, and registration and declarations with, any governmental or regulatory authority are necessary for the due execution and delivery of this Guarantee.
d.	This Guarantee constitutes the legal, valid, and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with all of its terms and conditions (subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar Law affecting creditors’ rights generally). The enforceability of the Guarantor’s obligations is also subject to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
e.	The Guarantor currently has the financial capacity to pay and perform the Guarantor’s obligations under this Guarantee.

7. Neither this Guarantee nor any of the rights, interests or obligations hereunder shall be transferred by either party (whether by operation of law or otherwise) without the prior written consent of the other party, provided, however, that the Beneficiary may transfer any of its rights and obligations to any Affiliate of the Beneficiary, but no such assignment shall relieve the Beneficiary of its obligations hereunder. Any transfer of any rights, interests or obligations hereunder in violation of this section shall be null and void.

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8.

This Guarantee may not be revoked or terminated and shall remain in full force and effect and shall be binding on the Guarantor, the Guarantor’s successors and permitted assignees until all of the Obligations to the extent payable under this Guarantee have been paid in full. Notwithstanding the foregoing, this Guarantee shall terminate and the Guarantor shall have no further obligation or liability under this Guarantee as of the termination of the Agreement in accordance with its terms; provided, that this Guarantee shall not so terminate as to any claim for which a notice setting forth in reasonable detail the basis for such claim has been given to the Guarantor prior to such termination until final resolution of such claim. Notwithstanding the foregoing, in the event that the Beneficiary asserts in any litigation or other proceeding relating to this Guarantee that any other provision of this Guarantee is illegal, invalid or unenforceable in whole or in part, or asserts any theory of liability against the Guarantor or any other Person with respect to this Guarantee, the Agreement or the transactions contemplated hereby or thereby other than the liability of the Guarantor under this Guarantee or the liability of the Seller under the Agreement, then (i) the obligations of the Guarantor under this Guarantee shall terminate ab initio and shall thereupon be null and void, and (ii) if the Guarantor has previously made any payments under this Guarantee, the Guarantor shall be entitled to recover such payments from the Beneficiary.

9.

All notices and other communications hereunder shall be in writing and shall be deemed given if mailed, delivered personally, telecopied (which is confirmed) or sent by an overnight courier service, such as Federal Express, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

If to the Guarantor:

Applied Digital Solutions, Inc.
1690 South Congress Ave., #201
Delray Beach, FL 33445
Attention: Lorraine Breece
Facsimile: 561-805-8001

with a copy to:

Baker Botts L.L.P.
2001 Ross Avenue
Dallas, Texas 75225
Attention: Sarah M. Rechter
Facsimile: 214-661-4419

If to the Beneficiary, as provided in the Agreement.

10.

To the fullest extent permitted by applicable Law, each party hereto (i) agrees that any claim, action or proceeding by such party seeking any relief whatsoever arising out of, or in connection with, this Guarantee or the transactions contemplated hereby shall be brought only in the United States District Court for the Southern District of New York or any New York State court, in each case, located in the Borough of Manhattan and not in any other State or Federal court in the United States of America or any court in any other country, (ii) agrees to submit to the exclusive jurisdiction of such courts located in the Borough of Manhattan for purposes of all legal proceedings arising out of, or in connection with, this Guarantee or the transactions contemplated hereby, (iii) waives and agrees not to assert any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court or any claim that any such

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	proceeding brought in such a court has been brought in an inconvenient forum, (iv) agrees that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 10 or any other manner as may be permitted by Law shall be valid and sufficient service thereof and (v) agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Law.
11.	This Guarantee (a) constitutes the entire agreement and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and thereof and (b) are not intended to confer upon any Person other than the parties hereto and thereto any rights or remedies hereunder.
12.	This Guarantee may be amended, modified and supplemented in any and all respects, but only by a written instrument signed by all of the parties hereto expressly stating that such instrument is intended to amend, modify or supplement this Guarantee. Either party hereto may extend the time for the performance of any of the obligations or other acts of the other party. Any agreement on the part of a party to any such extension shall be valid only if set forth in an instrument in writing signed by or on behalf of such party. The failure of either party to this Guarantee to assert any of its rights under this Guarantee or otherwise shall not constitute a waiver of those rights.
13.	This Guarantee may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties.
14.	Promptly after entering into any agreement or arrangement with respect to, or effecting, any proposed sale, exchange, dividend or other distribution or liquidation of all or a significant portion of its assets in one or a series of transactions, any significant recapitalization or reclassification of its outstanding securities or any extraordinary transaction, the Guarantor will notify the Beneficiary in writing thereof pursuant to Section 9.
15.	Each party shall be entitled to equitable relief, including specific performance, in the event of any breach or threatened breach of this Guarantee.

[remainder of page intentionally left blank]

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		Very truly yours,
		APPLIED DIGITAL SOLUTIONS, INC.
		By:	/s/ Joseph J. Grillo
		Name:	Joseph J. Grillo
		Title:	President and Chief Executive Officer
Accepted and Agreed:
THE STANLEY WORKS
By:	/s/ John F. Lundgren
Name:	John F. Lundgren
Title:	Chairman and Chief Executive Officer

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EX-10.3

Exhibit 10.3

EXECUTION VERSION

NON-COMPETITION AGREEMENT

          THIS NON-COMPETITION AGREEMENT (this “Agreement”) is made and entered into as of May 15, 2008 by and between Applied Digital Solutions, Inc., a Delaware corporation (the “Company”) and The Stanley Works, a Connecticut corporation (“Purchaser”) and is ancillary to the Stock Purchase Agreement (as hereinafter defined).

W I T N E S S E T H:

          WHEREAS, concurrently with the execution of this Agreement, VeriChip Corp, a subsidiary of the Company and a Delaware corporation (“VeriChip”) and Purchaser have entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”), pursuant to which Purchaser will purchase all of the outstanding capital stock of Xmark Corporation, a corporation governed under the laws of Canada (“Xmark”);

          WHEREAS, all capitalized terms not otherwise defined herein shall have the meanings attributed thereto in the Stock Purchase Agreement;

          NOW, THEREFORE, in consideration of the premises, the terms and provisions set forth in this Agreement, the mutual benefits to be gained by the performance thereof and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

          SECTION 1. Non-Competition and Non-Solicitation.

          (a) To induce Purchaser to enter into the Stock Purchase Agreement and consummate the transactions contemplated thereby and more effectively to protect the value of Xmark, the Company shall not from the Closing until the date that is three years after the Closing Date, directly or indirectly, on its own behalf or for the benefit of any other Person, engage directly or indirectly in Competitive Activities, it being agreed that for purposes of the Agreement, a Person shall be deemed to be engaged in “Competitive Activities” if it engages in, or directly or indirectly, controls or has an ownership interest in, any Person that is engaged in, the business of manufacturing, selling, financing, supplying, marketing or distributing of Business Products, anywhere in the world. “Business Products” means (a) human infant security systems, (b) wander prevention systems for human beings (c) active RFID asset tracking systems marketed to the healthcare industry and (d) vibration monitoring equipment for the mining, construction and geotechnical markets.

          (b) The Company acknowledges and agrees that the restrictions contained in this Agreement are reasonable in scope and duration, and are necessary to protect Purchaser after the Closing Date. If any provision of this Agreement as applied to any party or to any circumstance is adjudicated by a court to be invalid or unenforceable, the same will in no way affect any other circumstance or the validity or enforcement of this Agreement or this Agreement. If any such provision, or any part thereof, is held to be unenforceable because of the duration of such

provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and/or to delete specific words or phrases, to the extent necessary to make it enforceable, and in its reduced form, such provision shall then be enforceable and shall be enforced. The Company further acknowledges and agrees that if it breaches or threatens to breach the provisions of this Agreement, then, in addition to monetary damages, Purchaser shall be entitled to specific performance and injunctive and other equitable relief to prevent or restrain a breach or threatened breach of such provision or to enforce its terms.

          SECTION 2. Miscellaneous.

          (a) Termination. With respect to those Competitive Activities in which a Competitive Entity was engaged in prior to any Change in Control Effective Date, this Agreement shall terminate upon a Change in Control Effective Date. “Change in Control Effective Date” means the first day that any one or more of the following conditions shall have been satisfied:

     (i) the consummation of any bona fide transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, (the “Exchange Act”), which is a Competitive Entity is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities entitled generally to vote in the election of the Board of Directors of the Company;

     (ii) the stockholders of the Company approve a bona fide merger or consolidation of the Company with any other Competitive Entity, which is consummated, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

     (iii) the consummation of a bona fide agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets to a Competitive Entity.

“Competitive Entity” means any corporation, entity or “person” which, prior to any Change in Control Effective Date, is presently engaged in Competitive Activities.

          (b) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law thereof.

          (c) Severability. In the event that any portion of this Agreement becomes or is held by an arbitrator or a court of competent jurisdiction to conflict with any federal, state or local law, or to be otherwise illegal, void or unenforceable, the remainder of this Agreement will

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continue in full force and effect and be construed as if such portion had not been included in this Agreement.

          (d) No Assignment. Because the nature of the Agreement is specific to the actions of the Company, the Company may not assign this Agreement. This Agreement shall inure to the benefit of Purchaser and its successors and assigns.

          (e) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by registered or certified mail (return receipt requested) or sent via facsimile (with acknowledgment of complete transmission) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice); provided, however, that notices sent by mail will not be deemed given until received:

          If to Purchaser, to:

The Stanley Works
1000 Stanley Drive
New Britain, Connecticut 06053
Attention: Corporate Secretary
Telecopy: (860) 827-3911

          with a copy to:

Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
Attention: Ethan Klingsberg, Esq.
Telephone: (212) 225-2000
Telecopy: (212) 225-3999

          and

          if to the Company, to:

Applied Digital Solutions, Inc.
1690 South Congress Ave., #201
Delray Beach, FL 33445
Attention: Lorraine Breece
Telephone: (561) 276-0477
Telecopy: 561-805-8001

          with a copy to:

Baker Botts L.L.P.
2001 Ross Avenue, Suite 600
Dallas, Texas 75201

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Attention: Sarah M. Rechter
Telephone: (214) 953-6419
Telecopy: (214) 661-4419

          (f) Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior discussions, agreements and understandings, written or oral, between the parties with respect to the subject matter hereof.

          (g) Waiver of Breach. No delay or omission by Purchaser in exercising any right under this Agreement shall operate as a waiver of that right or any other right under this Agreement. The waiver of a breach of any term or provision of this Agreement, which must be in writing, shall not operate as or be construed to be a waiver of any other previous or subsequent breach of this Agreement.

          (h) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.

          (i) Amendments and Modification. This Agreement may not be modified, amended, altered or supplemented except by the execution and delivery of a written agreement executed by the parties hereto.

          (j) Interpretation. The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

[Signature Page Follows]

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          IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

THE STANLEY WORKS
By	/s/ John F. Lundgren
	Name: John F. Lundgren
	Title: Chairman and Chief Executive Officer
APPLIED DIGITAL SOLUTIONS, INC.
By	/s/ Joseph J. Grillo
	Name: Joseph J. Grillo
	Title: CEO

EX-10.4

Exhibit 10.4

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 CEO

EX-10.5

Exhibit 10.5

EXECUTION VERSION

CONSENT AND WAIVER AGREEMENT

     THIS CONSENT AND WAIVER AGREEMENT (this “Consent and Waiver Agreement”) is made and entered into effective as of May 15, 2008, by and among LAURUS MASTER FUND, LTD. (“Laurus”), a Cayman Islands company, KALLINA CORPORATION, a Delaware corporation (“Kallina”), VALENS U.S. SPV I, LLC, a Delaware limited liability company (“Valens U.S.”), VALENS OFFSHORE SPV I, LTD., a Cayman Islands company (“Valens Offshore I”), VALENS OFFSHORE SPV II, CORP., a Delaware corporation (“Valens Offshore II”) and PSOURCE STRUCTURED DEBT LIMITED, a Guernsey limited liability closed-ended company (“PSource”, and, together with Kallina, Valens U.S., Valens Offshore I and Valens Offshore II, the “Lenders”), and APPLIED DIGITAL SOLUTIONS, INC. D/B/A DIGITAL ANGEL, a Delaware corporation (the “Company”). Capitalized terms used but not defined herein shall have the meanings given them in the Voting Agreement (as defined below).

     WHEREAS, Laurus and the Company are parties to that certain Securities Purchase Agreement and the Related Agreements (as such term is defined in such Securities Purchase Agreement) all of which are dated as of August 24, 2006 (collectively, as amended, restated, modified and/or supplemented to date, the “2006 Agreements”); and

     WHEREAS, the Lenders (other than PSource) and the Company are parties to that certain Securities Purchase Agreement and the Related Agreements (as such term is defined in such Securities Purchase Agreement), all of which are dated as of August 31, 2007 (collectively, as amended, restated, modified and/or supplemented to date, the “2007 Agreements”); and

     WHEREAS, the Lenders (other than Valens Offshore I) and the Company are parties to that certain Omnibus Amendment and Waiver dated as of October 31, 2007 (“Omnibus Amendment”), which amends the 2006 Agreements and 2007 Agreements; and

     WHEREAS, the Lenders (other than Kallina and Valens Offshore II) and the Company are parties to that certain Amended and Restated Stock Pledge Agreement dated as of December 28, 2007 (the “Amended and Restated 2006 Pledge”); and

     WHEREAS, the Lenders (other than Laurus and PSource) and the Company are parties to that certain Amended and Restated Stock Pledge Agreement dated as of December 28, 2007 (the “Amended and Restated 2007 Pledge,” and together with the 2006 Agreements, the 2007 Agreements, the Omnibus Amendment and the Amended and Restated 2006 Pledge, the “Transaction Documents”); and

     WHEREAS, VeriChip Corp (“VeriChip”) and The Stanley Works (“TSW”) are entering into a Stock Purchase Agreement whereby VeriChip will sell to TSW all of the outstanding capital stock of its subsidiary, Xmark;

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     WHEREAS, pursuant to that certain Voting Agreement among the Company and TSW, dated May 15, 2008, and attached hereto as Exhibit A (the “Voting Agreement”), the Company will agree to grant an irrevocable proxy to vote all of the then-outstanding Shares Beneficially Owned by the Company, including shares that have been pledged pursuant to the Stock Pledge Agreements, in favor of the transactions contemplated by the Purchase Agreement;

     WHEREAS, pursuant to that certain Guarantee by the Company in favor of TSW, dated May 15, 2008, and attached hereto as Exhibit B (the “Guarantee”), the Company will agree to guarantee certain of VeriChip’s obligations under the Purchase Agreement; and

     WHEREAS, pursuant to the Transaction Documents, certain of the Shares Beneficially Owned by the Company constitute Collateral (as defined within the Transaction Documents), and therefore, the entering into of the Voting Agreement and the Guarantee and the consummation of the transactions contemplated by the Voting Agreement and the Guarantee require the prior written consent of the Lenders.

     NOW, THEREFORE, in consideration of the mutual covenants contained herein, 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:

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The Lenders hereby agree that, upon satisfaction by the Company of all of the terms and conditions hereof, they shall thereupon be deemed to have consented to the Voting Agreement and the Guarantee. Notwithstanding the foregoing, Lenders reserve all of their rights and remedies under the Stock Pledge Agreement, including without limitation, their rights to foreclose on the Collateral and to exercise any and all proxy and voting rights granted under the Stock Pledge Agreements without regard to the irrevocable proxy granted under the Voting Agreement.

2.

The Company acknowledges, agrees and confirms that the occurrence of any of the following (if deemed material by the Lenders in their reasonable discretion and only so long as the Company has any obligation, fixed, contingent or otherwise, to provide the Guarantee or under the Guarantee) constitutes an “Event of Default” under and as defined in each of the Transaction Documents where such term is used and a breach of the terms of, and an event of default under, all other Transaction Documents (each a “Trigger Event”): (i) VeriChip’s receipt of a Claim Notice (as defined in the that certain Stock Purchase Agreement dated the date hereof between TSW and VeriChip, as amended, modified, supplemented and/or superseded (the “Stock Puchase Agreement”)) in connection with its indemnification obligations under Section 8.1(a)(iii) of the Stock Purchase Agreement or (ii) a demand, claim or other request for payment is made by TSW against the Company under or in connection with the Guarantee. The Company shall, within two (2) days of the occurrence of any

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	Trigger Event, provide Lenders with written notice of the occurrence of such Trigger Event, which shall include copies of any and all written notices or other writings or correspondence received by the Company or VeriChip in connection therewith.
	TSW shall, contemponaneously with the provision thereof to the Company and/or VeriChip, furnish to Lenders, c/o LV Administrative Services, Inc. at 335 Madison Ave. 10th Floor, New York, NY 10017, a copy of all Claim Notices (as defined in the Stock Purchase Agreement) and all, demands, claims or requests for payment made under or in connection with the Guarantee.
3.

a.	The Company shall prepay its indebtedness owing to the Lenders under the Transaction Documents in an amount equal to eighty percent (80%) of each dividend and other distribution (“Lender Dividend Share”) payable, from time to time, to Company as a stockholder of VeriChip simultaneously with the payment of each such dividend or distribution by VeriChip. The Company shall cause VeriChip, and hereby irrevocably authorizes and instructs VeriChip, to pay the Lender Dividend Share directly to Lenders through Lenders’ administrative and collateral agent, LV Administrative Services, Inc. (“Agent”).
b.	The Company shall prepay its indebtedness owing to the Lenders under the Transaction Documents in an amount equal to eighty percent (80%) of the Guarantee Fee (“Lender Guaranty Fee Share”) simultaneously with the payment thereof by VeriChip. The Company shall cause VeriChip, and hereby irrevocably authorizes and instructs VeriChip, to pay the Lender Guaranty Fee Share directly to Agent, for the benefit of Lenders. “Guarantee Fee” shall have the meaning set forth in, and shall be payable in accordance with, Section 8(a) of that certain Intercompany Letter Agreement between VeriChip and the Company, dated as of May 15, 2008. VeriChip and the Company agree that they shall not reduce the amount of the Guarantee Fee without Agent’s prior written consent.
c.	All payments to made to Agent hereunder shall be payable by wire transfer of immediately available funds in accordance with the wiring instructions set forth below and shall be applied to the indebtedness owing to the Lenders in such manner as the Lenders shall elect.
	Bank Name: Capital One Bank NA Bank Address: 404 Fifth Avenue New York, NY 10018 Account Name: LV Administrative Services, Inc. ABA Number: 021407912 Account Number: 270-406-0132 RE: DIGA Paydown

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d. The payment instructions and authorizations to VeriChip set forth in this Section 3 are irrevocable and shall continue in full force and effect until such time as Agent notifies VeriChip, in writing, that all of the indebtedness owing to Lenders under the Transaction Documents has been satisfied in full. In the event the Company receives any portion of the Lender Dividend Share of any dividend or distribution or the Lender Guarantee Fee Share of the Guarantee Fee from VeriChip in contravention of this Section 3, such amounts shall be held in trust by the Company for the benefit of Lenders and shall be immediately remitted to Agent, for the benefit of Lenders, in the form received.

4.	The Company’s or VeriChip’s failure to timely perform their obligations and agreements set forth in this Consent Agreement shall constitute an “Event of Default” under and as defined in each of the Transaction Documents in which such term is used and a breach and default of all other Transaction Documents.
5.	Each consent and waiver set forth herein shall be effective as of the date first above written (the “Effective Date”) provided each of the Company and the Lenders shall have executed, and the Company shall have delivered to the Lenders, its respective counterpart to this Consent and Waiver Agreement.
6.	Except as specifically set forth in this Consent and Waiver Agreement, there are no other amendments, modifications or waivers to the Transaction Documents, and all of the other forms, terms and provisions of the Transaction Documents remain in full force and effect.
7.	The Company hereby represents and warrants to the Lenders that, as of the date hereof, there is no Event of Default under the Transaction Documents.
8.	This Consent and Waiver Agreement shall be binding upon the parties hereto and their respective successors and permitted assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and their respective successors and permitted assigns. THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. This Consent and Waiver Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument.
9.	The Company acknowledges that it has supplied the Lenders with information about the Voting Agreement and the Guarantee and the transactions contemplated therein (the “Information”) upon which the Lenders have relied in deciding to enter into this Consent and Waiver Agreement. The Company further acknowledges and agrees the Lenders’ agreement to the terms and conditions set forth herein is conditioned upon the Information being true, complete, accurate and correct and all material respects.

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10. The consents and waivers set forth herein are solely limited to the matters expressly described herein and no course of dealing or course of conduct shall be inferred from the Lenders’ execution hereof.

[The remainder of this page has been left blank intentionally; signature page follows]

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     IN WITNESS WHEREOF, the Lenders have executed and delivered this Consent and Waiver Agreement as of the date first above written.

LAURUS MASTER FUND, LTD
By:	LAURUS CAPITAL MANAGEMENT, LLC
Its:	Investment Manager
By:	/s/ Scott Bluestein
Name:	Scott Bluestein
Title:	Authorized Signatory
KALLINA CORPORATION
By:	LAURUS CAPITAL MANAGEMENT, LLC
Its:	Investment Manager
By:	/s/ Scott Bluestein
Name:	Scott Bluestein
Title:	Authorized Signatory
VALENS U.S. SPV I, LLC
By:	VALENS CAPITAL MANAGEMENT, LLC
Its:	Investment Manager
By:	/s/ Scott Bluestein
Name:	Scott Bluestein
Title:	Authorized Signatory
VALENS OFFSHORE SPV I, LTD.
By:	VALENS CAPITAL MANAGEMENT, LLC
Its:	Investment Manager
By:	/s/ Scott Bluestein
Name:	Scott Bluestein
Title:	Authorized Signatory

VALENS OFFSHORE SPV II, CORP.
By:	VALENS CAPITAL MANAGEMENT, LLC
Its:	Investment Manager
By:	/s/ Scott Bluestein
Name:	Scott Bluestein
Title:	Authorized Signatory
PSOURCE STRUCTURED DEBT LIMITED
By:	LAURUS CAPITAL MANAGEMENT, LLC
Its:	Investment Manager
By:	/s/ Scott Bluestein
Name:	Scott Bluestein
Title:	Authorized Signatory
APPLIED DIGITAL SOLUTIONS, INC.
By:	/s/ Joseph J. Grillo
Name:	Joseph J. Grillo
Title:	CEO
ACKNOWLEDGED AND AGREED ON MAY 15, 2008:
THE STANLEY WORKS
By:	/s/ John F. Lundgren
Name:	John F. Lundgren
Title:	Chairman & CEO

EX-99.1

Exhibit 99.1

DIGITAL ANGEL VOICES SUPPORT OF VERICHIP CORPORATION’S

SALE OF XMARK SUBSIDIARY

TRANSACTION EXPECTED TO PROVIDE FINANCIAL AND OPERATIONAL BENEFITS

FOR DIGITAL ANGEL STOCKHOLDERS

SO. ST. PAUL, MN (May 15, 2008) — The Board of Directors of Digital Angel (the “Company” or “Digital Angel”) (NASDAQ: DIGA), an advanced technology company in the field of animal identification and emergency identification solutions, today announced support of its approximately 49% owned subsidiary VeriChip Corporation’s (NASDAQ: CHIP) definitive agreement to sell its wholly-owned subsidiary Xmark Corporation to The Stanley Works (NYSE: SWK) for $45 million in cash. The transaction has been previously announced by both VeriChip and The Stanley Works.

Joseph J. Grillo, Digital Angel’s Chief Executive Officer and President, commented, “We believe that this transaction will have both financial and operational benefits for our Company and stockholders. Accordingly, our Board of Directors has formally agreed to vote all VeriChip shares held by it in favor of the transaction.”

Mr. Grillo added, “Pursuant to the transaction, VeriChip has agreed to repay approximately $5.0 million of debt owed to Digital Angel. VeriChip has also proposed an initial dividend of approximately $15 million to its stockholders upon closing of the transaction, which would result in a further cash payment to the Company of approximately $7.0 million, with another proposed distribution of available cash to occur following the release of funds to be escrowed for 12 months following the closing of The Stanley Works transaction and any proceeds derived from VeriChip’s recently announced plans to sell their VeriMed business.

“From an operational point of view, the transaction dovetails with our stated intention to focus on our core operations, as it minimizes our exposure to markets that are non-core for us. Our two core businesses are animal identification, using visual and radio frequency identification (RFID) technology for livestock, pets, horses, fish and other wildlife, and emergency identification, using global positioning system (GPS) technology for military, commercial and recreational use.”

Lorraine M. Breece, Digital Angel’s Chief Financial Officer, added, “As a result of the expected debt repayment and receipt of the initial special dividend, we expect to repay approximately $8.0 million of existing term debt and to add approximately $4.0 million to our available working capital. This should significantly improve our balance sheet, reduce our interest expense and strengthen our financial condition.”

Upon the closing of The Stanley Works transaction, Mr. Grillo will join the VeriChip Board, as Chairman, replacing Scott R. Silverman, the current Chairman. Mr. Grillo will not be paid any compensation for serving on the VeriChip Board. VeriChip Corporation has previously announced the details of the timing of the closing of the transaction, which is subject to the approval of VeriChip’s stockholders.

About Digital Angel

Digital Angel (www.digitalangel.com) is an advanced technology company in the field of animal identification and emergency identification solutions. Digital Angel’s products are utilized around the world in such applications as pet identification using its patented, FDA-approved implantable microchip; livestock identification and tracking using visual and radio frequency identification (RFID) ear tags; and global positioning systems (GPS) search and rescue beacons for use on aircraft, ships and boats, and by adventure enthusiasts. Digital Angel is an approximately 49% stockholder of VeriChip Corporation (NASDAQ: CHIP).

This press release contains certain “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements included in this press release include, without limitation, those concerning expectations regarding the consummation of the Stanley transaction, the benefits of that transaction for the Company and its stockholders, and the impact of the transaction on the Company’s financial results. These forward-looking statements are based on the Company’s current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions. Additional information about these and other factors that could affect the Company’s businesses is set forth in the Company’s Form 10-K under the caption “Risk Factors” filed with the Securities and Exchange Commission (“SEC”) on March 17, 2008, and subsequent filings with the SEC. The Company undertakes no obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this statement or to reflect the occurrence of unanticipated events, except as required by law.

Proxy Statement

VeriChip Corporation plans to file with the Securities and Exchange Commission (“SEC”) and mail to its stockholders a proxy statement in connection with the special meeting of stockholders to be called to approve the Xmark transaction. The proxy statement will contain important information about the VeriChip, the transaction and related matters. Investors and stockholders are urged to read the proxy statement carefully when it is available. Investors and stockholders will be able to obtain free copies of the proxy statement and other documents filed with the SEC by VeriChip through the web site maintained by the SEC at www.sec.gov. In addition, investors and stockholders will be able to obtain free copies of the proxy statement from VeriChip by contacting Kay E. Langsford, at 1690 Congress Avenue, Suite 200, Delray Beach, Florida 33445.

Participants in the Solicitation

The Company may be deemed, under SEC rules, to be a participant in the solicitation of proxies from the VeriChip’s stockholders with respect to the proposed Xmark transaction. More detailed information regarding the identity of potential participants, and their direct or indirect interests, by securities, holdings or otherwise, will be set forth in the proxy statement to be filed with the SEC in connection with the proposed Xmark transaction.

Contact:

Digital Angel
Jay F. McKeage
Phone: (561) 805-8041
jmckeage@digitangel.com

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