(b)            “Affiliate” of a Party means a person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with, said Party.

(c)            “Applicable Laws” shall mean (a) all laws, statutes, constitutions, treaties, rules, regulations, ordinances, codes, guidance, common law, and (b) all judicial, executive, legislative, administrative or military orders, directives, decrees, injunctions, judgments, Permits, agreements, and other legal requirements of, with, or adopted or imposed by any Governmental Authority, now or hereafter in effect and, in each case, as amended from time to time, including, without limitation, any such legal requirements that relate to or govern (i) the manufacture or quality of the Developed Products, (ii) health, safety, industrial hygiene, sanitation, or (iii) conditions on, under, about, or affecting any real property (including the environment).

(d)            “Confidential Information” means any information, not generally known, and proprietary to either Party or to a third party, including but not limited to any trade secret information, information relating to pricing, research, customer lists, diagrams, schematics, product development, manufacturing, purchasing, accounting, marketing, merchandising, selling, leasing, finance and business systems and techniques. The term “Confidential Information” does not include information: (i) that by reliable documentary evidence can be shown to have been already lawfully in the possession of the receiving Party through independent means at the time of disclosure thereof; (ii) is or later becomes part of the public domain through no fault of receiving Party; (iii) that by reliable documentary evidence can be shown to have been lawfully received by the receiving Party from a third party having no obligations of confidentiality to the disclosing Party; (iv) is required to be disclosed by law, by order of a governmental agency, or by a court of competent jurisdiction provided that the Party required to disclose such information pursuant to such law or legal process takes reasonable steps to provide the originally disclosing Party with the opportunity to contest such law, order or legal process; or (v) that by reliable documentary evidence can be shown to have been independently developed by the receiving Party its agents or employees having no access to the information otherwise constituting Confidential Information.

(e)            The “Developed Products” means the radio frequency identification (RFID) transponder invention, together with related devices, labeling, packaging, and/or reader equipment described on Schedule 1 , whether or not such transponder is injected or implanted, and including any Improvements developed during the Term, but not including any New Products, unless such New Products are added to this Agreement as contemplated in Section 3(e) of this Agreement, in which case such New Products will be deemed to be included in the Developed Products.

(f)               “Documentation” means existing and any later-developed technical information, know-how and documents associated with the Intellectual Property relating to the Developed Products including, without limitation, manufacturing instructions, schematic diagrams, printed circuit board layouts, parts lists, communication protocol specifications, design specifications (including design logic and flowcharts), technical data, testing specifications, code, user guides, and the like.

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(g)            The “Exclusive Market” means all applications in which the Developed Products are used for the primary purpose of secure human identification, including, but not limited to, those used as an implantable device.

(h)            The “Excluded Market” means applications of Developed Products other than for secure human identification or for any use in a country not included in the Territory.

(i)             “Force Majeure Event” means and includes, with respect to each of the Parties, Acts of God, acts or omissions of civil or military authority, fires, strikes, floods, epidemics, riot, war, acts of terrorism, quarantine restrictions, delays in transportation, inability to obtain equipment if not due to the acts or failure to act of a Party or its subcontractors, and prolonged shortage of energy or other supplies beyond the reasonable control of either Party which prevents, in whole or in material part, the performance by one of the Parties of its obligations hereunder or which renders the performance of such obligations so difficult or costly as to make such performance commercially unreasonable.

(j)             “Governmental Approvals” means any and all approvals required from a Governmental Authority in accordance with any Applicable Law.

(k)            “Governmental Authority” shall mean any federal, state, commonwealth, provincial, local or foreign governmental authority, entity, body, branch, agency, department, bureau, board, commission, officer, official, court, adjudicator, tribunal or other entity, including any agent thereof, exercising executive, legislative, judicial, regulatory, or administrative authority over the manufacture, marketing, pricing, use, or sale of any Developed Product (including any Improvements thereto) including, without limitation, any and all state, commonwealth, provincial, local and foreign equivalents.

(l)             “Improvements” means any and all upgrades, enhancements or other improvements made by the Company to the Developed Products during the Term which are associated with the use of the Developed Products in human tissue for the purpose of secure identification.

(m)           “Intellectual Property” means all know-how, ideas, concepts, trade secrets, Confidential Information, proprietary information, research, developments, mask works, moral rights, design rights, industrial property rights, rights in and to inventions, Improvements, and as-yet-undeveloped ideas, patent rights, patent applications, patents and any other intellectual property rights in any jurisdiction in the Territory including modifications and other applications using or based upon the resulting technology or required for the use of such technology wherever such concepts, designs, design changes, modifications, research, and developments might apply and which are created, developed, conceived, discovered, collected or prepared pursuant or related to the Developed Products including, but not limited to, patents set forth on Schedule 4 to this Agreement.

(n)            “New Products” means microchip products developed by the Company which are primarily intended for use in applications other than secure identification, such as

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biometric sensing capabilities, and for which any identification capabilities are ancillary to the primary intended use.

(o)            “Term” shall have the meaning set forth in Section 5 of this Agreement.

(p)            “Territory” shall mean the World.

2.              Supply and Purchase Requirements . During the Term, and with respect to the Exclusive Market, Company shall manufacture the Developed Products exclusively for, and shall sell the Developed Products exclusively to, VeriChip and any VeriChip resellers or other nominees within VeriChip’s control (the “VeriChip Group”), and the Company shall use its best efforts to supply, at the time(s) required, all of the requirements of VeriChip and the VeriChip Group for the Developed Products with respect to the Exclusive Market.  In the event that Company is unable or unwilling to meet VeriChip’s requirements for Developed Products, Company shall permit VeriChip to obtain additional suppliers and shall permit such additional suppliers to use the Intellectual Property for the sole purpose of meeting VeriChip’s supply requirements, subject to the provisions of Section 11(d) of this Agreement.

All reseller agreements shall contain provisions requiring such resellers to materially comply with provisions corresponding to those set forth in Sections 4, 7, 9, 10, 12 and 15 of this Agreement. In the event that VeriChip requests material changes to the foregoing, or desires to enter into a reseller agreement which does not contain provisions materially corresponding to those set forth in Sections 4, 7, 9, 10, 12 and 15 of this Agreement, VeriChip shall obtain the prior written consent of the Company to such changes or such arrangements, as applicable. During the Term, and with respect to the Exclusive Market, VeriChip shall purchase from Company and cause members of the VeriChip Group and any other resellers to purchase from the Company all of their respective requirements for the Developed Products with respect to the Exclusive Market. Except as otherwise provided below, the cost of each unit of the Developed Products during the Term and the ordering and payment terms shall be as set forth on Schedule 2 .  During the Term, Company shall not sell any Developed Product, New Product or any product whose principal use is for secure identification applications (either individually or otherwise) to any party other than a member of the VeriChip Group if the Company knows or should know that such party intends to use, market or otherwise sell or provide such products in the Exclusive Market. Company agrees that the covenant contained in the preceding sentence and its exclusive supply obligations as defined herein are conditions precedent to VeriChip’s obligations as defined in this paragraph. VeriChip shall be entitled to seek appropriate injunctive relief (without the requirement of proving actual damages or irreparable harm) if Company breaches its exclusivity obligations.

Each Party shall notify the other Party if such Party learns of (i) any person or entity other than a member of the VeriChip Group marketing the Developed Products in the Exclusive Market or (ii) any party who is or may be infringing upon any of the Intellectual Property. In either such event, the Company shall have an affirmative duty to prosecute and/or defend such violation of this Agreement or infringement, and only if Company refuses to pursue such person or entity, VeriChip shall be entitled to take any and all actions against such persons or entities that are marketing, selling or promoting the sale of Developed Products in violation of this Agreement,

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and Company shall provide VeriChip such non-financial assistance as may be necessary to pursue such persons or entities, including the right to bring suit in the name of Company either directly or as co-plaintiff.

In addition to the obligations set forth in the preceding paragraph above, if during the Term, to Verichip’s knowledge and upon providing reasonable notice and documentation to the Company, a third party (a “VeriChip Competitor”) makes, uses, sells or offers for sale any product or service * (a “Competitive Product”), then in order to permit VeriChip to more effectively compete against such Competitive Product, the price of the applicable Developed Products shall be adjusted as follows:

(i)     If the parties can determine the wholesale price paid by the VeriChip Competitor (based on VeriChip’s knowledge and reasonable documentation thereof) for the Competitive Product, the Company shall reduce its price for the corresponding Developed Products.*

(ii)    If the parties are unable to determine the wholesale price paid by the VeriChip Competitor for a Competitive Product), the Company shall reduce its price for the corresponding Developed Products.*

(iii)   If the parties cannot agree on the appropriate price reduction pursuant to clauses (i) and (ii) above, the parties shall submit the matter to binding arbitration in the manner set forth in Section 18 below.

(iv)   The price reduction referred to in clauses (i) or (ii) above shall remain in place so long as *; provided, however, that in the event that the Company obtains an injunction against the Competing Product or otherwise prevents the Competing Product from being offered within such territory, the price of the Developed Product shall return to the level in effect prior to the introduction of the Competing Product and, provided that Company (1)  engages in legal action to enjoin or prevent such infringement and (2) uses all commercially reasonable efforts to recover the aggregate price reduction granted by the Company pursuant to this paragraph as damages from the VeriChip Competitor, VeriChip shall reimburse the Company for * the aggregate price reduction granted by the Company pursuant to this paragraph which the Company is unable to recover as damages from such VeriChip Competitor.

(v)    In consideration of the price adjustments set forth in this paragraph, the liability of the Company for breaches of representations and warranties set forth in Paragraph* shall not exceed the profits generated by the Company from sales to VeriChip or the VeriChip Group for the applicable Developed Products.

3.              Improvements and New Products .

(a)            The Company shall use commercially reasonable efforts to make Improvements to the Developed Products. All such Improvements shall be promptly disclosed to VeriChip. Any such Improvements shall be deemed to be associated with a Developed Product for purposes hereof and the provisions of this Agreement with respect to the Developed Products shall mean the Developed Products together with any Improvements.  The pricing for any such Improvement shall be negotiated in good faith by the parties

* Confidential Treatment requested.

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hereto using the following criteria only: (i) the increase or decrease in cost of production to Company, (ii) Company’s direct and demonstrable research and development costs of developing the Improvements, (iii) a profit margin consistent with the Developed Products, and (iv) reimbursement for any payments required to be made by the Company to third party licensors if the Company is required to license technology to develop the Improvement.

(b)            In the event Company makes any Improvements to the Developed Products which are not requested by VeriChip, Company shall continue to manufacture and supply to VeriChip the previous (unimproved) iteration of the Developed Products.

(c)            VeriChip may from time-to-time request that Company make Improvements to the Developed Products including, without limitation, changes to packaging, labeling, transponder color, and the like. The Company shall use commercially reasonable efforts to incorporate the Improvements requested by VeriChip into the Developed Products; provided, however, that (a) VeriChip shall reimburse the Company promptly for all reasonable out-of-pocket expenses (including FDA costs) incurred by the Company in making Improvements as requested by VeriChip, and (b) the Company shall not make any Improvements that are inconsistent with then applicable FDA authorizations without obtaining any required FDA approvals.  In the event that Company is unable or unwilling to make an Improvement to meet VeriChip’s request, Company shall permit VeriChip to obtain additional suppliers and shall permit such additional suppliers to use the Intellectual Property for the sole purpose of meeting VeriChip’s requirement for Improvements, subject to the provisions of Section 11(d) of this Agreement.  In such event, (i)VeriChip shall have the right to seek any required Governmental Approvals for such Improvement, and (ii) any Improvement so developed shall be the property of VeriChip, provided that VeriChip will make any such Improvement available to Company for license in non-human applications on reasonable and non-discriminatory terms.

(d)            If VeriChip desires to use the Company’s transponder other than for implantation into human tissue, VeriChip shall provide not less than 120 days written notice to the Company, and the Company shall have the ability to make changes to the Developed Products necessary for VeriChip’s intended use, which changes will not affect the Developed Products’ functionality.

* Confidential Treatment requested.

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(e)            If VeriChip desires to use the Developed Products for applications in humans other than the Approved Medical Uses or Approved Non-Medical Uses (the “New Uses”), VeriChip shall so notify the Company, and the Company shall use all commercially reasonable efforts to obtain any required Governmental Approvals for such uses, if any. VeriChip shall not use the Developed Products for New Uses unless all required Governmental Approvals have been obtained or the Company has notified VeriChip that no Governmental Approvals are required. VeriChip shall cooperate with the Company in performing all acts related to obtaining required Governmental Approvals, including but not limited to providing marketing and other information related to the New Uses to the Company and joining the Company in the development and implementation of any required clinical studies. VeriChip shall promptly reimburse the Company for all out-of-pocket expenses incurred by the Company in connection with obtaining any Governmental Approvals required for VeriChip’s New Uses.  In the event that the Company refuses to seek any required Governmental Approvals, VeriChip shall notify the Company in writing of its desire to seek such Governmental Approvals directly or through its agents, appointees or other third parties, and unless the Company commences the steps necessary to obtain such required Governmental Approvals within thirty (30) days from the date of such notice, VeriChip shall have the right to seek and obtain such required Governmental Approvals in its own name and through use of its own resources, including the use of sub-licensees, OEM manufacturers and other third parties, as may be applicable, provided that VeriChip also agrees to share with the Company any information submitted in connection with obtaining such Governmental Approvals.

(f)             Except as provided herein, the license granted by this Agreement to VeriChip shall not apply to New Products. The Company shall promptly disclose any New Products to VeriChip, and if VeriChip desires to market and sell said New Products, the Parties shall negotiate in good faith the terms on which VeriChip shall have the opportunity to market and sell such New Products. For purposes of such negotiation, the Parties acknowledge and agree that the pricing applicable to all New Products should be determined in good faith on the same terms set forth in Section 3(a) with respect to Improvements.  In the event the Parties are unable to agree on the terms under which VeriChip shall have the right to market and sell such New Products within 90 days after the Company first notifies VeriChip of the existence of any such New Product, the Company shall have the right to market or sell such New Product, either directly or indirectly, provided that in the event that Company elects to market such New Product through any third party, and such third party offers pricing which is lower than the price last offered by VeriChip, Company shall again offer VeriChip the exclusive right to market the New Product on the terms proposed by the third party.  Otherwise, the Company shall have no further obligation to VeriChip.  Notwithstanding the foregoing, for so long as VeriChip retains its exclusive right to market the Developed Products in the Exclusive Market, the Company will not authorize the use of New Products for applications which would violate the Exclusive Market.

(g)            VeriChip shall have the right to design and build (or cause to be designed and built) its own readers which readers may, but shall not be required to, read Company’s transponders or tags in humans.  Company hereby grants VeriChip a fully-paid, royalty-free,

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perpetual, non-exclusive license to utilize Company’s U.S. Patent Number 5,952,935 for the purpose of designing and constructing, using, selling and offering to sell readers for human applications only.

4.              Market and Other Restrictions . VeriChip shall not, either directly or indirectly, promote, rent, lease, sell or authorize the rental, lease or sale of Developed Products, Improvements or New Products in the Excluded Market, but shall not be restricted from licensing its own intellectual property. VeriChip agrees that it will observe the territorial/market restrictions and end user limitations set forth herein for all products covered by this Agreement. VeriChip shall not sell any Developed Product, Improvements or New Product or other product covered by this Agreement (either individually or otherwise) to any party if it knows or should know that such party intends to use, market or otherwise sell or provide such products in the Excluded Market. Further, VeriChip shall not sell any Developed Product, Improvements or New Product to any party if it knows or should know that such party intends to use, market, or otherwise sell or provide such Developed Product, Improvements or New Product for human applications other than for Approved Medical Uses or Approved Non-Medical Uses. VeriChip shall notify the Company if VeriChip learns of any person or entity marketing the Developed Products in the Excluded Market. Company shall be entitled to appropriate injunctive relief if VeriChip breaches its obligations in this paragraph with respect to the Excluded Market and such breach remains uncured following written notice thereof from Company. Notwithstanding anything to the contrary herein, at any time, VeriChip and members of the VeriChip Group shall have the right to purchase, develop, use, have developed, or sell, for themselves and others, products competitive with the Developed Products, provided that such products do not infringe upon the Company’s Intellectual Property.

5.              Term and Termination; Loss of Exclusivity – Entire Territory .

(a)            The term of this Agreement shall commence on the date of execution and shall continue until March 4, 2013 (the “Term”). Provided that VeriChip continues to meet its purchase obligations hereunder, the Term shall thereafter be automatically renewed on an annual basis until the expiration of the last patents covering any of the Developed Products.  Notwithstanding the foregoing, either Party hereto may terminate this Agreement if (i) the other Party shall default in the performance of any obligations hereunder including the payment of money and shall not cure such default within 90 days after receipt of written notice thereof; (ii) a petition of bankruptcy shall be filed by the other Party; or (iii) a petition of bankruptcy shall be filed against the other Party and such petition shall not have been discharged within 30 days after the filing thereof. In the event of any termination as a result of breach by VeriChip hereunder, VeriChip shall be required to immediately pay for any units of the Developed Products that have been ordered, delivered, and not yet paid for.

(b)            VeriChip shall retain its exclusive right to distribute the Developed Products for the Term in the Territory provided that the VeriChip Group takes delivery and pays for a minimum number of transponders within each year referenced below (a “Minimum Unit Commitment”) at least equal to the unit levels set forth in Schedule 5 attached hereto:

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If during any year VeriChip and the VeriChip Group purchase in excess of the Minimum Unit Commitment for the applicable year, such excess purchases shall be credited towards the Minimum Unit Commitment for the following year or years. Notwithstanding anything contained herein, if VeriChip fails to purchase and pay for the volumes of transponders as indicated above, but is otherwise in compliance with the material terms of this Agreement, Company shall have the option, upon 60 days written notice, to terminate the exclusivity of this Agreement unless within 30 days after such written notice, VeriChip makes sufficient purchases to meet said transponder unit volumes.

The following shall be credited against the Minimum Unit Commitment: (a) Developed Products purchased by the VeriChip Group from the Company, (b) Developed Products purchased by VeriChip from third parties on which VeriChip pays the royalty described in Section 11(d) of this Agreement, and (c) Developed Products purchased by VeriChip from third parties while the payment of royalties is suspended because of the Company’s inability to supply VeriChip’s requirements.

6.              Sales Reports . VeriChip shall provide the Company with reports of its sales and marketing activities regarding the Developed Products in the Territory in such detail and with such frequency as is reasonably agreed between the Parties. In addition, VeriChip shall keep and maintain records of its sales of Developed Products. Such records shall be open to inspection from time to time, at reasonable times, as requested by the Company, as soon as practicable after such request and in any event within fifteen (15) business days after such request, by the Company and its officers, agents and other representatives. In addition, the Company will have the right to make or cause to be made an independent examination and/or audit of the books and records of VeriChip relating to its sales of Developed Products. Any such inspection shall be made at the Company’s expense. The records required by this paragraph shall be maintained and available for inspection during the Term.  All of the foregoing information shall be deemed to be Confidential Information as described hereinafter.

7.              Confidentiality

(a)            In furtherance of this Agreement and performance of the duties and obligations arising under this Agreement, each party may make Confidential Information available to the other. During the Term of this Agreement and for a period of three (3) years thereafter, (i) neither Party will use for its own benefit or the benefit of any other person or entity any Confidential Information of the other Party; and (ii) each Party will use all reasonable care, but in no event less care than it takes to protect its own Confidential Information of similar importance, to protect the Confidential Information of the other Party from unauthorized use, disclosure and publication.

(b)            The Parties acknowledge that each Party’s Confidential Information is a valuable, special, and unique asset of the respective Party’s business. Each Party hereby further acknowledges that such Confidential Information is the sole and exclusive property of the respective Party, absolutely and forever, and the other Party agrees not to use, copy, disclose, make available or divulge such Confidential Information to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever.

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(c)              Each of VeriChip and Company respectively assumes full liability hereunder for the actions, statements and representations of its employees, officers, agents and representatives; and agrees to inform each of them of the provisions of this Section 7 and enforce its provisions against each of them.

(d)              The Parties mutually agree that the rights protected by this Section 7 are unique and not adequately protected or compensated for by liquidated damages. In the event of a breach, the harmed Party shall be entitled to obtain injunctive relief against the breaching party and otherwise enjoin the breaching party from the use or dissemination of such Confidential Information.

(e)              The provisions of this Section shall survive the termination or expiration of this Agreement as provided above.

(f)               The Parties agree that all property of one Party that is in the possession of the other Parties at the time of termination of this Agreement, including without limitation, all designs, schematics, documents, reports, manuals, memoranda, computer print-outs, customer lists, and Confidential Information shall be immediately returned to the Parties providing such information.

8.              Product Warranties, Limitation of Liability and Indemnification Provisions .

(a)            Company hereby warrants that (i) the Company is the owner of the patents set forth on Schedule 4 to this Agreement; (ii) during the term of the patents set forth on Schedule 4 to