Document:

Filed by Bowne Pure Compliance

Exhibit 10.5

SUPPLEMENTAL INDENTURE

SUPPLEMENTAL
INDENTURE (this “Supplemental Indenture”), dated as of May 9, 2008,
between Celgene Corporation, a Delaware corporation (the “Company”), and The Bank of New
York, as trustee under the Indenture referred to below (the “Trustee”).

W I T N E S S E T H

WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (as
amended, supplemented or otherwise modified, the “Indenture”), dated as of June 3, 2003,
providing for the issuance of $400,000,000 principal amount of the Company’s 13/4% Convertible Notes
due 2008 (the “Notes”); and

WHEREAS, pursuant to Section 2.03 of the Indenture, the interest due on June 1, 2008 (the
“2008 Interest Payment Date”) is payable to the persons in whose name any Note is
registered on the Note Register at the close of business on May 15, 2008 (the “2008 Record
Date”); and

WHEREAS, pursuant to Section 16.01 of the Indenture, the holder of any Note may, at such
holder’s option, convert the principal amount of such Note, or any portion of such principal amount
which is a multiple of $1,000, into fully paid and non-assessable shares of Common Stock at any
time prior to the close of business on June 1, 2008, the date that is the maturity date of the
Notes; and

WHEREAS, pursuant to Section 16.02(c) of the Indenture, any Note or portion thereof
surrendered for conversion during the period from the close of business on the 2008 Record Date to
the close of business on the Business Day (as that term is defined in the Indenture) preceding the
2008 Interest Payment Date, i.e., May 30, 2008 (the “Section 16.02 Period”) shall be
accompanied by payment, in immediately available funds or other funds acceptable to the Company, of
an amount equal to the interest otherwise payable on such interest payment date on the principal
amount being converted (the “Interest Amount”); and

WHEREAS, because June 1, 2008, the date that is the 2008 Interest Payment Date and the
maturity date of the Notes, is not a Business Day, a holder of any Note cannot effect conversion of
such Note after the Section 16.02 Period and prior to the close of business on the maturity date of
the Notes in accordance with the requirements set forth in Section 16.02 of the Indenture, and
thereby avoid the requirement to pay the Interest Amount upon such conversion; and

 

 

 

WHEREAS, pursuant to Section 12.01(f) of the Indenture provides that the Company, when
authorized by resolutions of the Board of Directors of the Company, and the Trustee may, from time
to time, and at any time enter into an indenture or indentures supplemental to the Indenture to,
among other purposes, cure any ambiguity or to correct or supplement any provision contained herein
or in any supplemental indenture that may be defective or inconsistent with any other provision
contained in the Indenture or to make such other provisions in regard to matters or
questions arising under the Indenture that shall not adversely affect the interests of the holders
of the Notes; and

WHEREAS, for the sole purpose of permitting any holder of a Note to exercise the conversion
privilege in accordance with the requirements set forth in Section 16.02 of the Indenture, as if
the 2008 Interest Payment Date was a Business Day, and thereby avoid the requirement to pay the
Interest Amount upon such conversion, the Company desires to supplement the Indenture to provide
that for purposes of Section 16.02(c) of the Indenture, any Note or portion thereof surrendered for
conversion after the close of business on May 29, 2008 and prior to the close of business on June
1, 2008 shall be deemed to have been surrendered for conversion after the Section 16.02 Period and,
accordingly any such Note or portion thereof so surrendered for conversion need not be accompanied
by payment of the Interest Amount;

NOW, THEREFORE, in order to supplement the terms and conditions upon which the Notes were
authenticated, issued and delivered, and in consideration of the premises and of the purchase and
acceptance of the Notes by the holders thereof, the Company covenants and agrees with the Trustee
for the equal and proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided in the Indenture), as follows:

1. DEFINED TERMS. Capitalized terms that are not defined in this Supplemental Indenture shall have
the meanings ascribed to such terms in the Indenture.

2. SECTION 16.02(c). Notwithstanding anything to the contrary contained in the Indenture, for
purposes of Section 16.02(c) of the Indenture, any Note or portion thereof surrendered for
conversion after the close of business on May 29, 2008 and prior to the close of business on June
1, 2008 shall be deemed to have been surrendered for conversion after the Section 16.02 Period and,
accordingly any such Note or portion thereof so surrendered for conversion need not be accompanied
by payment of the Interest Amount.

3. RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURES PART OF INDENTURE. Except as expressly
amended hereby, the Indenture is in all respects ratified and confirmed and all the terms,
conditions and provisions thereof shall remain in full force and effect. This Supplemental
Indenture shall form a part of the Indenture for all purposes, and every holder of Notes heretofore
or hereafter authenticated and delivered shall be bound hereby.

 

2

 

4. COUNTERPARTS. This Supplemental Indenture may be executed in any number of counterparts, but
such counterparts together shall constitute but one and the same instrument.

5. EFFECT OF HEADINGS. The Section headings of this Supplemental Indenture have been inserted for
convenience of reference only, are not considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.

6. GOVERNING LAW. This Supplemental Indenture shall be deemed to be a contract made under the
laws of the State of New York, and for all purposes shall be construed in accordance with the laws
of the State of New York, without regard to conflicts of laws principles thereof.

7. NO RESPONSIBILITY FOR RECITALS, ETC. The recitals contained herein shall be taken as the
statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no representations as to the
validity or sufficiency of this Supplemental Indenture.

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed and attested, all as of the date first above written.

	 	 	 	 	 
	 	CELGENE CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	THE BANK OF NEW YORK,

     as Trustee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

3Filed by Bowne Pure Compliance

Exhibit 10.1

****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. ASTERISKS DENOTE
SUCH OMISSIONS.

Execution Copy

AMENDMENT NO. 1

TO THE

PRODUCT SUPPLY AND DISTRIBUTION AGREEMENT

BY AND BETWEEN

DIGITAL ANGEL CORPORATION

AND

SCHERING-PLOUGH HOME AGAIN LLC

This AMENDMENT
NO. 1 (this “Amendment No. 1”) dated as of this
5th day of January,
2008 (the “Amendment Effective Date”), to the Product Supply and Distribution
Agreement dated
February 13, 2007 (“Agreement”), is made by and between DIGITAL
ANGEL CORPORATION (“Digital Angel”)
and SCHERING-PLOUGH HOME AGAIN LLC (“Schering”).

Recitals:

WHEREAS, Schering
and Digital Angel (referred to collectively as “Parties” and individually as
“Party”) entered into the Agreement to, among other things, provide for the
distribution of Products within the Territory;

WHEREAS, Schering
and Digital Angel entered into Agreed Contract Amendment Terms on July 20,
2007 (“July Contract Terms”), pursuant to which the Parties agreed to enter in a
formal amendment to the Agreement to reflect and memorialize the terms set forth in such
July Contract Terms;

****

WHEREAS, the
Parties desire to **** and memorialize the July Contract Terms
by amending the Agreement in accordance with Section 11.5(b) thereof in order to, among other
things, (a) expand the market within which Schering may sell specific quantities of RFID
Biotherm Products under the Agreement, (b) provide for certain minimum purchases of
Products by Schering,
(c) reduce the prices payable by Schering for Products and Readers,
(d) add obligations for each Party with respect to new ISO Readers and the conversion from
the existing Reader technology to the new ISO 134 kHz standard, and (e) ****; and

NOW, THEREFORE, Schering and Digital Angel hereby agree to amend the Agreement as follows:

 

 

 

1. Defined Terms. Unless otherwise defined herein, each of the capitalized terms used
in this Amendment No. 1 shall have the meaning ascribed to it in the Agreement.

2. Amendments to Article I.

(a) Article I of the Agreement is hereby amended and supplemented by adding the following new
defined terms:

“Designated Animals” shall mean (a) horses, (b) parrots and other birds (to the
extent not included in the definition of Companion Animals, including poultry and
exotics), (c) animals typically found or maintained in a zoo, aquarium or research
facility, (d) rodents, primates and other mammals (to the extent not included in the
definition of Companion Animals), (e) reptiles, (f) wild game, including wild game
that is ranch-raised for hunting or for food, and (g) any other species for which
Digital Angel does not, as of the Amendment Effective Date, have an exclusive supply
agreement with any Person as indicated in Schedule A, which is attached hereto and
made a part hereof; provided, however, that this term shall not
include humans, cattle, swine, and sheep.

“Designated Animal Territory” shall mean all countries of the world (including the
countries in the Territory), but excluding those countries listed in Schedule A.

“Universal Reader” shall mean a Reader that is capable of reading, translating and
displaying Transponders at 125 kHz, 128 kHz and 134 kHz, which shall include the
capability to read, translate and display using the Trovan and Avid technologies via
version 74 software. For the avoidance of doubt, Universal Readers include any make
or model of Basic Readers, Read/Write Readers, Biothem Readers and Biotherm
Read/Write Readers capable of reading, translating and displaying Transponders at
125 kHz, 128 kHz and 134 kHz.

(b) Section 1.39 of the Agreement (definition of Readers) is hereby amended and supplemented
by adding the words “and (e) Universal Readers” after the phrase “Biotherm Read/Write Readers,” and
such section shall read in its entirety as follows:

“Readers” shall mean (a) Basic Readers, including the Worldscan Reader for
veterinary clinics and Worldscan PLUS Reader for animal shelters, (b) Read/Write
Readers, (c) Biothem Readers, (d) Biotherm Read/Write Readers, and (e) Universal
Readers.

(c) Section 1.45 of the Agreement (definition of RFID Product) is hereby deleted in its
entirety and replaced with the following:

“RFID Product” shall mean (a) an injectable sterile glass encapsulated radio
frequency microtransponder (frequency as specified by Schering) that stores and
transmits RFID identification information together with an anti-migration cap,
preloaded in a sterilized 12 gauge microtransponder syringe with plunger used to
deposit the transponder subcutaneously, (b) registration form content/artwork as
specified by Schering, (c) shrink-wrapped package containing (a) and (b) above
as well as inserts, tags, and administration instruction headercard, and (d) when
ordered in quantities, the multiple unit boxes (25 units per package) and related
packaging, master shipping carton and labels containing all of the forgoing
components, in each case (Section 1.45(a) through (c)) produced in accordance with
the Specifications.

 

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(d) Section 1.48 of the Agreement (definition of Specification) is hereby deleted in its
entirety and replaced with the following:

“Specifications” shall mean the written specifications for the manufacture, quality
control testing, and delivery of a Product, including details of the finished
packaging components for each Product, as set forth on Exhibit A-1 to
Amendment No. 1 or as added to after the Amendment Effective Date pursuant to
Section 4.02(a), which is attached hereto and made a part hereof, and as may be
amended from time to time by written agreement of the Parties.

3. Amendments to Article III.

(a) The first sentence of Section 3.01(a) of the Agreement is hereby deleted in its entirety,
and such section shall read in its entirety as follows:

During the Term, Digital Angel shall exclusively manufacture, supply, and sell to
Schering, and Schering shall exclusively purchase from Digital Angel, (i) the
quantities of the Products specified in Part I of Schedule B, which is attached
hereto and made a part hereof for the periods specified in Part I of Schedule B and
(ii) such additional quantities of the Products as Schering may specify from time to
time, pursuant to Section 3.03 of this Agreement. The purchase and sale of Products
is subject to the additional terms and conditions set forth in Part II of Schedule
B. Digital Angel shall not manufacture, supply or sell the Products to any Person
in the Territory, other than Schering. If, at any time during the Initial Term,
Schering exits the pet recovery business entirely, the rights granted in this
Section 3.01(a) and Section 3.01(b) shall become non-exclusive.

(b) The first sentence of Section 3.01(b) of the Agreement is hereby amended and supplemented
by adding the words “and Designated Animal market in the Designated Animal Territory” after the
phrase “Companion Animal market in the Territory” and before the phrase “both as to Schering and to
any downstream purchaser.” The second sentence of Section 3.01(b) is hereby amended and
supplemented by adding the words “and Designated Animal market in the Designated Animal Territory”
after the phrase “Companion Animal market in the Territory.” The third sentence of Section 3.01(b)
is hereby amended and supplemented by adding the words “Designated Animal” before the word
“Territory,” and such section shall read in its entirety as follows:

 

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Digital Angel’s sales of Products and Readers to Schering are intended to be
unconditional and to fully exhaust Digital Angel’s rights in such Products and
Readers under the Patent Rights in the Companion Animal market in the Territory and
Designated Animal market in the Designated Animal Territory, both as to
Schering and any downstream purchaser or user of Products or Readers sold by
Schering, including any rights of Digital Angel in any apparatus, method or system
claims within the Patent Rights. To the extent that the patent exhaustion doctrine
(as set forth in United States v. Univis Lens Co., Inc. 316 U.S. 241 (1942) and
subsequent case law) is found not to exhaust Digital Angel’s rights in such Products
and Readers under the Patent Rights, Digital Angel hereby grants Schering the right
to use the Patent Rights and Digital Angel’s other Intellectual Property Rights
relating to the Products and Readers solely in connection with the distribution,
marketing and sale of the Products and Readers in the Companion Animal market in the
Territory and Designated Animal market in the Designated Animal Territory. Schering
shall have the right to grant sublicenses in connection with its distribution,
marketing, and sale of the Products and Readers in the Designated Animal Territory.

(c) Section 3.02(a) of the Agreement is hereby amended and supplemented by deleting the second
sentence and adding a new second sentence, and such section shall read in its entirety as follows::

Digital Angel hereby grants exclusive distribution, marketing and sale rights to all
of Digital Angel’s RFID products (including the Products) in the Companion Animal
market in the Territory. Digital Angel hereby grants Schering non-exclusive
distribution, marketing and sale rights to Digital Angel’s RFID Biotherm Product in
the Designated Animal market in the Designated Animal Territory subject to a maximum
of **** units of such RFID Biotherm Products. Upon exhaustion of such quantity
(**** such units having been shipped to, and accepted by, Schering as of this
Amendment Effective Date), all rights in the Designated Animal market in the
Designated Animal Territory shall expire and Schering shall have no further rights
in such Designated Animal market in the Designated Animal Territory.

(d) Section 3.02 of the Agreement is hereby amended and supplemented by adding the following
new subsection (e):

During the Term, Digital Angel shall manufacture, supply, and sell to Schering, and
Schering shall purchase from Digital Angel, (i) the quantities of the Universal
Readers specified in Part II of Schedule C, which is attached hereto and made a part
hereof for the periods specified in Part II of Schedule C and (ii) such additional
quantities of the Universal Readers as Schering may specify from time to time. The
purchase and sale of Universal Readers is subject to the additional terms and
conditions set forth in Parts I and III of Schedule C.

(e) Section 3.02 of the Agreement is hereby amended and supplemented by adding the following
new subsection (f):

Digital Angel shall match Schering donations of up to 12,500 HomeAgain sterile
syringe assemblies in both 2007 and 2008 based upon a Schering proposal.

 

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(f) Section 3.02 of the Agreement is hereby amended and supplemented by adding the following
new subsection (g):

Schering shall have the option (but not the obligation) to convert some or all of
the older Readers that are currently in inventory or in the marketplace into newer
Universal Readers. If Schering elects to convert Readers, Digital Angel shall
replace or refit the older Readers with Universal Readers in accordance with the
pricing and other terms set forth in Part IV of Schedule C, and Attachments A, B and
C to Amendment No. 1 shall apply.

(i) Section 3.03 of the Agreement is hereby amended and supplemented by adding the following
new subsection (d):

(d) For the avoidance of doubt, Schering shall have no obligation to submit to
Digital Angel forecasts or purchase orders for Products for the Designated Animal
market in the Designed Animal Territory.

4. Amendments to Article IV.

(a) The first sentence of Section 4.01(a) of the Agreement is hereby amended and supplemented
by adding the words “and Designated Animal market in the Designated Animal Territory” after the
phrase “Companion Animal market in the Territory.” The second sentence of Section 4.01(a) is
hereby deleted in its entirety and replaced with a new second sentence, and such section shall read
in its entirety as follows:

Digital Angel hereby appoints Schering as a distributor with non-exclusive rights to
market, distribute, and sell Readers throughout the Companion Animal market in the
Territory and Designated Animal market in the Designated Animal Territory. Schering
may order Readers from Digital Angel using the procedures set forth in Section
3.03(c) and (d).

(b) Section 4.04(c) of the Agreement is hereby deleted in its entirety and replaced with the
following:

Schering may, but shall not be obligated to, promote, market and sell (i) Readers to
its customers in the Territory and Designated Animal Territory, and (ii) Digital
Angel’s RFID Biotherm Products (subject to the limitations set forth in 3.02(a)) in
the Designated Animal market in the Designated Animal Territory.

5. Amendments to Article V.

(a) Section 5.01(a) of the Agreement is hereby amended and supplemented by adding a second
sentence, and shall read in its entirety as follows:

For all orders placed and to be shipped during the period beginning on the Effective
Date and ending on October 1, 2007, Digital Angel shall provide the RFID Product to
Schering at a price of (i) **** for purchases of less than **** units during
the Term, and (ii) **** for purchases of **** or
more units. For all orders placed and to be shipped after October 1, 2007 and for
the remainder of the Term, Digital Angel shall provide the RFID Product to Schering
at a price of ****.

 

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(b) Section 5.02 (Cost of Readers) of the Agreement is hereby deleted in its entirety and
replaced with the following:

For all orders placed during the period beginning on the Effective Date and ending
on August 1, 2007, the price of (a) the Worldscan Reader shall be ****, and (b) the
Worldscan PLUS Reader shall be ****. For all orders placed after August 1, 2007,
the price of new Universal Readers shall be (i) ****for the balance of calendar year
2007, and (ii) **** thereafter and for the remainder of the Term. For the avoidance
of doubt, the Worldscan Reader and Worldscan PLUS Reader are both Biotherm Readers.
The pricing for Universal Readers is based on the components listed in Part I of
Schedule C.

(c) Section 5.04 (Permitted Product Substitution) of the Agreement is hereby deleted in its
entirety and replaced with the following:

The Parties acknowledge that Digital Angel will not have sufficient inventories of
the RFID Product to supply Schering’s expected demand in the first contract year of
the Term. Digital Angel has agreed to supply Schering with not more than ****
RFID Biotherm Products in lieu of RFID Products at the same price as RFID Products.
As of the Amendment Effective Date, Schering had received and paid for **** of
these RFID Biotherm Products. Schering agrees (a) to accept those **** RFID
Biotherm Products in lieu of RFID Products, and (b) with respect to the **** RFID
Biotherm Products contemplated herein, Schering may market and sell these RFID
Biotherm Products to its customers in the Companion Animal market in the Territory
and Designated Animal market in the Designated Animal Territory. The **** RFID
Biotherm Products previously purchased by Shiseido (and any additional RFID Biotherm
Products purchased by Schering after the Amendment Effective Date, up to the stated
maximum of ****) shall be counted as RFID Products for purposes of determining
the threshold for reduced pricing for RFID Products in Section 5.01(a)(ii).
****

6. Amendments to Article VI. Section 6.02 (Protection) of the Agreement is hereby
amended and supplemented by adding the words “Designated Animal” before the word “Territory” in the
first sentence, and such section shall read in its entirety as follows:

Digital Angel shall: (a) at all times recognize the validity and ownership of the
Trademarks, whether owned by Schering or any Affiliate or licensor of Schering, and
Schering’s sole right to use and license such Trademarks in the Designated Animal Territory;
and (b) at no time do, or allow to be done by its Agents or any Person on behalf of Digital
Angel or its Agents, whether by act, omission or commission, anything that would (i) put
into issue or otherwise adversely affect such

 

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validity or ownership or (ii) damage or prejudice the reputation or goodwill of Schering or any Affiliate or licensor
of Schering. Digital Angel shall not, except with the prior written consent of Schering or
any Affiliate or licensor of Schering, as the case may be, use the name, Schering-Plough
Home Again LLC, HomeAgain, the Trademarks, or any other trademarks, trade dress, logos,
or designs owned by Schering or such Affiliate or licensor in or as a trademark or trade
name or any trademark, trade dress, name, word or symbol that is confusingly similar in
appearance, sound, meaning, or commercial impression to, a colorable imitation of,
misleading or deceptive with respect to, or dilutes any of, the Trademarks or any part
thereof or any other trademark, trade dress, logo or design owned by Schering as a trademark
or trade name, whether during the Term or after the expiration or termination of this
Agreement. Digital Angel shall comply with all trademark usage requirements established by
Schering in connection with the depiction or presentation of the Trademarks. The packaging
for the Products shall indicate that the Products is manufactured by Digital Angel and
identify Digital Angel’s patent registration numbers.

7. Amendments to Article IX. Section 9.06 (Effect of Termination) of the Agreement is
hereby amended and supplemented by adding the words “Readers” in paragraph (a) after the words
“inventory of the Products” and by adding the words “(but not, for the avoidance of doubt, the
Readers)” in paragraph (b) after the words “and any unfinished goods,” and such section shall read
in its entirety as follows:

Upon the expiration or termination of this Agreement, (a) Schering shall have the right to
sell its remaining inventory of the Products, Readers, and any unfinished goods or (b)
Schering shall, at its option, have the right (but not the obligation) to require Digital
Angel to purchase from Schering, and Schering shall sell to Digital Angel, all or any
portion of the inventory of the Products and any unfinished goods (but not, for the
avoidance of doubt, the Readers) held by or for Schering at the cost in which they were
purchased by Schering; provided, however, that Digital Angel shall not be
required to purchase from Schering any Products, Readers or unfinished goods that have been
contract manufactured or packaged in a way that makes their resale by Digital Angel
impossible (i.e., permanent markings with the Trademarks, etc.).

8. Amendments to Article XI. Section 11.01 (Compliance with Applicable Laws) of the
Agreement is hereby amended and supplemented by adding the words “Designated Animal” before the
word “Territory,” and such section shall read in its entirety as follows:

At all times during the Term, each Party shall comply with all Applicable Laws in effect in
the Designated Animal Territory.

9. ****

 

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10. Representations and Warranties. Each Party represents and warrants to the other
Party that (a) it has not sold, assigned, transferred, hypothecated, pledged or encumbered, or
otherwise disposed of, in whole or in part, voluntarily or involuntarily, any Claim released
pursuant to this Amendment No. 1, and (b) no Person had or has any interest in any Claim released
pursuant to this Amendment No. 1.

11. Construction, Amendment and Waiver. Capitalized terms used in this Agreement
without definition shall have the meanings assigned to them in the Agreement. From and after the
execution of this Amendment No. 1, all references in the Agreement to “this Agreement,” “hereof,”
“herein,” and similar words or phrases shall mean and refer to the Agreement as amended, including
this Amendment No. 1. This Amendment No. 1 shall not be modified, supplemented, amended, or
terminated in any manner whatsoever, except by a written instrument signed by the Party against
which such modification, supplement, amendment, or termination is sought to be enforced.

12. Effect of the Amendment. Except as expressly modified by this Amendment No. 1,
all other terms and conditions of the Agreement shall remain in full force and effect. The
provisions of Section 9 **** and Section 10 (Representations and Warranties)
of this Amendment No. 1 shall survive the expiration or termination of the Agreement for any
reason. This Amendment No. 1, together with the Agreement, contains the entire agreement of the
Parties with respect to the subject matter hereof, and all prior or contemporaneous understandings
or agreements, including the July Contract Terms, between the Parties with respect to such subject
matter are hereby superseded in their entireties.

IN WITNESS WHEREOF, each of Schering and Digital Angel has caused this Amendment No. 1 to be
executed by its respective duly authorized officer as of the date first above written.

	 	 	 	 	 
	 	DIGITAL ANGEL CORPORATION

 	 
	 	By:  	/s/ Joseph J. Grillo
 	 
	 	 	Name:  	Joseph J. Grillo 	 
	 	 	Title:  	Pres./CEO 	 
	 
	 	SCHERING-PLOUGH HOME AGAIN LLC

 	 
	 	By:  	/s/ Steven Shul
 	 
	 	 	Name:  	Steven Shul 	 
	 	 	Title:  	VP, General Manager 	 
	 

 

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Amendment No. 1

Schedule A

Designated Animal Territory

	 	 	 	 	 
	No.	 	Countries Covered by Exclusivity
	 	1.	 	 	****

	 	2.	 	 	****

	 	3.	 	 	****

	 	4.	 	 	****

	 	5.	 	 	****

	 	6.	 	 	****

	 	7.	 	 	****

	 	8.	 	 	****

	 	9.	 	 	****

Digital Angel represents and warrants to Schering that the countries set forth on Schedule A above
are the only countries in which Digital Angel has granted exclusive rights as of the Amendment
Effective Date. If, at any time following the Amendment Effective Date, Digital Angel elects to
grant exclusive rights in any other country, such exclusivity shall be subject to an exception that
allows Schering to sell, on a non-exclusive basis, 125 kHz RFID Biotherm Product in the Designated
Animal market subject to a maximum of **** units of such RFID Biotherm Products, as provided in
Section 3.02(a) of the Agreement, as amended.

*       *       *

 

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Amendment No. 1

Schedule B

Minimum Purchase Requirement for Products and Related Terms

Part I:

	 	 	 	 	 
	Period	 	Quantity	 	Transponder Frequency
	4th Quarter Calendar 2007

	 	****	 	134 kHz RFID Products
	Calendar Year 2008

	 	****	 	Frequency as specified by Schering
	Calendar Year 2009

	 	****	 	Frequency as specified by Schering

Part II:

1. Should Digital
Angel fail to deliver **** 134 kHz RFID Products by December 31, 2007
to Schering, Digital Angel shall pay Schering an amount equal to (a) the difference between
the **** and the number of 134 kHz RFID Products actually received by Schering, (b)
****.

2. Schering has submitted or will submit all new package/syringe blister pack/registration
form artwork to Digital Angel. Digital Angel will print the requested materials as
supplied. Samples / proofs to be sent to Schering for approval before construction. If the
mutually agreed deadlines for artwork delivery are not met, Digital Angel reserves the right
to delay shipments by an equivalent amount of time.

3. Digital Angel will utilize upon agreement by Schering a new master shipper carton
configuration of either (8) or twelve (12) clinic packs of 25 assemblies / master shipper
carton. Schering and Digital Angel will work together to conduct appropriate shipper
testing to ensure integrity of clinic packs when shipped and Schering Quality Assurance must
provide written approval of new shipper carton configuration.

4. Schering has provided or will provide new dog tags for use in assemblies. If the
mutually agreed deadlines for dog tag delivery are not met, Digital Angel reserves the right
to delay shipments by an equivalent amount of time. If Digital Angel is to provide the dog
tag, the cost per assembly will ****.

5. All shipping charges are billed directly to Schering.

6. Puppy Broker Packaging

 

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A. From time to time Products are returned to Schering for reasons unrelated to the
performance or quality of the Product. The Parties have developed procedures for
(i) breaking down the existing packaging for the returned products, (ii) removing the
product literature and other materials included with the returned product, (iii) inserting
new product literature for a new product, (iv) re-sterilizing the syringe and new product
materials, (v) repacking the syringe and new product materials in a new blister pack, and
(vi) assembling the blister packs in boxes of 250 units each. Following sterilization
validation, the repackaged, boxed Products will be a new salable SKU for Schering known
generally as a “puppy broker product.”

B. Digital Angel will perform the steps referenced A(i) through A(v) above to break
down and repackage returned products so that they become puppy broker products. Schering
will pay Digital Angel ****/assembly for each returned product that is repackaged in
accordance with A(i) through A(v) above. As of the Amendment Effective Date, approximately
**** returned units have been approved by Digital Angel Quality Control for use in the
new Schering puppy broker product assemblies.

C. The new puppy broker product configuration requires the use of new blister
packaging. The new packaging will require sterilization validation. Digital Angel
currently uses an outside contractor to perform this sterilization validation. Digital
Angel has received a cost estimate of **** for the process. Schering has given oral
approval to cover up to **** of the cost associated with the validation of the new blister
pack. This will be paid via a separate purchase order from Schering.

*       *       *

 

- 11 -

 

Amendment No. 1

Schedule C

Minimum Purchase Requirement for Readers and Related Terms

Part I:

The following components are included with each Universal Reader:

	 	•	 	Pocket Reader model with ISO standard programming (“Universal”)

	 
	 	•	 	Latest production revision including temperature-sensing functionality
(i.e., “Bio-Thermo” technology)

	 
	 	•	 	134 kHz test tag and batteries

	 
	 	•	 	Shipping box w/ label

	 
	 	•	 	Reader labels

	 
	 	•	 	Instruction manual

	 
	 	•	 	24-month standard customer warranty and 6-month full replacement
warranty, incremental to 24-month in-service customer warranty, if shipped through
the Schering distribution center.

Part II:

	 	 	 	 	 	 	 
	 	 	Quantity of Universal Pocket	 	 
	Period	 	Readers (Units)	 	Price per Unit
	August 2007

	 	 	****	 	 	****
	September 2007

	 	 	****	 	 	****
	October 2007

	 	 	****	 	 	****
	November 2007

	 	 	****	 	 	****
	December 2007

	 	 	****	 	 	****
	Total:

	 	 	****	 	 	****

Beginning January 1, 2008, additional purchases of ISO Universal Pocket Readers under the Agreement
will be priced at **** for the remaining term of the Agreement.

Part III:

Incremental changes / parts to the Universal Pocket Readers will be billed at the prices as
outlined in Attachment A to Amendment No. 1: Incremental Hardware / Parts Pricing — based on prior
written authorization and approval by Schering Supply Chain Manager for all scanners requiring such
changes/parts.

July purchase orders placed
for **** ISO Universal Pocket Readers and **** ISO Universal EX readers
will remain in effect as currently ordered, priced and accepted.

 

- 12 -

 

Digital Angel will produce new
readers on the basis of **** / week beginning August 1, 2007. New
Readers ordered by the first day of each month will be produced and shipped within approximately 3
weeks from the date of accepted purchase order.

Schering has submitted or will submit all new package / label artwork to Digital Angel. Digital
Angel will print / produce the requested materials as supplied. Samples / proofs to be sent to
Schering for approval before construction. If the mutually agreed deadlines for artwork delivery
are not met, Digital Angel reserves the right to delay shipments by an equivalent amount of time.

All shipping charges are billed directly to Schering.

Part IV:

This Part IV sets forth the procedures for converting Readers that do not have universal sensing
functionality (i.e., the ability to read, translate and display Transponders at 125 kHz, 128 kHz
and 134 kHz) into Universal Readers. Schering may submit Readers for conversion that are new or
that have been previously released in the marketplace. Digital Angel will convert the new or
previously released Readers into Universal Readers as provided below. For those Readers that have
been previously released, conversion pricing is based not only on the age but the condition of the
Reader received from the marketplace. Based on this age / condition, Readers will be placed into
the appropriate pricing scenario as outlined in Attachments A and B. In addition, the following
terms shall apply to Reader conversions:

1. Schering will
pay **** to convert the **** new Readers currently in Schering’s
inventory that do not have universal sensing functionality into Universal Readers.

2. Digital Angel
will pay the **** conversion fee on **** Readers from the new Scanner
Stands distributed in the spring of 2007 on the launch of the new HomeAgain program as
specified in Scenario 2 of Attachment B to Amendment No. 1.

3. Conversion of Readers currently in the marketplace will be billed to Schering as
outlined in Attachment B: ISO Reader Conversion Pricing.

4. Repair of Readers currently in the marketplace will be billed to Schering as outlined
in Attachment A: Incremental Hardware / Parts Pricing and Attachment B: ISO Reader
Conversion Pricing. Repairs will be approved in advance and confirmed in writing by
Schering’s Supply Chain Manager.

5. Schering has submitted or will submit all new package / label artwork to Digital
Angel. Digital Angel will print / produce the requested materials as supplied. Samples
/ proofs to be sent to Schering for approval before construction. If the mutually agreed
deadlines for artwork delivery are not met, Digital Angel reserves the right to delay
shipments by an equivalent amount of time.

6. All shipping charges will be billed directly to Schering.

 

- 13 -

 

7. An action plan to handle the conversion of the Readers received from the marketplace
will be mutually agreed upon by both Schering and Digital Angel. This plan will be
driven by market requirements and customer satisfaction demands in support of Schering
plan to effectively and proactively develop the U.S. scanner infrastructure and restore
veterinary and shelter confidence in the U.S. microchipping market.

8. Schering will authorize Digital Angel to begin conversion of Readers received from
the marketplace and/or Schering per the scenarios and pricing structures outlined in the
Attachments through the use of open Purchase Orders.

9. Contingent upon the receipt and steady flow of Readers into Digital Angel’s
production facility, Digital Angel will convert Readers on the basis of 400 / week in
the month of August. By September 1, Digital Angel will increase the conversion rate to
750 Readers / week through the end of February 2008.

*       *       *

 

- 14 -

 

ATTACHMENT A:

INCREMENTAL HARDWARE / PARTS PRICING

Should Schering wish to provide new or replacement parts / hardware for Readers that are received
for conversion, and upon Schering’s written authorization and approval prior to any rework/repair
commencing, the following is a list of the incremental cost associated with each.

	 	•	 	Labor costs to insert / add the following materials are included in the cost of the
appropriate estimate scenarios detailed above.

	 	 	 
	 	 	Price / Unit
	•   Test Tag: 125 kHz

	 	****
	•   Test Tag: 134 kHz

	 	****
	•   Batteries

	 	****
	•   Instruction Manual

	 	****
	•   Lens Protector / Sleeve

	 	****

	 	•	 	Labor costs to insert / add the following materials are not included in the
cost of the appropriate estimate scenarios detailed above and will be billed incrementally
on basis of ****.

	 	 	 
	 	 	Price / Unit
	•   Antenna

	 	****
	•   Casement / Shell

	 	****
	•   Battery Clips

	 	****
	•   Display

	 	****
	•   Lanyard

	 	****

NOTES:

When originally designed and constructed, the Pocket Reader and Pocket Reader EX models were not
intended to ever be opened again. In fact, the internal circuitry is fused to the plastic
housing / covers and is quite difficult to separate after the fact.

With regard to the proposed software conversion, Readers will not require opening as the conversion
process can be accomplished via external means.

If Schering directs Digital Angel to open Readers in an attempt to repair potential problems, the
likelihood of damage to the internal circuitry is significantly heightened. A more cost effective
approach may be to provide a new Reader to the customer and/or offer a discount on the purchase of
a new Reader as the repair costs will probably outweigh the cost of a new unit.

In the case of housing replacements alone, not only is the likelihood of damage to the circuitry
heightened, but the labor involved in separating the elements from one another will be extensive
and costly. If Schering decides that a Reader must have housing replaced, again, it may be more
cost effective to provide a new Reader to the customer and / or offer a discount on the purchase of
a new Reader rather than try to replace the housing.

*       *       *

 

- 15 -

 

ATTACHMENT B:

ISO READER CONVERSION PRICING

The following is a presentation of the costs associated with converting the current PocketReader
(a/k/a WorldScan) and PocketReader EX (a/k/a WorldScan PLUS) models to become Universal Readers.

In response, Digital Angel has created cost estimates based on six different scenarios in to which
Readers may be grouped, handled and billed to complete the Reader conversion process. This
information is detailed as follows. A complete breakdown of the actions that will be taken with
regard to each Reader will be presented in the ISO Conversion Action Plan. As agreed by the
Parties on July 13, 2007, each of the scenarios described below will include a 24-month standard
customer warranty and 6-month full replacement warranty, incremental to 24-month in-service
customer warranty, if shipped through the Schering distribution center.

NOTE: Conversion pricing is based not only on the age but the condition of the Reader received from
the marketplace. Based on this age / condition, Readers will be placed into the appropriate
pricing scenario as outlined below:

	 	 	 	 	 	 	 
	Reader Condition / Age Included	 	Estimated Cost	 	Services Included	 	New Parts
	 
	 	 	 	 	 	 
	Scenario 1:

Readers that are
new / in stock at Schering’s
warehouse Schering Labels
(approx. **** units)

Thank you insert

	 	****
	 	Receive into Digital Angel system

Unpackaged

Identify serial #/age/condition

Reprogram

Repackage

Relabel

Ship to recipient
	 	No new parts
	 
	 	 	 	 	 	 
	 

	 	 	 	* Shipping costs are billed directly to
Schering’s carrier account #.	 	 

 

- 16 -

 

	 	 	 	 	 	 	 
	Reader Condition / Age Included	 	Estimated Cost	 	Services Included	 	New Parts
	 
	 	 	 	 	 	 
	Scenario 2:

Field returns shipped to
Schering since December,
2005

	 	****
	 	Receive into Digital Angel system

Schering Labels

Unpackaged

Shipping Box

Identify serial #/age/condition

Thank you insert

Reprogram

Test

Clean (wipe / surface clean)

Repackage

Relabel

Ship to recipient*	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Shipping costs are billed directly to
Schering’s carrier account #.	 	 
	 
	 	 	 	 	 	 
	Scenario 3:

Field returns that are
non-FDXB optimized and are
older than December, 2005
but less than 5 years old
and do not require
returning of circuitry
system

	 	****
	 	Receive into Digital Angel system

Schering Labels

Unpackaged

Shipping Box

Identify serial #/age/condition

Thank you insert

Reprogram

Test

Clean (wipe /surface clean)

Repackage

Relabel

Ship to recipient
	 	No new parts
	 
	 	 	 	 	 	 
	 

	 	 	 	* Shipping costs are billed directly to
Schering’s carrier account #.	 	 
	 
	 	 	 	 	 	 

 

- 17 -

 

	 	 	 	 	 	 	 
	Reader Condition / Age Included	 	Estimated Cost	 	Services Included	 	New Parts
	 
	 	 	 	 	 	 
	Scenario 4:

Field returns that are
non-FDXB optimized and are
older than December, 2005
but less than 5 years old
and do require
retuning of circuitry

	 	****
	 	Receive into Digital Angel system

Schering Labels

Unpackaged

Shipping Box

Identify serial #/age/condition

Thank you insert

Reprogram

Test

Repair**

Retest

Clean (wipe / surface clean)

Repackage

Relabel

Ship to recipient*
	 	No new parts
	 
	 	 	 	 	 	 
	Scanners reworked in excess of 1,000 units in this category will be set aside for Schering approval and instructions.
	 
	 	 	 	 	 	 
	 

	 	 	 	* Shipping costs are billed directly to
Schering’s carrier account #.	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	* Software repair only; no new parts included.	 	 

 

- 18 -

 

	 	 	 	 	 	 	 
	Reader Condition / Age Included	 	Estimated Cost	 	Services Included	 	New Parts
	 
	 	 	 	 	 	 
	Scenario 5:

	 	 	 	Receive into Digital Angel systems	 	 
	Field returns that are
non-Functioning
	 	 	 	 	 	 
	     Labels

	 	 	 	Unpackaged	 	 
	Recycling Fee =

	 	****	 	 	 	 
	     Shipping Box

	 	 	 	Identify serial #/age/condition	 	 
	If Reprogram, Repair, Return =

	 	****
	 	Reject & Recycle — or —	 	 
	     Thank you insert

	 	 	 	Approved parts	 	 
	 

	 	 	 	Reprogram	 	 
	 

	 	 	 	Test	 	 
	 

	 	 	 	Generate repair estimate	 	 
	 

	 	 	 	Submit estimate to Schering for “proceed” / “return”	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	If “proceed”

     Repair***

     Retest

     Clean

     Repackage

     Relabel

     Ship to recipient*

     If “return”

     Repackage

     Relabel

     Ship to recipient	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	* Shipping costs are billed directly to
Schering’s carrier account #.	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	*** Requires hardware / software repair; parts
billed to Schering as necessary to make the
Reader operational within the specs of the
conversion.	 	 
	 
	 	 	 	 	 	 
	Recommendation: Offer the owners of non-functioning units the opportunity to purchase a new Reader at a discounted
price rather than attempt to make repairs as the costs to repair may outweigh the cost of a new unit.

 

- 19 -

 

	 	 	 	 	 	 	 
	Reader Condition / Age Included	 	Estimated Cost	 	Services Included	 	New Parts
	 
	 	 	 	 	 	 
	Scenario 6:

Field returns that do not
qualify for the conversion
because they were
manufactured before 2002.

     Shipping box

Recycling Fee =

     NQ insert

	 	****
	 	Receive into Digital Angel system

 
Unpackaged
 

Identify serial #/age/condition

Reject & Recycle — or —

Repackage

Relabel

Ship to recipient*	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	* Shipping costs are billed directly to
Schering’s carrier account #.	 	 
	 
	 	 	 	 	 	 
	Recommendation: offer the owners of non-qualifying units the opportunity to purchase a new Reader at a discounted
price in return for surrendering their NQ Reader.

*       *       *

 

- 20 -

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