Document:

Exhibit 10.1

    
      
        

      

      Exhibit
        10.1

      

      For
        Purchases and Leases Direct From Supplier

      Subject
        to Competitive Bid Process

      

       

      

      

      

      

      PATIENT
        SECURITY SYSTEMS

      CAPITAL
        EQUIPMENT SUPPLIER AGREEMENT

      

      between

      

      NOVATION,
        LLC

      

      and

      

      eXI
        WIRELESS SYSTEMS, INC. 

      (Supplier
        Name)

      

      

      CE50122

      (Contract
        Number) 

      

      

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

      NOVATION,
        LLC

      

      CAPITAL
        EQUIPMENT SUPPLIER AGREEMENT

      

       

      1.    Introduction.

      

      a.    Purchasing
        and Leasing Opportunities for Members.
        Novation, LLC (“Novation”) is engaged in providing purchasing opportunities with
        respect to high quality products and services to participating health care
        providers (“Members”). A list of Members entitled to participate in Novation’s
        programs through their membership or other participatory status in any of
        the
        following client organizations: VHA Inc., University HealthSystem Consortium,
        and HealthCare Purchasing Partners International, LLC (collectively, “Clients”),
        is maintained in an electronic database (“Novation Database”). Novation is
        acting as the exclusive agent for each of the Clients and certain of each
        Client’s subsidiaries and affiliates, respectively (and not collectively), with
        respect to this Agreement. Novation and the Clients and their subsidiaries
        and
        affiliates will not be responsible or liable for any breach of any purchasing
        commitment or for any other actions of any Member. In addition, none of the
        Clients will be responsible or liable for the obligations of another Client
        or
        its subsidiaries or affiliates or the obligations of Novation or Supplier
        under
        this Agreement. All Clients and Members are intended third party beneficiaries
        of this Agreement.

      

      b.    Supplier.
        Supplier
        is the manufacturer of the equipment (“Equipment”), and/or parts and supplies
        (collectively, “Supplies”), and/or the provider of services (“Services”), all as
        listed on Exhibit A. The Equipment, Supplies, and/or Services are collectively
        referred to herein as “Products” and any specifications are attached hereto as
        Exhibit B (“Non-Price Specifications”). 

      

      2.    Contract
        Award.

       

      a.    Letter
        of Award.
        By
        executing and delivering the Letter of Award attached hereto as Exhibit C
        (“Award Letter”) to Supplier, Novation will have accepted your written offer to
        the Invitation to Bid (“Bid”), and Novation and Supplier therefore agree that
        Supplier will make the Products available for purchase to the Members as
        of the
        effective date (“Effective Date”) in the Award Letter in accordance with the
        terms of this Agreement and for the term (“Term”) stated in the Non-Price
        Specifications for any renewal terms set forth in the Non-Price Specifications
        and the forms of purchase, lease, license, financing or servicing agreements,
        if
        any, attached hereto as Exhibit D (collectively, “Forms”); provided, however,
        that Novation’s award of this Agreement to Supplier will not constitute a
        commitment by any person to purchase any of the Products. Supplier will not
        impose any purchasing commitment on any Member as a condition to the Member’s
        purchase of any Products pursuant to this Agreement. Supplier acknowledges
        that,
        in making its award to Supplier, Novation has materially relied on all
        representations, warranties and agreements made by Supplier as part of the
        Bid
        and that all such representations, warranties and agreements will survive
        acceptance of the Bid. 

       

      
        
          
          

        

        
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      b.    Use
        of Names, Etc.
        Supplier
        agrees that it will not use in any way in its promotional, informational
        or
        marketing activities or materials (i) the names, trademarks, logos,
        symbols
        or a description of the business or activities of Novation or any Client
        or
        Member without in each instance obtaining the prior written consent of the
        person owning the rights thereto; or (ii) the award or the content
        of this
        Agreement without in each instance obtaining the prior written consent of
        Novation.

      

      

      c.    Optional
        Purchasing or Leasing Arrangements.
        Supplier
        shall reserve the right to contract directly with each Member for Products
        included in this Agreement in exceptional circumstances; provided, however,
        Supplier shall give prior notice to Novation in writing of such exceptional
        circumstances and the essential terms of such agreement. Additional value
        required in such exceptional cases will be defined in an individual contract
        that will, at Novation’s discretion, be an exhibit to the Supplier Agreement.
        Supplier shall maintain the Reporting Requirements and fees (“Fees”) payable to
        Novation in Sections 5 and 7 for Products purchased through such independent
        contracts in recognition of the Novation contribution to and support for
        any
        such exceptional independent arrangement required. In addition, Supplier
        agrees
        to give Novation prior written notice and must obtain Novation’s prior consent
        to any proposed offer Supplier wishes to make to any Member to sell products
        that are not covered by this Agreement in conjunction with Products covered
        by
        this Agreement under circumstances where the Member has no real economic
        choice
        other than to accept such terms.

       

      d.    Market
        Competitive Pricing and Terms. 

      

      Price
        Terms 

      

      §  Supplier
        represents and warrants that the prices charged for the Products and/or Services
        purchased hereunder, net of all discounts and rebates, to not exceed Supplier’s
        net prices for the particular Products and/or Services charged to others
        who are
        the same class of purchaser as are Members and who purchase in comparable
        volume
        and terms of purchase. If Supplier Provides any general, “across the board”
        price decreases for Products to a substantial number of its customers during
        the
        Term, Supplier agrees to make such decreases available to Members immediately
        and in like amounts.

      

      §  Non-price
        Terms. 

      Supplier
        will improve non-price terms, such as quality, technology or other non-price
        financial value as necessary to assure market competitiveness, and in addition
        Supplier agrees to adjust non-price terms for a specific Member or group
        of
        Members at all times in the event Supplier offers more favorable non-price
        terms
        to any competitor of such Member or group of Members.

      

      If
        at any
        time during the Term Novation receives information from any source that
        indicates Supplier’s pricing or non-price terms are not market competitive,
        Novation may provide written

       

      
        
          
          

        

        
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      notice
        of
        such information to Supplier, and Supplier will, within five (5) business
        days
        for Novation’s private label Products and within ten (10) business days for all
        other Products, advise Novation in writing of all adjustments necessary to
        assure market competitiveness,
        provided Novation provides certifiable evidence of such non-competitive pricing
        such as published standard pricing from a direct competitor.

      

      e.    Notification
        of Changes in Pricing Terms.
        Supplier
        will provide not less than sixty (60) days’ prior written notice to Novation and
        not less than forty-five (45) days’ prior written notice to all Members of any
        change in pricing terms (such as list prices, discounts or pricing tiers
        or
        schedules) permitted or required by this Agreement. 

      

      f.    Underutilized
        Businesses.
        Certain
        Members may be required by law, regulation and/or internal policy to do business
        with underutilized businesses and Supplier will assist Novation in helping
        Members meet these requirements by complying with all Novation policies and
        programs with respect to such businesses. Novation, in its discretion, may
        make
        an award and/or negotiate another agreement with a HUB in addition to any
        sole
        or multi-source award.

       

      g.    E-Commerce
        Business.
        Certain
        Members have chosen to utilize the service of the Marketplace@NovationTM through
        Novation’s relationship with Neoforma, Inc. (“Neoforma”), to transact business
        associated with this Agreement with Supplier. To assist Novation in helping
        Members meet those needs, Supplier agrees to sign, prior to the issuance
        of any
        Award Letter, and comply with the Novation E-Commerce Agreement attached
        hereto
        as Exhibit F and support Novation’s programs with respect to e-commerce.

      

      3.    Product
        Supply.

    

    
      

      a.    Delivery
        and Invoicing.
        On
        and
        after the Effective Date, Supplier agrees to promptly deliver Products ordered
        by the Members to the Members, FOB Origin, and will direct its invoices to
        the
        Members in accordance with this Agreement. Supplier agrees to prepay and
        add
        charges to invoice, if any, for transporting Products to the Members. Payment
        terms are specified in Exhibit B. Within seven (7) calendar days after receipt
        of a purchase order from a Member, Supplier will provide estimated lead time
        from the date of a Member’s purchase order until delivery of the Product at the
        Member’s location. The actual delivery lead times may be increased by the
        ordering Member based on its needs. 

      

      b.    Return
        or Recall of Products.
        Any
        Member, in addition to and not in limitation of any other rights and remedies,
        will have the right to return Products to Supplier, in accordance with
        Supplier’s return goods policy as stated in Exhibit B. In addition, Supplier
        will reimburse Members for any cost associated with any Product corrective
        action, withdrawal or recall requested by Supplier or required by any
        governmental entity. In the event a product recall or a court action impacting
        supply occurs, Supplier will notify Novation in writing within twenty-four
        (24)
        hours of any such recall or action. Supplier’s obligations in this Subsection
        will survive the expiration or earlier termination of this
        Agreement.

      
 

      
        
          
          

        

        
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      c.    Supplies.
        Supplies
        necessary for the operation of the Equipment will be made available by Supplier
        to the Members at the prices or discounts listed on Exhibit A. All warranties
        and guarantees will remain in force for purchases made under this
        Agreement.

      

      d.    Manuals/Schematics/Inspection
        Procedures.
        Supplier
        will provide to the Members two complete and unabridged sets of operator
        service
        manuals for each model of Equipment purchased or leased, including all
        subassemblies and peripheral devices manufactured by eXI. The technical service
        manuals furnished to the Members will be at least as complete and comprehensive
        as those furnished to Supplier’s technical service personnel. All updates to
        such manuals will be provided to the applicable Members within two (2) weeks
        after the release of such updates. Member must sign a Non-Disclosure Agreement
        before manual will be initially released.

      

      e.    Product
        Acceptance.
        Upon
        completion of the installation, the Equipment will meet or exceed the
        specifications set forth in Supplier’s published documentation included in
        Exhibit B. Acceptance testing will include, but is not limited to, safety
        testing, calibration, performance testing, documentation inspection and testing
        for adherence to specifications. Formal acceptance and invoice payment will
        occur according to the terms agreed to between the Member and Supplier and
        the
        specified scope of work. A complete set of all test documentation and procedures
        will be made available to the Member prior to final acceptance. If the Equipment
        passes the acceptance testing, the Warranty Period for the Equipment will
        begin
        per the terms of Supplier’s Warranty.

      

      f.    Site
        Preparation.
        Supplier
        will provide the Members with a specific description of pre-installation
        planning and site preparation services and site preparation costs at the
        time
        the Member requests a quote from Supplier.

      

      g.    Installation/Assembly.
        When
        Member requests a quote from Supplier, Supplier will provide as part of the
        quote a scope of work for the installation to be performed by the authorized
        eXI
        Dealer in the local area.

      

      h.    Installation/Environmental
        Issues.
        Supplier
        will bear all costs associated with the removal of packaging, crating and
        other
        material associated with the installation of the Equipment. Supplier, at
        the
        discretion of the Member, will remove the retired equipment at a cost previously
        agreed to with the Member, including any expenses associated with the proper
        disposal of hazardous or other wastes.

      

      i.    Member
        Services.
        Supplier
        will consult with each Member to identify the Member’s policies relating to
        access to facilities and personnel. Supplier will comply with such policies
        and
        will establish a specific timetable for sales calls by sales representatives
        and, if applicable, service calls by service representatives, to satisfy
        the
        needs of the Member. Supplier will promptly respond to Members’ reasonable
        requests for verification of purchase or leasing history.

      
 

      
        
          
          

        

        
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      j.    Training.
        Members
        may attend eXI technical service training school at no charge, however members
        are responsible for all travel and out of pocket expenses. Supplier will
        also
        allow the Member to reproduce all training material for use by the Member’s
        personnel at the Member’s facility. In addition, Supplier will provide the
        initial in-service training for both operators and technical service staff
        of
        the Member at the Member’s site as part of the installation price for the
        system. Supplier will provide follow-up in-service training as mutually agreed
        with the Member for the life of the Equipment at a negotiated
        price.

       

      4.    Product
        Quality.

       

      a.    Free
        From Defects.
        Supplier
        warrants the Products, including, but not limited to, all attachments,
        subsystems and components thereof, against defects in material, workmanship,
        design and manufacturing for the warranty period set forth in Exhibit E attached
        hereto (“Warranty Period”). Supplier will make all necessary arrangements to
        assign such warranty to the Members. Supplier further represents and warrants
        that the Products will conform to the specifications, drawings, and samples
        furnished by Supplier or contained in the Non-Price Specifications and will
        be
        safe for their intended use. eXI Warranty terms will apply.

       

      b.    New
        Technology.
        

       

      
        	
                 

              	
                (i) 
                  During the Term, Supplier will disclose to Novation new technology
                  developed by Supplier which provides the same function as the Products.
                  Upon  troduction of the new technology by Supplier, each
                  Member will
                  be provided the option to exchange any Product purchased hereunder
                  for the
                  new technology upon the terms and conditions set forth in Exhibit
                  B
                  attached hereto. In the event Supplier fails to provide such option
                  to the
                  Members, (1) Novation will have the right to terminate any or all
                  of the
                  Products which have been superceded by such new technology providing
                  the
                  same function as the Products or (2) Novation may elect at its
                  discretion
                  to contract with one or more additional suppliers of comparatively
                  similar
                  new technology.

              
	 	 
	
                 

              	
                (ii) 
                  If
                  at any time during the Term new technology (as defined by a Novation
                  Council) a product becomes available from any source which provides
                  incremental patient care benefits and/or incremental safety benefits
                  over
                  technology currently available under this Agreement, Novation shall
                  provide written notice of such information to Supplier and may
                  elect to
                  contract with a third party vendor, or terminate the Agreement
                  and re-bid
                  the category so Members have access to New Technology at all times.
                  Such
                  action will not constitute a breach of this Agreement by
                  Novation.

              

      

      
 

      c.    Warranty
        Service.
        Warranty
        repairs will be per the eXI Warranty policy provided in Exhibit E.

      

      d.    Replacement
        Parts.
        Replacement
        parts supplied by Supplier at any time, whether during or after the Warranty
        Period or the term of any service agreement, will be newly manufactured parts
        or
        assemblies, unless the Member agrees otherwise. In the case where
        new

       

      
        
          
          

        

        
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      parts
        are
        not available, the service representative may install rebuilt parts in order
        to
        make the unit operational. Within thirty (30) days after the repair, the
        rebuilt
        parts must be replaced with newly manufactured parts. The Member may retain
        all
        parts that are not eligible for or are not returned by the Member for Supplier
        credit will remain the property of the Member. In all cases where Supplier
        is
        permitted to charge the Member for parts, Supplier will only replace and
        charge
        for parts necessary to bring the Equipment to operating condition. Supplier
        will
        warrant replacement parts and labor associated with such replacement parts
        for
        the period of time set forth in Supplier’s standard warranty.

       

      
        e.    Service
          Response Time.
           Supplier
          guarantees a response time of one (1) hour by phone and for on-site as
          agreed to
          by the Member for all warranty, contract or time and materials service
          calls
          requested by any Member during the life of the Equipment. The Supplier’s
          authorized dealer providing local service will provide first-level
          support.

        

        f.    Uptime
          Guarantee. For
          any
          calendar quarter during the Warranty Period and the term of any service
          agreement, Supplier guarantees that the Exit infrastructure will maintain
          a
          level of uptime equal to or better than 95%. Uptime will be calculated
          using the
          following formula:

        

        uptime
          =
(T
          - TNF) X 100

        T

         

        where
          “T”
          is the total number of hours that the eXI infrastructure is typically used
          per
          quarter (determined by multiplying the number of hours per day that the
          eXI
          infrastructure is typically used by the number of days per week that the
          eXI
          infrastructure is typically used, and multiplying the result by 13 weeks
          in a
          quarter), and “TNF” is the number of hours the eXI infrastructure or any
          component of the eXI infrastructure is not functional during the quarter
          (the
          hours calculated will only include those hours that the eXI infrastructure
          would
          typically be in use). If any portion of the total functionality of the
          eXI
          infrastructure is unavailable for operational use, the eXI infrastructure
          will
          be considered down. Downtime scheduled for preventive maintenance or any
          other
          scheduled event, including those for the convenience of Member, will not
          be
          included in the downtime calculation. Member will calculate uptime after
          each
          calendar quarter. Supplier will extend the Warranty Period or the service
          agreement without charge by one day for every day the eXI infrastructure
          or
          component thereof is not operational beyond the allowable 5%. This uptime
          guarantees only relates to the performance of the Supplier’s Products. Downtime
          cause by electrical or mechanical interference cause by other type of equipment
          such as other radio frequency generating equipment, monitors, microwaves,
          etc.
          is not covered by this uptime guarantee.

        

        g.    Preventive
          Maintenance.
          During
          the Warranty Period for fixed equipment, Supplier will perform preventive
          maintenance according to the manufacturer’s recommendations at no charge to the
          Member. Supplier will supply the Member with a written procedure that will
          be
          followed by Supplier’s representative during the preventive maintenance process.
          Reasonable additional testing will be performed by Supplier at a charge
          to the
          Member, upon request, to meet the requirements of procedures developed
          by the
          Member. The frequency of preventive maintenance and tests performed will
          comply
          with the manufacturer’s recommendations,

        
          
            
            

          

          
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        external
          codes (state, JCAHO, etc.), and all internal policies developed by the
          Member.
          During the Warranty Period, Supplier will provide preventive maintenance
          after
          hours at a cost agreed to with the Member. This does not include required
          system
          operational duties such as system backups and functional testing.

         

        h.    Upgrades.
          A list
          of optional software available from Supplier, including costs for the software
          both during the Warranty Period and after the Warranty Period, is attached
          hereto as Exhibit A. Since software upgrade are sometimes customized to
          meet a
          specific need, Members will be given the option of acquiring this software
          if
          they elect to upgrade the system at the discounts provide for in this Agreement.
          If a Software Maintenance Agreement (SMA) is purchased with system, software
          upgrades will be provided at no charge for the duration of the SMA. Labor
          charges for installing software upgrades are not included in the
          SMA.

         

        i.    Customization
          Software.
          Pricing
          relating to the customization of software and additional charges that the
          Member
          will incur for annual maintenance, training, documentation, backup, etc.
          is
          attached hereto as Exhibit A.

         

        j.    Operational
          Software. The form of software licensure
          agreements available to the Members will be included as part of any quote
          requested by a Member. All software necessary to operate the Equipment,
          unless
          otherwise provided in any exhibit hereto, will be licensed to the Member
          upon
          acceptance of the Equipment pursuant to Subsection 3.f. above. If a SMA
          is
          purchased with the system, software upgrades will be provided at no charge
          for
          the duration of the SMA. Any new operational software that provides additional
          functionality must be submitted to Novation as an addition to Exhibit A.
          New
          software will be installed as scheduled with facility.

        
           

          k.    Diagnostic
            Software.
            Not
            applicable, Infant Protection Systems/Wandering Patient Systems do not
            require
            diagnostic software.

        

         

        l.    Data
          Conversion/Interfaces.
          Typically, systems to not require conversion of data, they operate on a
          stand-alone basis. Interfaces to other information systems may be quoted
          on a
          custom basis, and will not be part of this agreement.

         

        m.    Service
          Contract Cancellation.
          Service
          contracts are provided through Supplier’s authorized dealers. Terms of the
          service contract with the authorized dealer will apply.

         

        n.    Product
          Compliance.
          Supplier
          represents and warrants to Novation, the Clients and the Members that the
          Products are, if required, registered, and will not be distributed, sold,
          leased
          or priced by Supplier in violation of any federal, state or local law.
          Supplier
          represents and warrants that as of the date of delivery to the Members
          all
          Products will not be adulterated or misbranded within the meaning of the
          Federal
          Food, Drug and Cosmetic Act and will not violate or cause a violation of
          any
          applicable law, ordinance, rule, regulation or order. Supplier agrees it
          will
          comply with all applicable Good Manufacturing Practices and Standards contained
          in 21 C.F.R. Parts 210, 211, 225, 226, 600, 606, 610, 640, 660, 680 and
          820.
          Supplier represents and warrants that it will provide adequate warnings
          and
          instructions to inform users of the Products of the risks, if any, associated
          with the use of the Products. Supplier’s representations,
          warranties

        
          
            
            

          

          
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        and
          agreements in this Subsection will survive the expiration or earlier termination
          of this Agreement.

        
           

          o.    Product
            Condition.
            Unless
            otherwise stated in the Non-Price Specifications or unless agreed upon
            by a
            Member in connection with Products it may order, all Products will be
            new.
            Products, which are demonstrators, used, obsolete, seconds, or which
            have been
            discontinued are unacceptable unless otherwise specified in the Non-Price
            Specifications or the Member accepts delivery after receiving notice
            of the
            condition of the Products. A description of and pricing for demonstrators
            or
            refurbished Products is attached hereto as Exhibit A.

        

        

        5.    Reports and
          Other
          Information
          Requirements. Within
          twenty (20) days after the end of each full and partial quarter during
          the Term
          (“Reporting Quarter”), Supplier will submit to Novation a Sales report in form
          and content reasonably satisfactory to Novation (“Net Sales Report”) and any
          other information during the time period required as set forth in the
          Information Requirements Guidebook. Such Guidebook may be found at the
          Novation
          website at www.novationco.com.

        

        6.    Obligations
          of Novation.

        

        a.    Information
          to Members.
          After
          issuing the Award Letter, Novation, in conjunction with the Clients, will
          deliver a summary of the purchasing and/or leasing arrangements covered
          by this
          Agreement to each Member and will, from time to time, at the request of
          Supplier, deliver to each Member reasonable and appropriate amounts and
          types of
          materials supplied by Supplier to Novation which relate to the purchase
          or lease
          of the Products.

        

        b.    Marketing
          Services.
          Novation, in conjunction with the Clients, will market the purchasing and/or
          leasing arrangements covered by this Agreement to the Members. Such promotional
          services may include, as appropriate, the use of direct mail, contact by
          Novation’s field service delivery team, member support services, and regional
          and national meetings and conferences. As appropriate, Novation, in conjunction
          with the Clients, will involve Supplier in these promotional activities
          by
          inviting Supplier to participate in meetings and other reasonable networking
          activities with Members.

         

        7.    Fees.

         

        a.    Calculation.
          Supplier
          will pay to Novation, as the authorized collection agent for each of the
          Clients
          and certain of each Client’s subsidiaries and affiliates, respectively (and not
          collectively), Fees belonging to any of the Clients or certain of their
          subsidiaries or affiliates equal to the Agreed Percentage of all Net Sales
          of
          the Products to the Members directly or indirectly from Supplier, whether
          under
          the pricing and other terms of this Agreement or under the terms of any
          other
          purchasing or pricing arrangements that may exist between the Members and
          Supplier. As used herein, Net Sales shall mean invoiced sales of Products
          less
          related Product returns. The “Agreed Percentage” will be defined in the Award
          Letter.

        
          
            
            

          

          
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        b.    Payment.
          Supplier
          will submit fees on all net sales within twenty (20) days of the close
          of any
          calendar quarter during the term of this agreement. 

        

        Fee
          checks must be made payable to Novation,
          LLC
          and sent
          to:

        

        If
          Sent
          By First
          Class Mail: 

        

        Novation,
          LLC

        75
          Remittance Dr., Suite 1420

        Chicago,
          IL 60675-1420

        

        If
          Sent
          Via Courier (i.e.,
          Federal Express, United Parcel Service, Messenger): 

        The
          Northern Trust Company

        350
          North Orleans Street

        Receipt
          & Dispatch 8th
          Floor

        Chicago,
          IL 60654

        

        Attn:
          Novation, LLC, Lockbox Number 1420

        Telephone
          No. (312) 444-3576

        

        On
          the
          airbill please remember to list the bank’s telephone number, as recipient at
          this location. You should also include your telephone number as the
          sender.

        

        IMPORTANT
          REMINDER: ALL
          checks
          for Fees should be made payable to Novation,
          LLC,
          regardless of whether they are sent first-class mail or by courier. Under
          no circumstances should checks be made payable to The Northern Trust
          Company.

        

        8.    Compliance
          With Law and Government Program Participation.

        

        a.    Compliance
          With Law.
          Supplier
          represents and warrants that to the best of its knowledge, after due inquiry,
          it
          is, and for the Term shall be, in compliance with all federal, state and
          local
          statutes, laws, ordinances and regulations applicable to it (“Legal
          Requirements”) which are material to the operation of its business and the
          conduct of its affairs, including Legal Requirements pertaining to the
          safety of
          the Products, occupational health and safety, environmental protection,
          nondiscrimination, antitrust, and equal employment opportunity. In the
          event of
          Supplier’s failure to comply with the foregoing, Novation will have the right to
          immediately terminate any or all of the Product(s) subject to such failure,
          with
          notice to Supplier, or to terminate this Agreement in its entirety pursuant
          to
          Section 12.a. During
          the Term, Supplier will: (1) promptly notify Novation of any lawsuits,
          claims, administrative actions or other proceedings asserted or commenced
          against it which assert in whole or in part that Supplier is in noncompliance
          with any Legal Requirement which is material to the operation of its business
          and the conduct of its affairs and (2) promptly provide Novation
          with true
          and correct copies of all written notices of adverse findings from the
          U.S. Food
          and Drug Administration (“FDA”) and all written results of FDA inspections which
          pertain to the Products.

        

        b.    Government
          Program Participation.
          Supplier
          represents and warrants that it is not excluded from participation, and
          is not
          otherwise ineligible to participate, in a “Federal health care program” as
          defined in 42 U.S.C. §
          1320a-7b(f) or in any other government payment

        
          
            
            

          

          
            -9-

            
              

            

          

          
            
            

          

        

        program.
          In the event Supplier is excluded from participation, or becomes otherwise
          ineligible to participate in any such program during the Term, Supplier
          will
          notify Novation in writing within three (3) days after such event, and
          upon the
          occurrence of such event, whether or not such notice is given to Novation,
          Novation may immediately terminate this Agreement upon written notice to
          Supplier. 

        

        9.     
          Insurance.

        

         
          a.    Policy
          Requirements.
          Supplier
          will maintain and keep in force during the Term product liability, general
          public liability, and property damage insurance against any insurable claim
          or
          claims, which might or could arise regarding Products, purchased or leased
          from
          Supplier. Such insurance will contain a minimum combined single limit of
          liability for bodily injury and property damage in the amounts of not less
          than
          $1,000,000 per occurrence and $3,000,000 in the aggregate After award of
          contract, Supplier will provide to Novation within fifteen (15) days after
          Novation’s request, an insurance certificate indicating the foregoing coverage,
          issued by an insurance company licensed to do business in the relevant
          states
          and signed by an authorized agent.

        

         
          b.    Self-Insurance.
          Notwithstanding anything to the contrary in Subsection a. above,
          Supplier
          may maintain a self-insurance program for all or any part of the foregoing
          liability risks, provided such self-insurance policy in all material respects
          complies with the requirements applicable to the product liability, general
          public liability and property damage insurance set forth in Subsection a.
          

        

         
          c.    Amendments,
          Notices and Endorsements.
          Supplier
          will not amend, in any material respect that affects the interests of Novation,
          the Clients or the Members, or terminate said liability insurance or
          self-insurance program except after thirty (30) days’ prior written notice to
          Novation and will provide to Novation copies of all notices and endorsements
          as
          soon as practicable after it receives or gives them.

        

        10.    Release
          and Indemnity. Supplier will release, indemnify, hold harmless, and, if
          requested, defend Novation, the Clients and the Members, and their respective
          officers, directors, regents, agents, subsidiaries, affiliates and employees
          (collectively, the “Indemnitees”), from and against any claims, liabilities,
          damages, actions, costs and expenses (including, without limitation, reasonable
          attorneys’ fees, expert fees and court costs) of any kind or nature, whether at
          law or in equity,
          arising
          from or caused in any part by (1) the breach of any representation, warranty,
          covenant or agreement of Supplier contained in this Agreement or in the
          Bid; (2)
          the condition of any Product, including a defect in material, workmanship,
          design or manufacturing; or (3) the warnings and instructions associated
          with
          any product.
          Such
          indemnification, hold harmless and right to defense will not be applicable
          to
          the extent the claim, liability, damage, action, cost or expense arises
          as a
          result of an act or failure to act of Indemnitees. In addition, Supplier
          represents and warrants that sale or use of the products will not infringe
          any
          United States patent and will, at its

        
          
            
            

          

          
            -10-

            
              

            

          

          
            
            

          

        

        own
          expense, defend every suit which will be brought against Novation or a
          member
          for any alleged infringement of any patent by reason of the sale or use
          of the
          products and will pay all costs, damages and profits recoverable in any
          such
          suit. This
          Section and the obligations contained herein will survive the expiration
          or
          earlier termination of this Agreement. The remedies set forth in this Section
          are in addition to and not a limitation on any other rights or remedies
          that may
          be available against Supplier.

        

        11.    Books
          and Records; Facilities Inspections.
          Supplier
          agrees to keep, maintain and preserve complete, current and accurate books,
          records and accounts of the transactions contemplated by this Agreement
          and such
          additional books, records and accounts as are necessary to establish and
          verify
          Supplier’s compliance with this Agreement. All such books, records and accounts
          will be available for inspection and audit by Novation representatives
          at any
          time during the Term and for two (2) years thereafter, but only during
          reasonable business hours and upon reasonable notice. Novation agrees that
          its
          routine audits will not be conducted more frequently than twice in any
          consecutive twelve (12) month period, subject to Novation’s right to conduct
          special audits whenever it deems it to be necessary. In addition, Supplier
          will
          make its manufacturing and packaging facilities available for inspection
          from
          time to time during the Term by Novation representatives, but only during
          reasonable business hours and upon reasonable notice. The exercise by Novation
          of the right to inspect and audit is without prejudice to any other or
          additional rights or remedies of either party.

        

        12.    Termination.
          Either
          party may terminate this Agreement at any time for any reason whatsoever
          by
          delivering not less than ninety (90) days’ prior written notice thereof to the
          other. In addition, either party may terminate this Agreement immediately
          by
          delivering written notice thereof to the other upon the occurrence of either
          of
          the following events:

        

        (a) The
          other
          party breaches this Agreement and does not cure such breach within thirty
          (30)
          days of receipt of such notice, except for Supplier’s monetary breach or breach
          of Compliance with Laws, for which a cure period shall not be allowed;
          or

        

        (b) The
          other
          party becomes bankrupt or insolvent or makes an unauthorized assignment
          or goes
          into liquidation or proceedings are initiated for the purpose of having
          a
          receiving order or winding up order made against it or the other party
          and
          applies to the courts for protection from its creditors.

         

        13.    Confidential
          Information.

        

         
          a.    Nondisclosure.
          Supplier
          agrees that it will:

         

        
          	 	(1) keep
                  strictly confidential and hold in trust all Confidential Information,
                  as
                  defined in Subsection 13.b. below, of Novation, the Clients
                  and the
                  Members;

        

        
          
            
            

          

          
            -11-

            
              

            

          

          
            
            

          

        

        

        
          
            	
                     

                  	
                    (2) not
                      use the Confidential Information for any purpose other than
                      the
                      performance of its obligations under this Agreement, without
                      the prior
                      written consent of Novation;

                  
	 	 
	 	(3) not
                    disclose the Confidential Information to any third party (unless
                    required
                    by law) without the prior written consent of Novation; and
	 	 
	
                     

                  	
                    (4) not
                      later than thirty (30) days after the expiration or earlier
                      termination of
                      this Agreement, return to Novation, the Client or the Member,
                      as the case
                      may be, the Confidential
                      Information.

                  

          
 
          

         
          b.         Definition.
          “Confidential
          Information,” as used in Subsection 13.a. above, will consist of all
          information relating to the prices and usage of the Products (including
          all
          information contained in the reports produced by Supplier pursuant to
          Section 5 above) and all documents and other materials of Novation,
          the
          Clients and the Members containing information relating to the programs
          of
          Novation, the Clients or the Members of a proprietary or sensitive nature
          not
          readily available through sources in the public domain. 

        

         
          c.         
HIPAA.
          If a
          Member determines, in its sole reasonable discretion, that Supplier is
          a
“business associate,” as that term is defined in the privacy rules promulgated
          pursuant to The Health Insurance Portability and Accountability Act of
          1996
          (“HIPAA”) codified at 42 CFR Parts 160 and 164, Supplier will negotiate with
          Member a mutually acceptable written agreement which will govern Supplier’s
          access to “protected health information” as defined under HIPAA (a “Business
          Associate Contract”).

         

        
          14.    Miscellaneous.

           

                  
            a.   Choice
            of Law.
            This
            Agreement will be governed by and construed in accordance with the internal
            substantive laws of the State of Delaware and the Delaware courts will
            have
            jurisdiction over all matters relating to this Agreement; provided, however,
            the
            terms of any agreement between Supplier and a Member will be governed
            by and
            construed in accordance with the choice of law and venue provisions set
            forth in
            such agreement.

        

        

                
          b.   No
          Assignment.  No
          assignment of all or any part of this Agreement may be made without the
          prior
          written consent of the other party. As used herein, “assignment” shall mean a
          transfer by virtue of operation of law, under an order of any court, or
          pursuant
          to any plan of merger, consolidation or sale of stock or assets. Any assignment
          of all or any part of this Agreement by either party will not relieve that
          party
          of the responsibility of performing its obligations hereunder to the extent
          that
          such obligations are not satisfied in full by the assignee. This Agreement
          will
          be binding upon and inure to the benefit of the parties’ respective successors
          and assigns.

        

                
          c.   Notices.
          Except
          as otherwise expressly provided herein, all notices or other communications
          required or permitted under this Agreement will be in writing and will
          be

        
          
            
            

          

          
            -12-

            
              

            

          

          
            
            

          

        

        deemed
          sufficient when mailed by United States mail, or delivered in person to
          the
          party to which it is to be given, at the address of such party set forth
          below:

        

        If
          to
          Supplier:

        

        eXI
          Wireless Systems, Inc.

        Attn:
          Daniel Drebnicki

        Suite
          100-13551 Commerce Parkway

        Richmond,
          BC, Canada V6V 2L1

        

        If
          to
          Novation:

        

        Novation

        Attn:
          General Counsel

        125
          East
          John Carpenter Freeway

        Irving,
          TX 75062-2324

        

        Or
          such
          other address as the party will have furnished in writing in accordance
          with the
          provisions of this Subsection.

        

        d.    Severability.
          Whenever
          possible, each provision of this Agreement will be interpreted in such
          a manner
          as to be effective and valid under applicable law, but if any provision
          of this
          Agreement will be prohibited by or invalid under applicable law, such provision
          will be ineffective to the extent of such prohibition or invalidity without
          invalidating the remainder of such provision or the remaining provisions
          of this
          Agreement. Each party will, at its own expense, take such action as is
          reasonably necessary to defend the validity and enforceability of this
          Agreement
          and will cooperate with the other party as is reasonably necessary in such
          defense.

        

        e.    Entire
          Agreement.
          This
          Agreement, together with the exhibits listed below, will constitute the
          entire
          agreement between Novation and Supplier. This Agreement, together with
          the
          exhibits listed below and each Member’s purchase and/or lease order and/or other
          applicable Form will constitute the entire agreement between each Member
          and
          Supplier. In the event of any inconsistency between this Agreement and
          a
          Member’s purchase and/or lease order and/or other applicable Form, the terms of
          this Agreement will control, except that the Member’s purchase and/or lease
          order and/or other applicable Form will supersede Sections 3 and 4 of this
          Agreement in the event of any inconsistency with such Sections. No other
          terms
          and conditions in any document, acceptance, or acknowledgment will be effective
          or binding unless expressly agreed to in writing. The following exhibits
          are
          incorporated by reference in this Agreement:

        

        Exhibit
          A    Product
          and Service Description and Pricing

        

        Exhibit
          B    Non-Price
          Specifications

        

        Exhibit
          C    Award
          Letter

        
          
            
            

          

          
            -13-

            
              

            

          

          
            
            

          

        

        

        Exhibit
          D    Forms
          of
          Purchase, Lease, License, Financing and/or Service Agreements

        

        Exhibit
          E    Warranty

        

        Exhibit
          F    Neoforma
          Master Supplier Agreement

        

        

        SUPPLIER:    
          eXI
          Wireless Systems, Inc.

        ADDRESS:     
          Suite
          100
          - 13551 Commerce Parkway

                                 
          Richmond,
          BC V6V 2L1

        

        

        SIGNATURE:
          /s/ Alan Foster

        TITLE:
          President    DATE:
          April 18, 2005

         

         

        
          
            
            

          

          
            -14-exhibit 10.15

    
      
        

      

    

    Exhibit
      10.15

    

    

    

    

    VERICHIP
      CORPORATION

    

    2005
      FLEXIBLE STOCK PLAN

    

    

    
    

    

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    VERICHIP
      CORPORATION

    2005
      FLEXIBLE STOCK PLAN

    TABLE
      OF
      CONTENTS

    

      
        	 	 	 	
                Page

              
	
              	
              	
              	
              
	 	 	 	 
	
              	
              	
              	
              
	
                1.
                  NAME AND PURPOSE

              	 
	
              	
              
	 	
                1.1.
                  Name.

              	
                1

              
	
              	
              	
              
	 	
                1.2.
                  Purpose.

              	
                1

              
	
              	
              	
              
	 	 	 	 
	
              	
              	
              	
              
	
                2.
                  DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION

              	 
	
              	
              
	 	
                2.1.
                  General Definitions.

              	 
	
              	
              	
              
	 	 	
                2.1.1.
                  Affiliate.

              	
                1

              
	
              	
              	
              	
              
	 	 	
                2.1.2.
                  Agreement.

              	
                1

              
	
              	
              	
              	
              
	 	 	
                2.1.3.
                  Benefit.

              	
                1

              
	
              	
              	
              	
              
	 	 	
                2.1.4.
                  Board.

              	
                1

              
	
              	
              	
              	
              
	 	 	
                2.1.5.
                  Cash Award.

              	
                1

              
	
              	
              	
              	
              
	 	 	
                2.1.6.
                  Change of Control.

              	
                1

              
	
              	
              	
              	
              
	 	 	
                2.1.7.
                  Code.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.8.
                  Company.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.9.
                  Committee.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.10.
                  Common Stock.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.11.
                  Director.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.12.
                  Effective Date.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.13.
                  Employee.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.14.
                  Employer.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.15.
                  Exchange Act.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.16.
                  Fair Market Value.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.17.
                  Fiscal Year.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.18.
                  ISO.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.19.
                  NQSO.

              	
                2

              
	
              	
              	
              	
              
	 	 	
                2.1.20.
                  Option.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.21.
                  Other Stock Based Award.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.22.
                  Parent.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.23.
                  Participant.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.24.
                  Performance Based Compensation.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.25.
                  Performance Share.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.26.
                  Plan.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.27.
                  Reload Option.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.28.
                  Restricted Stock.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.29.
                  Rule 16b-3.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.30.
                  SEC.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.31.
                  Share.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.32.
                  SAR.

              	
                3

              
	
              	
              	
              	
              
	 	 	
                2.1.33.
                  Subsidiary.

              	
                3

              
	
              	
              	
              	
              
	 	
                2.2.
                  Other Definitions.

              	
                4

              
	
              	
              	
              
	 	
                2.3.
                  Conflicts.

              	
                4

              
	
              	
              	
              
	 	 	 	 
	
              	
              	
              	
              
	
                3.
                  COMMON STOCK

              	 
	
              	
              
	 	
                3.1.
                  Number of Shares.

              	
                4

              
	
              	
              	
              
	 	
                3.2.
                  Reusage.

              	
                4

              
	
              	
              	
              

      

      
      

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

      
        	 	
                3.3.
                  Adjustments.

              	
                4

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                4.
                  ELIGIBILITY

              	 
	
              	
              
	 	
                4.1.
                  Determined By Committee.

              	
                4

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                5.
                  ADMINISTRATION

              	 
	
              	
              
	 	
                5.1.
                  Committee.

              	
                4

              
	
              	
              	
              
	 	
                5.2.
                  Authority.

              	
                5

              
	
              	
              	
              
	 	
                5.3.
                  Delegation.

              	
                5

              
	
              	
              	
              
	 	
                5.4.
                  Determination.

              	
                5

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                6.
                  AMENDMENT

              	 
	
              	
              
	 	
                6.1.
                  Power of Board.

              	
                5

              
	
              	
              	
              
	 	
                6.2.
                  Limitation.

              	
                5

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                7.
                  TERM AND TERMINATION

              	 
	
              	
              
	 	
                7.1.
                  Term.

              	
                6

              
	
              	
              	
              
	 	
                7.2.
                  Termination.

              	
                6

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                8.
                  MODIFICATION OR TERMINATION OF BENEFITS

              	 
	
              	
              
	 	
                8.1.
                  General.

              	
                6

              
	
              	
              	
              
	 	
                8.2.
                  Committee’s Right.

              	
                6

              
	
              	
              	
              
	 	
                8.3.
                  Compliance with Applicable Laws.

              	
                6

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                9.
                  CHANGE OF CONTROL

              	 
	
              	
              
	 	
                9.1.
                  Vesting and Payment.

              	
                6

              
	
              	
              	
              
	 	
                9.2.
                  Other Action.

              	
                6

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                10.
                  AGREEMENTS AND CERTAIN BENEFITS

              	 
	
              	
              
	 	
                10.1.
                  Grant Evidenced by Agreement.

              	
                7

              
	
              	
              	
              
	 	
                10.2.
                  Provisions of Agreement.

              	
                7

              
	
              	
              	
              
	 	
                10.3.
                  Transferability.

              	
                7

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                11.
                  REPLACEMENT AND TANDEM AWARDS

              	 
	
              	
              
	 	
                11.1.
                  Replacement.

              	
                7

              
	
              	
              	
              
	 	
                11.2.
                  Tandem Awards.

              	
                7

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                12.
                  PAYMENT, DIVIDENDS AND WITHHOLDING

              	 
	
              	
              
	 	
                12.1.
                  Payment.

              	
                7

              
	
              	
              	
              
	 	
                12.2.
                  Dividend Equivalents.

              	
                7

              
	
              	
              	
              

      

      
      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

      
        	 	
                12.3.
                  Withholding.

              	
                8

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                13.
                  OPTIONS

              	 
	
              	
              
	 	
                13.1.
                  Types of Options.

              	
                8

              
	
              	
              	
              
	 	
                13.2.
                  Grant of ISOs and Option Price.

              	
                8

              
	
              	
              	
              
	 	
                13.3.
                  Other Requirements for ISOs.

              	
                8

              
	
              	
              	
              
	 	
                13.4.
                  NQSOs.

              	
                8

              
	
              	
              	
              
	 	
                13.5.
                  Determination by Committee.

              	
                8

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                14.
                  SARS

              	 
	
              	
              
	 	
                14.1.
                  Grant and Payment.

              	
                8

              
	
              	
              	
              
	 	
                14.2.
                  Grant of Tandem Award.

              	
                8

              
	
              	
              	
              
	 	
                14.3.
                  ISO Tandem Award.

              	
                8

              
	
              	
              	
              
	 	
                14.4.
                  Payment of Award.

              	
                8

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                15.
                  ANNUAL LIMITATIONS

              	 
	
              	
              
	 	
                15.1.
                  Limitation on Options and SARs.

              	
                8

              
	
              	
              	
              
	 	
                15.2.
                  Limitation on Performance Shares.

              	
                8

              
	
              	
              	
              
	 	
                15.3.
                  Computations.

              	
                9

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                16.
                  RESTRICTED STOCK AND PERFORMANCE SHARES

              	 
	
              	
              
	 	
                16.1.
                  Restricted Stock.

              	
                9

              
	
              	
              	
              
	 	
                16.2.
                  Cost of Restricted Stock.

              	
                9

              
	
              	
              	
              
	 	
                16.3.
                  Non-Transferability.

              	
                9

              
	
              	
              	
              
	 	
                16.4.
                  Performance Shares.

              	
                9

              
	
              	
              	
              
	 	
                16.5.
                  Grant.

              	
                9

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                17.
                  CASH AWARDS

              	 
	
              	
              
	 	
                17.1.
                  Grant.

              	
                9

              
	
              	
              	
              
	 	
                17.2.
                  Annual Limits.

              	
                9

              
	
              	
              	
              
	 	
                17.3.
                  Restrictions.

              	
                10

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                18.
                  OTHER STOCK BASED AWARDS AND OTHER BENEFITS

              	 
	
              	
              
	 	
                18.1.
                  Other Stock Based Awards.

              	
                10

              
	
              	
              	
              
	 	
                18.2.
                  Other Benefits.

              	
                10

              
	
              	
              	
              
	 	 	 
	
              	
              	
              
	
                19.
                  MISCELLANEOUS PROVISIONS

              	 
	
              	
              
	 	
                19.1.
                  Underscored References.

              	
                10

              
	
              	
              	
              
	 	
                19.2.
                  Number and Gender.

              	
                10

              
	
              	
              	
              
	 	
                19.3.
                  Unfunded Status of Plan.

              	
                10

              
	
              	
              	
              
	 	
                19.4.
                  Termination of Employment.

              	
                10

              
	
              	
              	
              
	 	
                19.5.
                  Designation of Beneficiary.

              	
                11

              
	
              	
              	
              
	 	
                19.6.
                  Governing Law.

              	
                11

              
	
              	
              	
              
	 	
                19.7.
                  Purchase for Investment.

              	
                11

              
	
              	
              	
              

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
       

      
        	
                 

              	
                19.8.
                  No Employment Contract.

              	
                11

              
	
              	
              	
              
	 	
                19.9.
                  No Effect on Other Benefits.

              	
                11

              
	
              	
              	
              
	 	
                19.10.
                  Limitation on Exercise.

              	
                11

              
	
              	
              	
              

      

      
      

    

    

    
    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    VERICHIP
      CORPORATION

    2005
      FLEXIBLE STOCK PLAN

     

    1.
      NAME AND PURPOSE

    1.1
      Name.

     

    The
      name
      of this Plan is the “VeriChip Corporation 2005 Flexible Stock
      Plan.”

     

    1.2
      Purpose.

     

    The
      Company has established this Plan to attract, retain, motivate and reward
      Employees and Directors and to encourage ownership of the Company’s Common Stock
      by them.
      The
      Company also intends in appropriate circumstances to grant awards of its common
      stock in lieu of cash compensation pursuant to the mutual agreement of the
      Participant and the Company. 

     

    2.
      DEFINITIONS
      OF TERMS AND RULES OF CONSTRUCTION

    2.1
      General Definitions.

     

    The
      following words and phrases, when used in the Plan, unless otherwise
      specifically defined or unless the context clearly otherwise requires, shall
      have the following respective meanings:

     

    2.1.1
      Affiliate.

     

    A
      Parent
      or Subsidiary of the Company.

     

    2.1.2
      Agreement.

     

    The
      document which evidences the grant of any Benefit under the Plan and which
      sets
      forth the Benefit and the terms, conditions and provisions of, and restrictions
      relating to, such Benefit.

     

    2.1.3
      Benefit.

     

    Any
      benefit granted to a Participant under the Plan.

     

    2.1.4
      Board.

     

    The
      Board
      of Directors of the Company.

     

     

    2.1.5
      Cash
      Award.

     

    A
      Benefit
      payable in the form of cash.

     

     

    2.1.6
      Change
      of Control.

     

    If
      any
“person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
      Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated
      under the Exchange Act), directly or indirectly, of securities of the Company
      representing 20% or more of the combined voting power of the Company’s then
      outstanding securities; upon the first purchase of the Common Stock pursuant
      to
      a tender or exchange offer (other than a tender or exchange offer made by the
      Company); upon the approval by the Company’s stockholders of a merger or
      consolidation, a sale or disposition of all or substantially all of the
      Company’s assets or a plan of liquidation or dissolution of the Company; or if
      during an period of two consecutive years, individuals who at the beginning
      of
      such period constitute the Board cease for any reason to constitute at least
      a
      majority thereof, unless the election or nomination for the election by the
      Company’s stockholders of each new director was approved by a vote of at least
      2/3 of the Board then still in office who were members of the Board at the
      beginning of the period. Notwithstanding the foregoing, a Change in Control
      shall not be deemed to occur if the Company either merges or consolidates with
      or into another company or sells or disposes of all or substantially all of
      its
      assets to another company, if such merger, consolidation, sale or disposition
      is
      in connection with a corporate restructuring wherein the stockholders of the
      Company immediately before such merger, consolidation, sale or disposition
      own,
      directly or indirectly, immediately following such merger, consolidation, sale
      or disposition of at least 80% of the combined voting power of all outstanding
      classes of securities of the company resulting from such merger or
      consolidation, or

     

    

    
      
        
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    to
      which
      the Company sells or disposes of its assets, in substantially the same
      proportion as their ownership in the Company immediately before such merger,
      consolidation, sale or disposition.

     

    2.1.7
      Code.

     

    The
      Internal Revenue Code of 1986, as amended. Any reference to the Code includes
      the regulations promulgated pursuant to the Code.

     

    2.1.8
      Company.

     

    VeriChip
      Corporation.

     

    2.1.9
      Committee.

     

    The
      Committee described in Section 5.1.

     

    2.1.10
      Common
      Stock.

     

    The
      Company’s common stock which presently has a par value of $.001 per
      Share.

     

    2.1.11
      Director.

     

    A
      member
      of the Board or a member of the Board of Directors of an Affiliate.

     

    2.1.12
      Effective
      Date.

     

    The
      date
      that the Plan is approved by the shareholders of the Company (or the
      shareholders of the Company’s Parent, if none of the common shares of the
      Company are publicly traded),
      which
      must occur within one year before or after approval by the Board. Any grants
      of
      Benefits prior to such approval shall be void if such approval is not
      obtained.

     

    2.1.13
      Employee.

     

    Any
      person employed by the Employer.

     

    2.1.14
      Employer.

     

    The
      Company and all Affiliates.

     

    2.1.15
      Exchange
      Act.

     

    The
      Securities Exchange Act of 1934, as amended.

     

    2.1.16
      Fair
      Market Value.

     

    The
      last
      sale price, regular way, or, in case no such sale takes place on such date,
      the
      average of the closing bid and asked prices, regular way, of the Shares, in
      either case as reported in the principal consolidated transaction reporting
      system with respect to securities listed or admitted to trading on the New
      York
      Stock Exchange, Inc. (the “NYSE”) or, if the Shares are not listed or admitted
      to trading on the NYSE, as reported in the principal consolidated transaction
      reporting system with respect to securities listed on the principal national
      securities exchange on which the Shares are listed or admitted to trading or,
      if
      the Shares are not listed or admitted to trading on any national securities
      exchange, the last quoted sale price on such date or, if not so quoted, the
      average of the high bid and low asked prices in the over-the-counter market
      on
      such date, as reported by the National Association of Securities Dealers, Inc.
      Automated Quotations System or such other system then in use, or, if on any
      such
      date the Shares are not quoted by any such organization, the average of the
      closing bid and asked prices on such date as furnished by a professional market
      maker making a market in the Shares selected by the Committee. If the Shares
      are
      not publicly held or so listed or publicly traded, the determination of the
      Fair
      Market Value per Share shall be made in good faith by the
      Committee.

     

    2.1.17
      Fiscal
      Year.

     

    The
      taxable year of the Company which is the calendar year.

     

    2.1.18
      ISO.

     

    An
      Incentive Stock Option as defined in Section 422 of the Code.

     

    2.1.19
      NQSO.

     

    A
      non-qualified stock Option, which is an Option that does not qualify as an
      ISO.

     

    

    
      
        
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    2.1.20
      Option.

     

    An
      option
      to purchase Shares granted under the Plan.

     

    2.1.21
      Other
      Stock Based Award.

     

    An
      award
      under Section 3.1 that is valued in whole or in part by reference to, or is
      otherwise based on, Common Stock.

     

    2.1.22
      Parent.

     

    Any
      corporation (other than the Company or a Subsidiary) in an unbroken chain of
      corporations ending with the Company, if, at the time of the grant of an Option
      or other Benefit, each of the corporations (other than the Company) owns stock
      possessing 50% or more of the total combined voting power of all classes of
      stock in one of the other corporations in such chain.

     

    2.1.23
      Participant.

     

    An
      individual who is granted a Benefit under the Plan.
      Benefits may be granted only to Employees, members of the Board, (including
      former Employees and former members of the Board if in connection with their
      separation from the Company), employees and owners of entities which are not
      Affiliates but which have a direct or indirect ownership interest in an Employer
      or in which an Employer has a direct or indirect ownership interest, individuals
      who, and employees and owners of entities which, are customers and suppliers
      of
      an Employer, individuals who, and employees and owners of entities which, render
      services to an Employer, and individuals who, and employees and owners of
      entities, which have ownership or business affiliations with any individual
      or
      entity previously described.

     

    2.1.24
      Performance
      Based Compensation.

     

    Compensation
      which meets the requirements of Section 162(m)(4)(C) of the Code.

     

    2.1.25
      Performance
      Share.

     

    A
      Share
      awarded to a Participant under Section 16.4of the Plan.

     

    2.1.26
      Plan.

     

    The
      VeriChip Corporation 2005 Flexible Stock Plan and all amendments and supplements
      to it.

     

    2.1.27
      Reload
      Option.

     

    An
      Option
      to purchase the number of Shares used by a Participant to exercise an Option
      and
      to satisfy any withholding requirement incident to the exercise of such
      Option.

     

    2.1.28
      Restricted
      Stock.

     

    Shares
      issued under Section 16.1 of the Plan.

     

    2.1.29
      Rule
      16b-3.

     

    Rule
      16b-3 promulgated by the SEC, as amended, or any successor rule in effect from
      time to time.

     

    2.1.30
      SEC.

     

    The
      Securities and Exchange Commission.

     

    2.1.31
      Share.

     

    A
      share
      of Common Stock.

     

    2.1.32
      SAR.

     

    A
      stock
      appreciation right, which is the right to receive an amount equal to the
      appreciation, if any, in the Fair Market Value of a Share from the date of
      the
      grant of the right to the date of its payment.

     

    2.1.33
      Subsidiary.

     

    Any
      corporation, other than the Company, in an unbroken chain of corporations
      beginning with the Company if, at the time of grant of an Option or other
      Benefit, each of the corporations, other than the last corporation in the
      unbroken chain, owns stock possessing 50% or more of the total combined voting
      power of all classes of stock in one of the other corporations in such
      chain.

     

    

    
      
        
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    2.2
      Other Definitions.

    In
      addition to the above definitions, certain words and phrases used in the Plan
      and any Agreement may be defined in other portions of the Plan or in such
      Agreement.

     

    2.3
      Conflicts.

     

    In
      the
      case of any conflict in the terms of the Plan relating to a Benefit, the
      provisions in the section of the Plan which specifically grants such Benefit
      shall control those in a different section. In the case of any conflict between
      the terms of the Plan relating to a Benefit and the terms of an Agreement
      relating to a Benefit, the terms of the Plan shall control.

     

    3.
      COMMON STOCK

    3.1
      Number of Shares.

     

    The
      number of Shares which may be issued or sold or for which Options, SARs or
      Performance Shares may be granted under the Plan shall be 1,250,000. Such Shares
      may be authorized but unissued Shares, Shares held in the treasury, or both.
      The
      full number of Shares available may be used for any type of Option or other
      Benefit.

     

    3.2
      Reusage.

     

    If
      an
      Option or SAR expires or is terminated, surrendered, or canceled without having
      been fully exercised, if Restricted Shares or Performance Shares are forfeited,
      or if any other grant results in any Shares not being issued, the Shares covered
      by such Option or SAR, grant of Restricted Shares, Performance Shares or other
      grant, as the case may be, shall again be available for use under the Plan.
      Any
      Shares which are used as full or partial payment to the Company upon exercise
      of
      an Option or for any other Benefit that requires a payment to the Company shall
      be available for purposes of the Plan.

     

    3.3
      Adjustments.

     

    If
      there
      is any change in the Common Stock of the Company by reason of any stock
      dividend, spin-off, split-up, spin-out, recapitalization, merger, consolidation,
      reorganization, combination or exchange of shares, or otherwise, the number
      of
      SARs and number and class of shares available for Options and grants of
      Restricted Stock, Performance Shares and Other Stock Based Awards and the number
      of Shares subject to outstanding Options, SARs, grants of Restricted Stock
      which
      are not vested, grants of Performance Shares which are not vested, and Other
      Stock Based Awards, and the price thereof, as applicable, may be appropriately
      adjusted by the Committee.

     

    4.
      ELIGIBILITY

    4.1
      Determined
      By Committee.

     

    The
      Participants and the Benefits they receive under the Plan shall be determined
      solely by the Committee. In making its determinations, the Committee shall
      consider past, present and expected future contributions of Participants and
      potential Participants to the Employer, including, without limitation, the
      performance of, or the refraining from the performance of, services. Unless
      specifically provided otherwise herein, all determinations of the Committee
      in
      connection with the Plan or an Agreement shall be made in its sole
      discretion.

     

    5.
      ADMINISTRATION

    5.1
      Committee.

     

    The
      Plan
      shall be administered by the Committee. The Committee shall consist of the
      “outside directors” of the Board, unless the Board appoints a Committee of two
      or more but less than all of the Board all
      of
      whom are “outside directors” as defined in Section 162(m) of the Code.
The
      Committee shall use its best efforts to grant Options, SARs, Restricted Stock,
      Performance Shares, Cash Awards and Other Stock Based Awards under this Plan
      to
      an Employee which will qualify as “performance-based compensation” for purposes
      of Section 162(m) of the Code, except where the Committee deems that the
      Company’s interests when viewed broadly will be better served by a grant which
      is free of the conditions required to so qualify any such grant for purposes
      of
      Section 162(m) of the Code. 

     

    If
      the
      Committee does not include the entire Board, it shall serve at the pleasure
      of
      the Board, which may from time to time appoint members in substitution for
      members previously appointed and fill vacancies, however caused, in the
      Committee. The Committee may select one of its members as its Chairman and
      shall
      hold its meetings at such times and places as it may determine. A majority
      of
      its members shall constitute a quorum. All determinations of the Committee
      made
      at a meeting at which a quorum is present shall be made by a majority of its
      members present

     

    

    
      
        
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    at
      the
      meeting. Any decision or determination reduced to writing and signed by a
      majority of the members shall be fully as effective as if it had been made
      by a
      majority vote at a meeting duly called and held.

     

    5.2
      Authority.

     

    Subject
      to the terms of the Plan, the Committee shall have discretionary authority
      to:

     

    (a) determine
      the individuals to whom Benefits are granted, the type and amounts of Benefits
      to be granted and the date of issuance and duration of all such
      grants;

     

    (b) determine
      the terms, conditions and provisions of, and restrictions relating to, each
      Benefit granted;

     

    (c) interpret
      and construe the Plan and all Agreements;

     

    (d) prescribe,
      amend and rescind rules and regulations relating to the Plan;

     

    (e) determine
      the content and form of all Agreements;

     

    (f) determine
      all questions relating to Benefits under the Plan;

     

    (g) maintain
      accounts, records and ledgers relating to Benefits;

     

    (h) maintain
      records concerning its decisions and proceedings;

     

    (i) employ
      agents, attorneys, accountants or other persons for such purposes as the
      Committee considers necessary or desirable;

     

    (j) take,
      at
      any time, any action required or permitted by Section 9.1 or 9.2(a),
      respectively, irrespective of whether any Change of Control has occurred or
      is
      imminent;

     

    (k) determine,
      except to the extent otherwise provided in the Plan, whether and the extent
      to
      which Benefits under the Plan will be structured to conform to the requirements
      applicable to Performance-Based Compensation, and to take such action, establish
      such procedures, and impose such restrictions at the time such Benefits are
      granted as the Committee determines to be necessary or appropriate to conform
      to
      such requirements; and

     

    (l) do
      and
      perform all acts which it may deem necessary or appropriate for the
      administration of the Plan and carry out the purposes of the Plan.

     

    5.3
      Delegation.

     

    Except
      as
      required by Rule 16b-3 with respect to grants of Options, Stock Appreciation
      Awards, Performance Shares, Other Stock Based Awards, or other Benefits to
      individuals who are subject to Section 16b-3of the Exchange Act or as otherwise
      required for compliance with Rule 16b-3 or other applicable law, the Committee
      may delegate all or any part of its authority under the Plan to any Employee,
      Employees or committee.

     

    5.4
      Determination.

     

    All
      determinations of the Committee shall be final.

     

    6.
      AMENDMENT

    6.1
      Power
      of Board.

     

    Except
      as
      hereinafter provided, the Board shall have the sole right and power to amend
      the
      Plan at any time and from time to time.

     

    6.2
      Limitation.

     

    The
      Board
      may not amend the Plan, without approval of the shareholders of the
      Company:

     

    (a) in
      a
      manner which would cause Options which are intended to qualify as ISOs to fail
      to qualify;

     

    (b) in
      a
      manner which would cause the Plan to fail to meet the requirements of Rule
      16b-3; or

     

    (c) in
      a
      manner which would violate applicable law.

     

    

    
      
        
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    7.
      TERM AND TERMINATION

    7.1
      Term.

     

    The
      Plan
      shall commence as of the Effective Date and, subject to the terms of the Plan,
      including those requiring approval by the shareholders of the Company and those
      limiting the period over which ISOs or any other Benefits may be granted, shall
      continue in full force and effect until terminated.

     

    7.2
      Termination.

     

    The
      Plan
      may be terminated at any time by the Board.

     

    8.
      MODIFICATION OR TERMINATION OF BENEFITS

    8.1
      General.

     

    Subject
      to the provisions of Section 8.2, the amendment or termination of the Plan
      shall
      not adversely affect a Participant’s right to any Benefit granted prior to such
      amendment or termination.

     

    8.2
      Committee’s
      Right.

     

    Any
      Benefit granted may be converted, modified, forfeited or canceled, in whole
      or
      in part, by the Committee if and to the extent permitted in the Plan or
      applicable Agreement or with the consent of the Participant to whom such Benefit
      was granted. Except as may be provided in an Agreement, the Committee may,
      in
      its sole discretion, in whole or in part, waive any restrictions or conditions
      applicable to, or accelerate the vesting of, any Benefit.

     

    8.3
      Compliance with Applicable Laws.

     

    The
      Plan
      shall be administered and interpreted in accordance with applicable federal
      tax
      laws, including Section 409A of the Code, and the regulations promulgated
      thereunder. 

     

    9.
      CHANGE OF CONTROL

    9.1
      Vesting and Payment.

     

    In
      the
      event of a Change of Control:

     

    (a) all
      outstanding Options shall become fully exercisable, except to the extent that
      the right to exercise the Option is subject to restrictions established in
      connection with an SAR that is issued in tandem with the Option;

     

    (b) all
      outstanding SARs shall become immediately payable, except to the extent that
      the
      right to exercise the SAR is subject to restrictions established in connection
      with an Option that is issued in tandem with the SAR;

     

    (c) all
      Shares of Restricted Stock shall become fully vested;

     

    (d) all
      Performance Shares shall be deemed to be fully earned and shall be paid out
      in
      such manner as determined by the Committee; and

     

    (e) all
      Cash
      Awards, Other Stock Based Awards and other Benefits shall become fully vested
      and/or earned and paid out in such manner as determined by the
      Committee.

     

    9.2
      Other Action.

     

    In
      the
      event of a Change of Control, the Committee, in its sole discretion, may, in
      addition to the provisions of Section 9.1 above and to the extent not
      inconsistent therewith:

     

    (a) provide
      for the purchase of any Benefit for an amount of cash equal to the amount which
      could have been attained upon the exercise or realization of such Benefit had
      such Benefit been currently exercisable or payable;

     

    (b) make
      such
      adjustment to the Benefits then outstanding as the Committee deems appropriate
      to reflect such transaction or change; and/or

     

    (c) cause
      the
      Benefits then outstanding to be assumed, or new Benefits substituted therefor,
      by the surviving corporation in such change.

     

    

    
      
        
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    10.
      AGREEMENTS AND CERTAIN BENEFITS

    10.1
      Grant Evidenced by Agreement.

     

    The
      grant
      of any Benefit under the Plan may be evidenced by an Agreement which shall
      describe the specific Benefit granted and the terms and conditions of the
      Benefit. The granting of any Benefit shall be subject to, and conditioned upon,
      the recipient’s execution of any Agreement required by the Committee. Except as
      otherwise provided in an Agreement, all capitalized terms used in the Agreement
      shall have the same meaning as in the Plan, and the Agreement shall be subject
      to all of the terms of the Plan.

     

    10.2
      Provisions
      of Agreement.

     

    Each
      Agreement shall contain such provisions that the Committee shall determine
      to be
      necessary, desirable and appropriate for the Benefit granted which may include,
      but not necessarily be limited to, the following with respect to any Benefit:
      description of the type of Benefit; the Benefit’s duration; its transferability;
      if an Option, the exercise price, the exercise period and the person or persons
      who may exercise the Option; the effect upon such Benefit of the Participant’s
      death, disability, changes of duties or termination of employment; the Benefit’s
      conditions; when, if, and how any Benefit may be forfeited, converted into
      another Benefit, modified, exchanged for another Benefit, or replaced; and
      the
      restrictions on any Shares purchased or granted under the Plan.

     

    10.3
      Transferability.

     

    Unless
      otherwise specified in an Agreement or permitted by the Committee, each Benefit
      granted shall be not transferable other than by will or the laws of descent
      and
      distribution and shall be exercisable during a Participant’s lifetime only by
      him.

     

    11.
      REPLACEMENT AND TANDEM AWARDS

    11.1
      Replacement.

     

    The
      Committee may permit a Participant to elect to surrender a Benefit in exchange
      for a new Benefit.

     

    11.2
      Tandem Awards.

     

    Awards
      may be granted by the Committee in tandem. However, no Benefit may be granted
      in
      tandem with an ISO except SARs.

     

    12.
      PAYMENT, DIVIDENDS AND WITHHOLDING

    12.1
      Payment.

     

    Upon
      the
      exercise of an Option or in the case of any other Benefit that requires a
      payment by a Participant to the Company, the amount due the Company is to be
      paid:

     

    
      	 	
              (a)

            	
              in
                cash, including by means of a so-called “cashless exercise” of an
                Option;

            

    

     

    
      	 	
              (b)

            	
              by
                the surrender of all or part of a Benefit (including the Benefit
                being
                exercised);

            

    

     

    
      	 	
              (c)

            	
              by
                the tender to the Company of Shares owned by the optionee and registered
                in his name having a Fair Market Value equal to the amount due to
                the
                Company;

            

    

     

    
      	 	
              (d)

            	
              in
                other property, rights and credits deemed acceptable by the Committee,
                including the Participant’s promissory note;
                or

            

    

     

    
      	 	
              (e)

            	
              by
                any combination of the payment methods specified in (a), (b), (c)
                and (d)
                above.

            

    

     

    Notwithstanding,
      the foregoing, any method of payment other than (a) may be used only with the
      consent of the Committee or if and to the extent so provided in an Agreement.
      The proceeds of the sale of Shares purchased pursuant to an Option and any
      payment to the Company for other Benefits shall be added to the general funds
      of
      the Company or to the Shares held in treasury, as the case may be, and used
      for
      the corporate purposes of the Company as the Board shall determine.

     

    12.2
      Dividend
      Equivalents.

     

    Grants
      of
      Benefits in Shares or Share equivalents may include dividend equivalent payments
      or dividend credit rights.

     

    

    
      
        
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    12.3
      Withholding.

     

    The
      Company may, at the time any distribution is made under the Plan, whether in
      cash or in Shares, or at the time any Option is exercised, withhold from such
      distribution or Shares issuable upon the exercise of an Option, any amount
      necessary to satisfy federal, state and local income and/or other tax
      withholding requirements with respect to such distribution or exercise of such
      Options. The Committee or the Company may require a participant to tender to
      the
      Company cash and/or Shares in the amount necessary to comply with any such
      withholding requirements.

     

    13.
      OPTIONS

    13.1
      Types
      of Options.

     

    It
      is
      intended that both ISOs and NQSOs, which may be Reload Options, may be granted
      by the Committee under the Plan.

     

    13.2
      Grant
      of ISOs and Option Price.

     

    Each
      ISO
      must be granted to an Employee and granted within ten years from the earlier
      of
      the date of adoption by the Board or the Effective Date. The purchase price
      for
      Shares under any ISO shall be no less than the Fair Market Value of the Shares
      at the time the Option is granted.

     

    13.3
      Other
      Requirements for ISOs.

     

    The
      terms
      of each Option which is intended to qualify as an ISO shall meet all
      requirements of Section 422 of the Code.

     

    13.4
      NQSOs.

     

    The
      terms
      of each NQSO shall provide that such Option will not be treated as an ISO.
      The
      purchase price for Shares under any NQSO shall be no less than 100% of the
      Fair
      Market Value of the Shares at the time the Option is granted.

     

    13.5
      Determination by Committee.

     

    Except
      as
      otherwise provided in Section 13.1 through Section13.4, the terms of all Options
      shall be determined by the Committee.

     

    14.
      SARS

    14.1
      Grant
      and Payment.

     

    The
      Committee may grant SARs. Upon electing to receive payment of a SAR, a
      Participant shall receive payment in Shares.

     

    14.2
      Grant of Tandem Award.

     

    The
      Committee may grant SARs in tandem with an Option, in which case: the exercise
      of the Option shall cause a correlative reduction in SARs standing to a
      Participant’s credit which were granted in tandem with the Option; and the
      payment of SARs shall cause a correlative reduction of the Shares under such
      Option.

     

    14.3
      ISO Tandem Award.

     

    When
      SARs
      are granted in tandem with an ISO, the SARs shall have such terms and conditions
      as shall be required for the ISO to qualify as an ISO.

     

    14.4
      Payment of Award.

     

    SARs
      shall be paid by the Company to a Participant, to the extent payment is elected
      by the Participant (and is otherwise due and payable), as soon as practicable
      after the date on which such election is made.

     

    15.
      ANNUAL LIMITATIONS

    15.1
      Limitation on Options and SARs.

     

    The
      number of (a) Shares covered by Options where the purchase price is no less
      than
      the Fair Market Value of the Shares on the date of grant plus (b) SARs which
      may
      be granted to any Participant in any Fiscal Year shall not exceed
      1,000,000.

     

    15.2
      Limitation on Performance Shares 

     

    The
      number of Shares covered by Performance Shares in any Fiscal Year shall not
      exceed 500,000.

     

    

    
      
        
          8

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    15.3
      Computations.

     

    For
      purposes of Section 15.1, Shares covered by an Option that is canceled shall
      count against the maximum, and, if the exercise price under an Option is
      reduced, the transaction shall be treated as a cancellation of the Option and
      a
      grant of a new Option; and SARs covered by a grant of SARs that is canceled
      shall count against the maximum; and, if the Fair Market Value of a Share on
      which the appreciation under a grant of SARs will be calculated is reduced,
      the
      transaction will be treated as a cancellation of the SARs and the grant of
      a new
      grant of SARs.

     

    16.
      RESTRICTED STOCK AND PERFORMANCE SHARES

    16.1
      Restricted Stock.

     

    The
      Committee may grant Benefits in Shares available under Section 3.1 of
      the
      Plan as Restricted Stock. Shares of Restricted Stock shall be issued and
      delivered at the time of the grant or as otherwise determined by the Committee,
      but shall be subject to forfeiture until provided otherwise in the applicable
      Agreement or the Plan. Each certificate representing Shares of Restricted Stock
      shall bear a legend referring to the Plan and the risk of forfeiture of the
      Shares and stating that such Shares are nontransferable until all restrictions
      have been satisfied and the legend has been removed. At the discretion of the
      Committee, the grantee may or may not be entitled to full voting and dividend
      rights with respect to all shares of Restricted Stock from the date of
      grant.

     

    16.2
      Cost of Restricted Stock.

     

    Unless
      otherwise determined by the Committee, grants of Shares of Restricted Stock
      shall be made at a per Share cost to the Participant equal to par
      value.

     

    16.3
      Non-Transferability.

     

    Shares
      of
      Restricted Stock shall not be transferable until after the removal of the legend
      with respect to such Shares.

     

    16.4
      Performance Shares.

     

    Performance
      Shares are the right of an individual to whom a grant of such Shares is made
      to
      receive Shares or cash equal to the Fair Market Value of such Shares at a future
      date in accordance with the terms and conditions of such grant. The terms and
      conditions shall be determined by the Committee, in its sole discretion, but
      generally are expected to be based substantially upon the attainment of targeted
      profit and/or performance objectives. The Committee shall determine the
      performance targets which will be applied with respect to each grant of
      Performance Shares at the time of grant, but in no event later than 90 days
      after the beginning of the period of service to which the performance targets
      relate. The performance criteria applicable to Performance Shares will be one
      or
      more of the following: (1) stock price; (2) average annual growth in earnings
      per share; (3) increase in shareholder value; (4) earnings per share; (5) net
      income; (6) return on assets; (7) return on shareholders’ equity; (8) increase
      in cash flow; (9) operating profit or operating margins; (10) revenue growth
      of
      the Company; and (11) operating expenses. Each performance target applicable
      to
      a Performance Share award and the deadline for satisfying each such target
      shall
      be stated in the Agreement between the Company and the Employee. The Committee
      must certify in writing that each such target has been satisfied before the
      Performance Shares award becomes effective. 

     

    16.5
      Grant.

     

    The
      Committee may grant an award of Performance Shares. The number of Performance
      Shares and the terms and conditions of the grant shall be set forth in the
      applicable Agreement.

     

    17.
      CASH AWARDS

    17.1
      Grant.

     

    The
      Committee may grant Cash Awards at such times and (subject to Section 17..2)
      in
      such amounts as it deems appropriate.

     

    17.2
      Annual Limits.

     

    The
      amount of any Cash Award in any Fiscal Year to any Participant shall not exceed
      the greater of $100,000 or 100% of his cash compensation (excluding any Cash
      Award under this Section 17.2) for such Fiscal Year.

     

    

    
      
        
          9

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    17.3
      Restrictions.

     

    Cash
      Awards may be subject or not subject to conditions (such as an investment
      requirement), restricted or nonrestricted, vested or subject to forfeiture
      and
      may be payable currently or in the future or both. The Committee may make grants
      of Cash Awards that are intended to be Performance Based Compensation and grants
      of Cash Awards that are not intended to be Performance Based Compensation.
      

     

    The
      Committee shall determine the performance targets which will be applied with
      respect to each grant of Cash Awards that are intended to be Performance Based
      Compensation at the time of grant, but in no event later than 90 days after
      the
      beginning of the period of service to which the performance targets relate.
      The
      performance criteria applicable to Performance Based Compensation awards will
      be
      one or more of the following: (1) stock price; (2) average annual growth in
      earnings per share; (3) increase in shareholder value; (4) earnings per share;
      (5) net income; (6) return on assets; (7) return on shareholders’ equity; (8)
      increase in cash flow; (9) operating profit or operating margins; (10) revenue
      growth of the Company; and (11) operating expenses. Each performance target
      applicable to a Cash Award intended to be Performance Based Compensation and
      the
      deadline for satisfying each such target shall be stated in the Agreement
      between the Company and the Employee. The Committee must certify in writing
      that
      each such target has been satisfied before the Performance Based Compensation
      award is paid. 

     

    18.
      OTHER STOCK BASED AWARDS AND OTHER BENEFITS

    18.1
      Other Stock Based Awards.

     

    The
      Committee shall have the right to grant Other Stock Based Awards which may
      include, without limitation, the grant of Shares based on certain conditions,
      the payment of cash based on the performance of the Common Stock, and the grant
      of securities convertible into Shares.

     

    18.2
      Other Benefits.

     

    The
      Committee shall have the right to provide types of Benefits under the Plan
      in
      addition to those specifically listed, if the Committee believes that such
      Benefits would further the purposes for which the Plan was
      established.

     

    19.
      MISCELLANEOUS PROVISIONS

    19.1
      Underscored References.

     

    The
      underscored references contained in the Plan are included only for convenience,
      and they shall not be construed as a part of the Plan or in any respect
      affecting or modifying its provisions.

     

    19.2
      Number and Gender.

     

    The
      masculine and neuter, wherever used in the Plan, shall refer to either the
      masculine, neuter or feminine; and, unless the context otherwise requires,
      the
      singular shall include the plural and the plural the singular.

     

    19.3
      Unfunded Status of Plan.

     

    The
      Plan
      is intended to constitute an “unfunded” plan for incentive and deferred
      compensation. With respect to any payments or deliveries of Shares not yet
      made
      to a Participant by the Company, nothing contained herein shall give any rights
      that are greater than those of a general creditor of the Company. The Committee
      may authorize the creation of trusts or other arrangements to meet the
      obligations created under the Plan to deliver Shares or payments hereunder
      consistent with the foregoing.

     

    19.4
      Termination of Employment.

     

    If
      the
      employment of a Participant by the Company terminates for any reason, except
      as
      otherwise provided in an Agreement, all unexercised, deferred, and unpaid
      Benefits may be exercisable or paid only in accordance with rules established
      by
      the Committee, provided however if a Participant is an Employee and he or she
      is
“Terminated for Cause”, as defined herein below, or violates any of the terms of
      their employment after they have become vested in ant of their rights herein,
      the Participant’s full interest in such rights shall terminate on the date of
      such termination of employment and all rights thereunder shall cease. Whether
      a
      Participant’s employment is Terminated for Cause shall be determined by the
      Board. Cause shall include, but not be limited to gross negligence, willful
      misconduct, flagrant or repeated violations of the Employer’s policies, rules or
      ethics, a material breach by the Participant of any employment agreement between
      the Participant and the Employer, intoxication, substance abuse, sexual or
      other
      unlawful harassment, disclosure of confidential or proprietary information,
      engaging in a business competitive with the Employer, or dishonest, illegal
      or
      immoral conduct.

     

    

    
      
        
          10

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    19.5
      Designation of Beneficiary.

     

    A
      Participant may file with the Committee a written designation of a beneficiary
      or beneficiaries (subject to such limitations as to the classes and number
      of
      beneficiaries and contingent beneficiaries as the Committee may from time to
      time prescribe) to exercise, in the event of the death of the Participant,
      an
      Option, or to receive, in such event, any Benefits. The Committee reserves
      the
      right to review and approve beneficiary designations. A Participant may from
      time to time revoke or change any such designation of beneficiary and any
      designation of beneficiary under the Plan shall be controlling over any other
      disposition, testamentary or otherwise; provided, however, that if the Committee
      shall be in doubt as to the right of any such beneficiary to exercise any Option
      or to receive any Benefit, the Committee may determine to recognize only an
      exercise by the legal representative of the recipient, in which case the
      Company, the Committee and the members thereof shall not be under any further
      liability to anyone.

     

    19.6
      Governing Law.

     

    This
      Plan
      shall be construed and administered in accordance with the laws of the State
      of
      Delaware, without regard to any applicable conflicts of law. By accepting an
      Option, the Employee irrevocably and unconditionally consents to submit to
      the
      exclusive jurisdiction of the courts of the State of Florida or of the United
      States of America, in each case located in Palm Beach County, Florida, for
      any
      litigation arising out of or relating to this Plan (and agrees not to commence
      any litigation relating thereto except in such courts). The Employee also
      irrevocably and unconditionally waives any objection to the laying of venue
      of
      any litigation arising out of or related to the Option or this Plan in the
      courts of the State of Florida or of the United States of America, in each
      case
      located in Palm Beach County, Florida, and hereby further irrevocably and
      unconditionally waives and agrees not to plead or claim in any such court that
      any such litigation brought in any such court has been brought in an
      inconvenient forum.

     

    19.7
      Purchase for Investment.

     

    The
      Committee may require each person purchasing Shares pursuant to an Option or
      other award under the Plan to represent to and agree with the Company in writing
      that such person is acquiring the Shares for investment and without a view
      to
      distribution or resale. The certificates for such Shares may include any legend
      which the Committee deems appropriate to reflect any restrictions on transfer.
      All certificates for Shares delivered under the Plan shall be subject to such
      stock-transfer orders and other restrictions as the Committee may deem advisable
      under all applicable laws, rules and regulations, and the Committee may cause
      a
      legend or legends to be put on any such certificates to make appropriate
      references to such restrictions.

     

    19.8
      No Employment Contract.

     

    Neither
      the adoption of the Plan nor any Benefit granted hereunder shall confer upon
      any
      Employee any right to continued employment nor shall the Plan or any Benefit
      interfere in any way with the right of the Employer to terminate the employment
      of any of its Employees at any time.

     

    19.9
      No Effect on Other Benefits.

     

    The
      receipt of Benefits under the Plan shall have no effect on any benefits to
      which
      a Participant may be entitled from the Employer, under another plan or
      otherwise, or preclude a Participant from receiving any such
      benefits.

     

    19.10
      Limitation on Exercise

     

    Notwithstanding
      anything herein or in the stock option award, no holder of an Option may
      exercise such Option if the Company’s common stock is not then traded publicly
      on the bulletin board or on a stock exchange or stock market, except: (i) in
      connection with a sale of all or part of the Company’s common stock, or (ii)
      within two months prior to the expiration of the Option as provided in the
      stock
      option award (or as may be extended by the Committee).

     

    

    
    

    
11

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