DEVELOPMENT AND SUPPLY AGREEMENT

Exhibit 10.2

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

DEVELOPMENT AND SUPPLY AGREEMENT

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

RECITALS

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

ARTICLE IA — DEVELOPMENT OF THE PRODUCT

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

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

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

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

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

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

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

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

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

ARTICLE I. SUPPLY OF PRODUCTS

Section 1.01 Supply of Product.

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

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

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

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

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

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

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

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

ARTICLE II. — REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 2.01 By VeriChip

VeriChip represents, warrants and covenants to Medcomp as follows:

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

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

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

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

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

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

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

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

(i)

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

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

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

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

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

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

(l) VeriChip shall make available to Medcomp all records and reports relating to the m