Exhibit 10.2





Exhibit 10.2



***CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.



DEVELOPMENT AND SUPPLY AGREEMENT




THIS AGREEMENT is between Medical Components, Inc. a Pennsylvania corporation, located at 1499
Delp Drive, Harleysville, PA 19438 (“Medcomp”) and VeriChip Corporation, a Delaware corporation,
located at 1690 South Congress Avenue, Suite 200, Delray, FL 33445 (“VeriChip”).



RECITALS





	 	A.	 	Medcomp is engaged in the development, manufacture and sale of various
medical devices, including venous catheters and infusion ports.
	 
	 	B.	 	The parties have agreed that VeriChip will seek development and
manufacture of an 8mm RFID Microchip similar to its current 12mm RFID Microchip,
as described on Exhibit A (the “Product”) for sale to Medcomp in accordance with
the specifications, delivery schedules and other requirements referenced in this
Agreement.
	 
	 	C.	 	Medcomp wishes to purchase the Product from VeriChip for implantation
into Medcomp’s vascular access product lines.
	 
	 	D.	 	The parties now desire to enter into an arrangement whereby VeriChip will
develop, manufacture and sell the Product and Medcomp will buy the Product for
implantation into vascular access medical devices on an exclusive basis.





NOW, THEREFORE, intending to be legally bound, the parties hereto agree as follows:



ARTICLE IA — DEVELOPMENT OF THE PRODUCT




Section 1A.01 Development Efforts. Medcomp and VeriChip acknowledge that they will cooperate
in the development of the Product and agree that all prior and future joint development efforts
with respect to the Product shall be governed by the terms of this Agreement. Medcomp and VeriChip
agree that, during the term of this Agreement, they will cooperate and expend reasonable efforts to
jointly develop the Product in a manner which permits the effective use of the Product. Such joint
development efforts may include testing, development of prototypes, development and/or refinement
of specifications for the Product (the “Specifications”) manufacturing processes and other research
efforts. Medcomp shall be responsible for obtaining any necessary regulatory approvals for use of
the Product. Medcomp and VeriChip agree to jointly conduct studies, tests, research and other
procedures designed to develop the Product and improve the Product. Each party shall assist and
coordinate with the other, make its technical personnel and facilities required to perform such
research and development available to the other and use its best efforts to successfully complete
the development of the Product.


 


 









 







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Section 1A.02 Development Plan. As soon as possible following the signing of this Agreement,
VeriChip will begin development of the Product. VeriChip shall provide Medcomp with a complete and
operational prototype of the Product as well as the design history file for the prototype of the
Product within ninety (90) days of the commencement of this Agreement. If VeriChip fails to meet
this ninety (90) day deadline, Medcomp may terminate this Agreement provided however, that the
ninety (90) day deadline may be extended by written agreement.



Section 1A.03 Development Costs and Expenses. Subject to Section 1A.07, each party shall be
responsible for payment of all of its own direct costs and expenses for personnel and facilities
relating to the development of the prototype and the Product.



Section 1A.04 Specifications and Standards for the Product. Upon completion of the development
of the prototype of the Product, such that the parties agree the same is feasible for manufacture
and sale, they shall discuss and agree upon the Specifications. The Specifications shall, when
adopted, be consistent with Exhibit A, be reduced to writing, be signed by authorized individuals
from Medcomp and VeriChip, and by reference be incorporated herein provided, however, that the
Specifications may be amended at any time by the written agreement of the parties.



Section 1A.05 Property Rights. Medcomp acknowledges and agrees that VeriChip owns and/or has
the right to use and shall retain all of the right, title and interest in and to all of the
patents, trademarks, trade names, inventions, copyrights, know-how, trade secrets and other
intellectual property rights relating to the design, assembly, manufacture, operation and/or
service of its RFID Microchips and the Product. The use by Medcomp of any of these property rights
is authorized only for the purposes set forth in this Agreement and upon expiration of termination
of this Agreement for any reason such authorization shall cease.



Section 1A.06 Product Development Fee. Medcomp will pay VeriChip a fee to cover its costs
relating to completion of the development of the Product in an agreed amount of ***. Medcomp will
make this payment in two equal installments of *** each, with the first installment due within ten
(10) days of the commencement of this Agreement and the second installment due within forty (40)
days of the commencement of this Agreement. Should VeriChip fail to meet the ninety (90) day
deadline set forth in Section 1A.02 above, or such extended deadline as is agreed to by the
parties, and Medcomp terminates this Agreement as a result, VeriChip shall, within ten (10) days of
the termination of this Agreement, repay to Medcomp the Product development fee set forth above.



Section 1A.07 Tooling. All tooling unique to the production of the Product (the “Tooling”)
shall be the sole property of VeriChip. VeriChip shall be responsible for the routine maintenance
and repairs of the Tooling.


 


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*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.



ARTICLE I. SUPPLY OF PRODUCTS




Section 1.01 Supply of Product.




(a) VeriChip agrees to sell the Product exclusively to Medcomp during the Term of this
Agreement, and agrees that it shall not manufacture or sell the Product, or any product
using or incorporating the same, or substantially similar technology, to any other
manufacturer, seller or distributor of vascular access products. Notwithstanding the
foregoing, VeriChip may use or sell a product substantially equivalent to the Product so
long as such use or sale is not in connection with vascular access products (that compete
with Medcomp, directly or indirectly). VeriChip agrees that it will seek a similar
exclusivity from the manufacturer of the Product. In the event VeriChip becomes insolvent or
otherwise ceases operations during the term of this Agreement, and has no successor which is
bound by the terms of this Agreement, Medcomp shall be able to maintain said exclusivity
with the manufacturer of the Product. Medcomp agrees during the Initial Term of this
Agreement, that it will purchase not less than the following number of Products (the
“Minimum Purchase Requirements”): (i) *** in the first Product Purchase Year, (ii) *** in
the second Product Purchase Year, (iii) *** in the third Product Purchase Year, (iv) *** in
the fourth Product Purchase Year and (v) *** in the fifth Product Purchase Year. For the
purpose of this Agreement, the “Product Purchase Years” are the five (5) respective
consecutive twelve (12) month periods beginning on the date of the last to occur of the
following: (i) the Product being ready for production; or (ii) 510k approval of the Product.
In the event Medcomp fails to meet the Minimum Purchase Requirements for a Product Purchase
Year, Medcomp shall, within thirty (30) days of written demand from VeriChip, make a payment
to VeriChip equal to *** times the number of Products by which Medcomp failed to meet the
Minimum Purchase Requirement for the Product Purchase Year at issue. Medcomp shall be
released from the Minimum Purchase Requirements should the FDA issue a recall of the
Product, for more than thirty (30) days.




(b) Medcomp’s original order for the Product shall be submitted within ten (10) days of
510k approval of the Product and Medcomp shall order the Product on a quarterly basis
thereafter. All orders for the Product shall be in writing and shall specify (i) the number
of units of each of the Product to be purchased (in accordance with the terms and conditions
of the Agreement) and (ii) the destination to which the Product is to be shipped. With each
order of the Product, Medcomp shall also provide a forecast of the number of Products it
will be purchasing for the next six (6) months. VeriChip will deliver no less than ninety
percent (90%) of the first order for Products within eight (8) weeks of full production
commencing. Thereafter, VeriChip agrees to deliver no less than ninety percent (90%) of the
Products ordered by Medcomp within less than thirty (30) days of the order date provided
that the number of Products (i) does not exceed one-hundred twenty percent (120%) of the
immediately previous order or, (ii) alone, or in conjunction with the immediately previous
order, does not exceed the then current six (6) month forecast of Medcomp. If the number of
Products ordered (i) does exceed one-hundred twenty percent (120%) of the immediately
previous order or, (ii) alone, or in
conjunction with the immediately previous order, exceeds the then current six (6) month
forecast of Medcomp, VeriChip agrees to deliver no less than ninety percent (90%) ordered
within sixty (60) days of the order date. VeriChip shall be permitted a thirty (30) day cure
period for any missed delivery deadline. VeriChip shall not be liable for any consequential
damages as result of a failure to meet delivery deadlines. Medcomp shall be released from
the Minimum Purchase Requirements of any particular year if its inability to meet the
minimum purchase requirements of that particular year was due to VeriChip’s inability to
make delivery pursuant to the schedule set forth above.



(c) VeriChip agrees, during the Term, to make its other products that are compatible
with the Product available to Medcomp on commercially reasonable terms.



 


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Section 1.02 Pricing. The standard purchase price for the Product will be ***,
provided, however, that if Medcomp places an order within the first three (3) months of any
Product Purchase Year (i) for not less than *** units for delivery of Product in that
Product Purchase Year, the price for those Products will be ***, or (ii) for not less than
*** units for delivery in that Product Purchase Year, the price of those Products will be
***. It is understood that all such pricing will be firm for the Initial Tem.



Section 1.03 Delivery Terms. Products will be shipped, FOB Medcomp’s Harleysville, PA,
facility. Payment for shipping charges shall be Medcomp’s responsibility.



Section 1.04 Payment. Notwithstanding the Product Development Fee subject to Section
1A.06, unless otherwise agreed by the parties in writing, payment shall be made by Medcomp
separately for each shipment of Products. Medcomp shall pay all invoice amounts within
thirty (30) days of the date of invoice in U.S. dollars. Any invoices not paid within thirty
(30) days shall accrue interest at the rate of one and one-half percent (1-1/2%) per month.



Section 1.05 Inability to Supply. VeriChip expects and intends to supply Medcomp with
the Product in accordance with the provisions of this Agreement. If VeriChip determines that
it will be unable to supply Medcomp with the Product in the desired quantities for
unanticipated reasons such as an Act of God or a long-term shortage of materials, VeriChip
shall give Medcomp prompt notice of its inability to timely supply of the Product. If
VeriChip is unable to make timely deliveries of the Product for unanticipated reasons such
as set forth above, or by reason such as war, civil commotion, embargo, strike or any other
act which is beyond the reasonable control of VeriChip, VeriChip shall be excused from
meeting said delivery deadlines provided, however, that VeriChip shall continue performance
hereunder with reasonable dispatch whenever such causes are removed.


 


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ARTICLE II. — REPRESENTATIONS, WARRANTIES AND COVENANTS



Section 2.01 By VeriChip





VeriChip represents, warrants and covenants to Medcomp as follows:




(a) This Agreement has been duly authorized, executed and delivered by VeriChip and
constitutes a valid and binding obligation of VeriChip, enforceable in accordance with its
terms.




(b) This Agreement does not conflict with any applicable law, rule or regulation to
which VeriChip is subject, or any agreement to which VeriChip is a party.




(c) VeriChip represents and warrants that the Products, when sold to Medcomp, do not
infringe or encroach upon any party’s personal, contractual or proprietary rights, including
but not limited to, patents, trademarks, copyrights, or trade secrets. VeriChip further
represents and warrants that the Products, when sold to Medcomp, (i) are merchantable, (ii)
are fit for the purposes for which they were sold, (iii) are free from any and all defects
in design, material and workmanship, (iv) conform to the Specifications and Medcomp’s
quality standards (v) are fit and safe for use by Medcomp; and (vi) shall have at least
eighty percent (80%) of their shelf life remaining when sold to Medcomp, and shall remain in
full compliance with the Specifications for the full shelf life period of such Products; and
(vii) shall be in compliance with all applicable laws and regulations and all regulatory
requirements of the United States Food and Drug Administration (the “FDA”), or other
appropriate regulatory authority currently in effect, including without limitation the
Federal Food, Drug and Cosmetic Act, as amended from time to time (the “Act”), the FDA’s
then current Good Manufacturing Practices (“cGMP”). VeriChip further represents and
warrants that they will convey good and merchantable title to Medcomp for the Products and
that the Products are free of any security interest or other lien or encumbrance.




(d) No Products constituting or being a part of any shipment hereunder shall at the time
of any such shipment be (i) adulterated or misbranded within the meaning of the Act, or
regulations promulgated thereunder, as such law or regulation is constituted and in effect at
the time of any such shipment, or (ii) an article which may not, under the provisions of
Sections 404, 505 or 512 of the Act, be introduced into interstate commerce.




(e) VeriChip agrees that it will attain the manufacturing, processing and packaging of
the Products only at specified and approved facility(ies) (the “Plant”) and that part of such
services may at any time be subcontracted to a third party without prior written approval of
Medcomp.




(f) VeriChip shall not make any changes in the Specifications or raw materials,
purchased components, packaging materials, labeling, formulations, quality control test
methods or manufacturing processes or manufacturing equipment, with regard to the Product,
without Medcomp’s prior written agreement.


 


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(g) VeriChip owns or has the right to use all copyright, trademarks, patents, and other
intellectual property rights to the intellectual property which they shall use to perform
their obligations hereunder.




(h) VeriChip shall provide to Medcomp all documentation and information requested by
Medcomp: (i) in order to assist Medcomp in determining whether any delivery complies fully
with the Specifications and the requirements of this Agreement (including VeriChip’s
calculation of any price adjustments, rebates, loss allowance, credits and/or most favored
nations status); (ii) in order to assist Medcomp in obtaining any and all regulatory
approvals necessary to market Medcomp’ products which contain the Product; or (iii) to
enable Medcomp to comply with any statutory or regulatory requirements, or with a request by
any governmental or regulatory authority.




(i)



(i) VeriChip agrees to work with the manufacturer to assure the quality
level of the Product through the use of a formal quality assurance program (the
“QA Program”) reasonably acceptable to Medcomp. The QA program shall require the
manufacturer to prepare and maintain written records sufficient to enable Medcomp
to trace the build and inspection history of the Product. VeriChip will require
the manufacturer to maintain such records for a period of five (5) years after
manufacture. Pursuant to the QA Program, VeriChip shall require the manufacturer
to place lot numbers and date codes on all Products to enable the identification
and traceability of the Product. During the Term, and upon reasonable notice,
Medcomp shall have the right to reasonably audit the QA program, at its expense,
during regular business hours.




(ii) VeriChip shall require the manufacturer to conduct and document final
inspection and quality control tests in accordance with reasonable Medcomp
procedures on the Products prior to shipment to verify that the Product meets
and conforms to the Specifications and the QA Program provided, however, that
if Medcomp requires a type of inspection or quality control test involving
equipment that is not currently owned by manufacturer, that Medcomp shall be
responsible for the cost of obtaining such
equipment.




(iii) Medcomp will, at its expense, and upon reasonable notice to VeriChip
and the manufacturer, have the right to reasonably inspect manufacturer’s
facilities to ensure compliance with the terms and conditions of the QA Program.
Proprietary VeriChip or manufacturer’s manufacturing process technology shall not
be subject to any such inspection.




(iv) VeriChip shall cooperate with, and provide assistance to, Medcomp with
respect to customer complaints and product recalls relating to
the Product.


 


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(j) VeriChip shall immediately notify Medcomp of any contact which the FDA or any other
regulatory or other governmental authority has with it concerning the Product or its
manufacturing facilities relating thereto, including, but not limited to, cGMP’s, product
registrations and safety and efficacy claims. The parties shall consult with one another in
an effort to arrive at a mutually acceptable response; however, should the parties not agree
as to a response, Medcomp shall have total discretion to respond appropriately to such
regulatory or other governmental authority.




(k) VeriChip shall inform Medcomp within twenty-four (24) hours of any notification to
VeriChip of any site visits by the FDA, state or federal regulatory agencies or any other
governmental or regulatory agency, relating, directly or indirectly, to the manufacture,
storage, disposal and/or transportation of the Product, and shall provide to Medcomp all
other materials related thereto or used in connection therewith. VeriChip shall report in
writing the results of the visit to Medcomp within thirty (30) days of the occurrence
thereof In the event that any such governmental or regulatory agency finds that VeriChip’s
operation relating, directly or indirectly, to the manufacture, storage, disposal and/or
transportation of the Product is deficient or unsatisfactory in any respect, VeriChip, as is
appropriate, shall cure all said deficiencies within the earlier of ninety (90) days or such
cure period as ordered by the governmental or regulatory agency.




(l) VeriChip shall make available to Medcomp all records and reports relating to the
manufacture, storage, disposal and transportation of the Product, and all other materials
related thereto or used in connection therewith, including without limitation those documents
relating to analytical data, for Medcomp’s review during normal business hours and upon
reasonable prior notice, and Medcomp shall have the right to make and retain copies of these
documents as required at Medcomp’s expense. Such records and reports shall be subject to the
confidentiality provisions of this Agreement. Medcomp shall have the right to conduct
inventory reconciliation audits and other audits as reasonably required for its internal
control, at Medcomp’s sole cost and expense.




(m)




(i) In the event (A) any government authority of the United States or
other jurisdiction issues a request, directive or order that any of the
Product or Medcomp’s products containing the Product be recalled, or (B) a
court of competent jurisdiction orders such a recall, or (C) the parties
reasonably determine after consultation with each other that any of the
Product or Medcomp’s products containing the Product should be recalled (a
“Recall”), the parties shall take all appropriate corrective action. Medcomp
shall also retain the right to conduct a product recall for safety reasons
at Medcomp’s sole discretion.


 


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(ii) In the event a Recall results from the defective manufacture
of the Product or any other cause or event solely attributable to VeriChip
or the manufacturer of the Product. VeriChip shall be responsible for all
out-of-pocket expenses of a Recall. In all other cases, Medcomp shall be
responsible for the expenses of a Recall including, but not limited to,
responsibility to reimburse VeriChip for its expenses in connection with a
Recall. For purposes of this Agreement, Recall expenses shall include, but
not be limited to, the expenses of notification and destruction or return of
the recalled Products, as the case may be, and Medcomp’s cost

of the recalled Products, as the case may be.




(n) Written notice and an explanation of the circumstances of any claim that the Products
are not in conformance with the Specifications or are defective in material or workmanship
shall be given promptly by Medcomp to VeriChip. VeriChip shall thereafter notify manufacturer
and allow manufacturer to be provided a reasonable opportunity to inspect said Products.




Section 2.02 By Medcomp




Medcomp represents warrants and covenants to VeriChip as follows:




(a) This Agreement has been duly authorized, executed and delivered by Medcomp and
constitutes a valid and binding obligation of Medcomp, enforceable in accordance with its
terms.




(b) This Agreement does not conflict with any applicable law, rule or regulation to
which Medcomp is subject, or any agreement to which Medcomp is a party.




(c) All vascular access products manufactured by Medcomp and the Medcomp trademark do not
infringe or encroach upon any parties’ personal, contractual or proprietary rights, including,
but not limited to, patents, trademarks, copyrights, or trade secrets.




Section 2.03 Covenants of both parties: co-marketing




(a) Upon FDA 510k approval of the Product, Medcomp will use its best efforts

to:




	 	(i)	 	engage in a co-marketing relationship with VeriChip Corporation to
market, distribute, sell and promote the sale of the new Medcomp vascular port
(with RFID microchip) and the Health Link by VeriMed personal health record
system.
	 
	 	(ii)	 	purchase and/or facilitate the purchase of “Health Link by VeriMed”
scanners for distribution to appropriate medical personnel and/or facilities;
	 
	 	(iii)	 	brand all ports with RFID technology as the brand name of the port
with RFID technology (e.g. “Dignity w/RFID”).
	 
	 	(iv)	 	site VeriChip Corporation on all literature focused on implantation
of the device.
	 
	 	(v)	 	include “Health Link by VeriMed” information on all literature
focused on continuous care (Oncology) and diagnosis (CT / Radiology).
	 
	 	(vi)	 	provide training to all VeriChip Sales and Marketing Staff and sales
partners on the details of the port technology.
	 
	 	(vii)	 	provide VeriChip with sales tracings of facilities and
departments where the
ports w/RFID have been sold on a quarterly basis. This information will include
facility, department and main contact information to focus sales efforts.




 


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	 	(viii)	 	hand over all leads or inquiries for Health Link by VeriMed to VeriChip
Corporation.
	 
	 	(ix)	 	work closely with VeriChip Corporation and also agree to not poach
employees or partners from VeriChip Corporation without prior consent.






(b) Upon FDA 510k approval of the Product, VeriChip Corporation will use its best efforts to:




	 	(i)	 	engage in a co-marketing relationship with Medcomp to market,
distribute, sell and promote the sale of the new Medcomp vascular port (with
RFID microchip) and the HealthLink by VeriMed personal health record system.
	 
	 	(ii)	 	provide training to Medcomp Sales and Marketing Staff on the
details of the Health Link by VeriMed System.
	 
	 	(iii)	 	hand over all leads or inquiries for port technology to Medcomp.
	 
	 	(iv)	 	work closely with Medcomp and also agree to not poach employees or
partners from Medcomp without prior consent.





ARTICLE III. — TERM





Section 3.01
Term.



This Agreement shall be deemed to have commenced as of the date this Agreement has been signed
by all parties hereto and shall continue in force until the expiration of the fifth Product
Purchase Year (the “Initial Term”), unless earlier terminated in accordance with Section 3.02. Upon
expiration of the Initial Term, this Agreement may be extended as agreed upon in writing by the
parties for such term as they agree (“Renewal Term(s)”). The Initial Term and any Renewal Term(s)
are collectively referred to herein as the “Term”.




Section 3.02 Termination.




(a) Either party may terminate this Agreement as follows:




(i) If the other party commits a material breach of any of the provisions of this
Agreement and does not cure such breach within sixty (60) days after receipt of
written notice thereof; or




(ii) Immediately upon written notice to the other party in the event that
proceedings in bankruptcy or insolvency are instituted by or against the other
party, or a receiver is appointed, or if any substantial part of the assets of the
other party is the object of attachment, sequestration or other type of comparable
proceeding, and such proceeding is not vacated or terminated within thirty (30) days
after its commencement or institution.


 


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(iii) Immediately upon written notice to the other if the development of the
Product is not completed in accordance with the deadline and any extensions thereof
as set forth in paragraph IA.02 provided, however, that such notice is effective
only if provided within thirty (30) days of the end of the deadline period.




(b) Medcomp may terminate this Agreement as follows:




(i) Prior to the end of the Initial or any Renewal Term upon thirty (30) days’
written notice, in the event that VeriChip is acquired (whether through merger, sale
of stock representing fifty percent (50%) or more of the outstanding voting stock of
that party, sale of all or substantially all of that party’s assets or otherwise) by
any third party (or by an entity that is a party to a collaboration agreement with a
third party) that manufactures, sells or otherwise distributes products which are
competitive with vascular ports manufactured, sold or distributed by Medcomp.




(ii) Immediately upon written notice in the event the FDA fails to approve the
Product and said failure was not the result of any action or inaction on the part of
Medcomp. In the event of such a termination, Medcomp shall still be responsible to
pay to VeriChip for any Products ordered and manufactured.




(iii) In the event Medcomp determines, in its sole discretion, that (i) the Product
is not commercially feasible due to market preferences, (ii) new technology has made
the Product obsolete or non-competitive or (iii) applicable clinical research or FDA
findings have made the sale of the Product inadvisable, Medcomp may terminate this
Agreement by providing sixty (60) days written notice to VeriChip. In the event
Medcomp so terminates this Agreement, Medcomp shall, within thirty (30) days of the
date of termination, make a payment to VeriChip of an amount equal to *** times the
number of Products by which Medcomp failed to meet the Minimum Purchase Requirement
for the Product Purchase Year in which the Agreement is terminated by Medcomp.




(iv) Immediately upon written notice if any governmental or regulatory agency finds
that VeriChip’s operation at the site relating, directly or indirectly, to the
manufacture, storage, disposal and/or transportation of the Product is deficient or
unsatisfactory and VeriChip fails to cure said deficiencies as set forth in Article
2.01(k).




(v) Subject to Section 1.05, immediately upon written notice if VeriChip fails to
deliver Product within the time periods set forth in Section 1.01(b) and any cure
period set forth therein.




Section 3.03 Effects of Termination.



Following the expiration or termination of this Agreement, all further rights and
obligations of the parties shall cease, except that the parties shall not be relieved of (i)
their respective obligations set forth in Sections IA.05, 1A.07, 2.01(h), 2.01(j-n), 3.02, 3.03,
7.01, 7.07, Article IV
and Article VI of this Agreement; (ii) their respective obligations to pay monies due or
which become due as of or subsequent to the date of expiration or termination; and (iii) any
other respective obligations under this Agreement which specifically survive or are to be
performed after the date of expiration or termination. In addition, following the termination of
this Agreement, VeriChip shall, upon the request of Medcomp, within ten (10) days of said
request, deliver to Medcomp all items owned by Medcomp that are in VeriChip’s possession.


 


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ARTICLE IV. — INDEMNIFICATION





(a) Medcomp shall indemnify, defend and hold VeriChip, its directors, officers,
shareholders, employees, servants and agents (collectively “VeriChip Indemnitees”) harmless
from and against any and all liabilities, claims, demands, actions, suits, losses, damages,
costs and expenses (including reasonable attorney’s fees and disbursements) based upon any
death, actual bodily injury or physical property damage resulting from Medcomp’s negligence
or willful misconduct, except to the extent caused by VeriChip’s negligence or willful
misconduct.




(b) VeriChip shall indemnify, defend and hold Medcomp and its directors, officers,
shareholders, employees, servants and agents (collectively “Medcomp Indemnitees”) harmless
from and against any and all liabilities, claims, demands, actions, suits, losses, damages,
costs and expenses (including reasonable attorney’ s fees and disbursements) based upon any
death, actual bodily injury or physical property damage resulting from any defect in the
manufacture of the Product and/or VeriChip’s negligence or willful misconduct, except to the
extent caused by Medcomp’s negligence or willful misconduct.




(c) Medcomp shall defend, indemnify and hold harmless the VeriChip Indemnitees from and
against all claims, demands, actions, liabilities, losses, damages and expenses, including
reasonable attorney’ s fees, arising out of any claim made against VeriChip for infringement
of any copyright, patent or other intellectual property right of any kind related to any of
Medcomp’s products and the Medcomp trademark. VeriChip shall defend, indemnify and hold
harmless the Medcomp Indemnitees from and against all claims, demands, actions, liabilities,
losses, damages and expenses, including reasonable attorney’s fees, arising out of any claim
made against Medcomp for infringement of any copyright, patent, or other intellectual
property right of any kind related to the Product.




(d) Each of the parties shall notify the other of any such claim or potential
claim covered by any of the above subparagraphs in this Article and shall include sufficient
information to enable the other party to assess the facts. Each of the parties shall
cooperate fully with the other party in the defense of all such claims. No settlement or
compromise shall be binding on a party hereto without its prior written consent, which shall
not be unreasonably withheld or delayed.


 


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(e) Upon the assertion of any third party claim against a party entitled to
indemnification hereunder’ (an “Indemnified Party”) hereto that may give rise to a
right of indemnification of this Agreement, the Indemnified Party shall give prompt
notice to a party obligated to provide indemnification hereunder (an “Indemnifying Party”)
of the existence of such claim and shall give the Indemnifying Party reasonable opportunity
to control, defend and/or settle such claim at its own expense and with counsel of its own
selection; provided, however, that the Indemnified Party shall, at all times, have the right
to fully participate in such defense at its own expense with separate counsel and, provided
that both parties shall, to the extent that they are not contractually or legally excluded
therefrom, or otherwise prejudiced in a legal position by so doing, cooperate with each
other and with their respective insurers in relation to the defense of such third party
claim. The Indemnifying Party shall consult with the Indemnified Party with respect to
settlement of any claim. The Indemnifying Party shall have the right to settle any claim
without the consent of the Indemnified Party, provided that the Indemnified Party is
unconditionally released from such claim and is not otherwise prejudiced by the terms of
settlement in the sense that the Indemnified Party reasonably believes that such settlement
terms may have a material adverse effect on its business.



ARTICLE
V. — INSURANCE




Each party shall maintain Commercial General Liability (CGL) insurance (including product
liability coverage) and upon such terms (including coverages, deductible limits and self-insured
retentions) as is customary for the activity to be conducted by it under this Agreement and is
appropriate to cover its indemnification obligations hereunder. VeriChip shall maintain for the
entire terms of this Agreement CGL including product liability coverage of $1,000,000 per
occurrence and $5,000,000 in the aggregate. Medcomp shall be named as an additional insured on the
policy. VeriChip shall provide Medcomp with a certificate of insurance reflecting the same within
thirty (30) days from the effective date of this Agreement.



ARTICLE VI. — CONFIDENTIALITY





Section 6.01 Confidential Information.



“Confidential Information” and “Proprietary Concept” shall include any terms normally embraced
within such terms (e.g., drawings, specifications, customer lists, patient information, technical
data, marketing and financial plans, and production or’ purchasing schedules or forecasts) and, in
addition, any information concerning either party’s marketing or pricing of its products, or any
information regarding the customers of either party, that enables or would enable that party to
obtain a competitive advantage in the marketplace. The existence, subject matter and terms and
conditions of this Agreement shall be considered to be included in the Confidential Information.
“Confidential Information” shall not include information that (i) is in or comes into the public
domain without violation of this Agreement, (ii) is known by the receiving party prior to
disclosure to it by the other’ party, (iii) is received lawfully and under no obligation of
confidentiality by the receiving party from a third party subsequent to this Agreement, (iv) is
released by the owner to others without restriction, or (v) is independently developed by the
receiving party, provided that the person or persons developing this information have not had
exposure to the same information as received from the disclosing party.


 


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Section 6.02 Protection of Confidential Information



Each party agrees: (a) to protect the confidentiality of the other’s Confidential Information
to the same extent and in the same manner as it protects its own confidential information; and (b)
not to disclose any Confidential Information obtained under the Agreement to any third party except
to the extent necessary to serve the purposes of this Agreement and in any event subject to this
Agreement, including this Article VI. The party receiving Confidential Information under this
Agreement shall disclose that information only to its employees who need to know such information.
Each party agrees to provide in all contracts with third parties confidentiality provisions
equivalent to those contained in this Agreement. The burden of proving the existence of facts which
would negate the obligations of this Agreement under this Article VI shall rest with the party in
receipt of the subject information.




Section 6.03 Use of Confidential Information



Both parties shall use the Confidential Information solely for the purpose of furthering
the relationship contemplated by this Agreement.




Section 6.04 Ownership



Any trade secrets, confidential information or proprietary concepts received or learned by
either party from the other, or any of its employees, servants, or agents, relating to the business
or customers of the other party shall be deemed the exclusive property of the disclosing party and
shall remain the valuable scientific, trade, and engineering secrets of the disclosing party.




Section 6.05 Disclosure Compelled by Law



In the event either party believes it is required by law (whether pursuant to oral questions,
interrogatories, requests for information or documents, subpoena, civil investigative demand or
similar process) to disclose any confidential information, it shall provide the disclosing party
with prompt notice thereof so that the disclosing party may seek an appropriate protective order
and/or waive compliance with this Agreement; provided however, that if, in the absence of a
protective order or the receipt of a waiver hereunder, such party is in the reasonable opinion of
its counsel compelled to disclose confidential information not otherwise disclosable hereunder to
any legislative, judicial or regulatory body, agency or authority or else be exposed to liability
for contempt, fine, or penalty, or to other censure, such confidential information may be
disclosed.




Section 6.06 Ongoing Confidentiality Obligation



The obligations of VeriChip and Medcomp pursuant to this Article VI shall survive
termination of this Agreement.


 


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ARTICLE VII. — MISCELLANEOUS





Section 7.01 Applicable Law and Arbitration



This Agreement, and any claim or controversy relating thereto, shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania and United States of
America. All disputes, controversies or differences which may arise between the parties in relation
or in connection with this Agreement shall be resolved by arbitration. Arbitration shall take place
in Montgomery County, Pennsylvania, United A. States of America, and be conducted as provided
under Subchapter B of the Pennsylvania Uniform Arbitration Act. The arbitrators shall be selected
as follows: the party demanding arbitration shall do so in writing and, as part of its demand,
shall select an arbitrator. The party receiving the demand will select its arbitrator and notify
the party demanding arbitration in writing of said election within ten (10) days of service of the
demand for arbitration. The two arbitrators will select a third arbitrator. If the two arbitrators
chosen by the parties cannot agree on a third arbitrator within fourteen (14) days of the selection
of the second arbitrator, the Court of Common Pleas of Montgomery County, Pennsylvania shall select
a third arbitrator upon the filing of a petition by either party. Either party will bear the cost
of its own arbitrator. The expense of the third arbitrator will be shared equally between the
parties. A decision agreed to by two of the three arbitrators shall be binding upon the parties and
may be entered as a judgment in the Court of Common Pleas of Montgomery County, Pennsylvania and in
any court of competent jurisdiction with the ability to enforce a judgment against the party whom
the judgment is rendered. All parties hereby consent to the jurisdiction of the arbitration panel
described above and to the jurisdiction of the Court of Common Pleas of Montgomery County,
Pennsylvania.




Section 7.02 No Agency



VeriChip shall at all times during the term of this Agreement be an independent contractor,
maintaining sole and exclusive control over their personnel and operations. At no time shall any
party hold itself out to be the agent, employee, lessee, sub lessee, partner, or joint venture
partner of any other. It is understood and agreed between VeriChip and Medcomp that the full and
exclusive relationship between them is that of an independent contractor and nothing in this
Agreement shall be construed to create any relationship between the parties other than that of
independent contractor. No party shall have any express or implied right or authority to assume or
create any obligations on behalf of or in the name of any other party or to bind any other party
with regard to any other contract, agreement, or undertaking with a third party.




Section 7.03 Titles and Headings



Titles and headings in this Agreement are for the convenience of the parties only, and are
not intended to be a part of or affect the meaning or interpretation of this Agreement.


 


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Section 7.04 Severability of Provisions



If any term or provision of this Agreement or the application thereof to any person or
circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement or
the application of such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable shall not be affected, and each term and provision of this
Agreement shall be valid and be enforced to the fullest extent permitted by law.




Section 7.05 Amendment



This Agreement may not be amended, supplemented or, otherwise modified except by an
instrument in writing signed by all parties.




Section 7.06 Assignment



This Agreement may not be assigned by any party except to an Affiliate without the prior
written consent of the other party. If any such Affiliate has been the assignee of any rights
under this Agreement and loses its status as an Affiliate, then immediately and automatically upon
the loss of such status as an Affiliate, the assignment of this Agreement to such former Affiliate
and all rights under or with respect to this Agreement shall immediately terminate and be of no
further force or effect. This Agreement shall be binding upon, and inure to the benefit, of the
parties respective heirs, successors, and assigns.




Section 7.07 No Use of Name



Neither party shall employ or use the name of the other party in any publication or
promotional materials nor in any form of public distribution nor make any public disclosure of this
Agreement without the prior express written consent of the other party, except as may be required
for compliance with Governmental obligations.




Section 7.08 Notices



Any notices, waivers, and other communications required or permitted hereunder shall be in
writing and shall be deemed to be fully given when delivered by hand or dispatched (with
reasonable evidence of receipt) by telex, telegraph or other names of electronic facsimile
transmission or by an internationally recognized overnight courier service, addressed to the party
to whom the notice is intended to be given at the addresses specified below,




	 	(a)	 	If to Medcomp:
	 
	 	 	 	Medical Components, Inc.

1499 Delp Drive

Harleysville, Pennsylvania 19438

Attn: Timothy Schweikert

Facsimile No.                                        




 


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	 	(b)	 	If to VeriChip:
	 
	 	 	 	VeriChip Corporation

1690 South Congress Avenue, Suite 200

Delray Beach, Florida 33445

Attn: William Caragol

Facsimile No. 561-805-8001





or such other address or addresses as a party may from time to time designate for itself by like
notice.




Section 7.09 Waiver



No provision of this Agreement shall be deemed to have been waived unless such waiver is in
writing, signed by the waiving party. No failure by any party to insist upon the strict performance
of any provision of this Agreement, or to exercise any right or remedy consequent upon a breach
thereof, shall constitute a waiver of any such breach, of such provision, or of any other
provision. No waiver of any provision of this Agreement shall be deemed a waiver of any other
provision of this Agreement or a waiver of such provision with respect to any subsequent breach,
unless expressly provided in writing.




Section 7.10 No Third-Party Beneficiary Rights



No person not a party to this Agreement is an intended beneficiary of this Agreement, and
no person not a party to this Agreement shall have any right to enforce any term of this
Agreement.




Section 7.11 Governing Document



The parties contemplate exchanging the usual commercial forms such as purchase orders and
invoices in furtherance of this Agreement; provided, however, that any terms and conditions which
may appear on such documents, other than those purchase order terms required by Section 1.01(b) of
this Agreement and the invoice amounts, shall be of no force or effect.




Section 7.12 Entire Agreement



This Agreement constitutes the entire agreement of the parties relating to the subject matter
hereof. There are no promises, terms, conditions, obligations, or warranties other than those
contained in this Agreement. This Agreement supersedes all prior communications, representations,
or agreements, verbal or written, among the parties, relating to the subject matter hereof.




Section 7.13 Force Majeure



In the event an act of the government, war conditions, strikes, fire, flood, or other act of
God (collectively “force majeure”) prevents either party from performance in accordance with the
provisions of this Agreement, such non-performance shall be excused and shall not be considered a
breach or default for so long as such conditions prevail. The party invoking force
majeure shall give prompt written notice thereof to the other party and shall take whatever
reasonable steps are necessary to relieve the effect of such cause as rapidly as possible.


 


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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be effective as of the
date first written above.



	 	 	 	 	 	 	 	 	 	 	 
	MEDICAL COMPONENTS, INC.	 	 	 	VERICHIP CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Timothy M. Schweikert
 

Name: Timothy M. Schweikert
	 	 	 	By:
	 	/s/ William J. Caragol
 

Name: William J. Caragol
	 	 
	 

	 	Title:   President
	 	 	 	 	 	Title:   President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date: 04/02/09	 	 	 	Date: 3/17/09	 	 






 


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TRANSPONDER SPECIFICATION




	 	 	 
	 

	 	Injectable
	 

	 	Transponder
	 

	 	TX1400SST






Product Description:




The injectable Transponder is a passive radio-frequency Identification tag, designed to work
in conjunction with a compatible radio-frequency ID reading system. The transponder consists
of an electromagnetic coil and microchip sealed in a tubular glass enclosure. The chip is
pre-programmed with a unique ID code that cannot be altered; over 274 billion individual
code numbers are available. When the transponder is activated by a low-frequency radio
signal, it transmits the ID code to the reading system.




Although specifically designed for injecting in fish and livestock, this transponder can be
used for other animal and non animal applications.



Specifications:









Dimensions (nominal): 12.48mm X 2.07mm (0.49134” X 0.08150”)

Antenna type: Ferrite

Operating frequency: 134.2kHz

ISO Conformance: ISO 11784, ISO 11785

Housing: Bio-compatible glass

Weight: 0.1020 gram (0.0036 ounce)

Temperature range: -40 to 70C (-40 to 158F), operating and storage




Read range with the Model FS2001F-ISO Portable Reader:




(In a benign noise environment with optimal orientation of transponder and scanner
antenna)




FS2001F-ISO Portable Reader with 2001F-ISO (710060801) Racket Antenna and 2 meter cable
(228004502)




Typical: 20.32 cm (8.0 inches)      Minimum: 19.05 cm (7.5 inches)




Read speed: 1 meter per second

Vibration:

Sinusoidal; 1.5 mm (0.06”) peak-to-peak, 10 to 80 Hz, 3 axis

Sinusoidal; 10 g peak-to-peak, 80 Hz to 2 kHz, 3 axis

Injector needle size: About 12 gauge (Destron part #445-0008-00)




 


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