AMENDED AND RESTATED SUPPLY, LICENSE, AND DEVELOPMENT AGREEMENT
Exhibit
10.4
AMENDED
AND RESTATED
THIS
AMENDED
AND RESTATED SUPPLY, LICENSE AND DEVELOPMENT AGREEMENT
(this
“Agreement”), is dated as of the 28th day of December,
2005
by and
between DIGITAL
ANGEL CORPORATION,
a
Delaware corporation (“Company”), and VERICHIP
CORPORATION,
a
Delaware corporation (“VeriChip”).
RECITALS
WHEREAS,
Company and VeriChip (hereinafter referred to collectively as the “Parties”, and
individually as a “Party”) previously entered into that certain Supply and
License Agreement dated March 4, 2002 (the “Original Supply and License
Agreement”), relating to the use of the Developed Products (as
defined herein) in
humans
for security, financial, emergency identification and other
applications;
WHEREAS,
the U.S. Food and Drug Administration (“FDA”) has (i) cleared the Developed
Products for human patient identification and health information (the “Approved
Medical Uses”) and (ii) has provided the Company with a letter dated
October
17, 2002 which
states that FDA approval will not be required for non-healthcare
related uses
of
the Developed Products in
humans, as previously provided to VeriChip (the “Approved Non-Medical
Uses”);
WHEREAS,
Company desires to supply VeriChip with the Developed Products
and
VeriChip desires to buy the Developed Products for both
the
Approved Medical Uses and the Approved Non-Medical Uses
in
humans only;
WHEREAS,
Company desires to notify VeriChip of the development of New Products and
VeriChip desires to have the right to buy, market and sell New Products, as
more
specifically described herein; and
WHEREAS,
the Parties desire to clarify the circumstances under which VeriChip may have
the ability to manufacture or have manufactured the Developed Products and
in
connection therewith have access to certain of the Company’s Intellectual
Property.
NOW
THEREFORE, in consideration of the mutual covenants and obligations hereinafter
set forth, and other consideration, the adequacy and sufficiency of which are
hereby acknowledged, Company and VeriChip agree to be legally bound as
follows:
AGREEMENT
1. Definitions.
In
addition to the terms defined in the Recitals of this Agreement, the following
terms used in this Agreement shall have the following meanings:
(a) The
“Act”
means the U.S. Food, Drug and Cosmetic Act as amended from time to time and
any
foreign equivalents.
(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 8(a)(i) below* 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.
5
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.
6
(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-
7
free,
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:
8
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.
9
(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 this
Agreement, the Company has not entered into any agreement with any third party
which is inconsistent with the terms of this Agreement;
(iii)
to the best of the Company’s knowledge, the
patents set forth on Schedule
4
to this
Agreement are valid and enforceable in the Exclusive Market; (iv)
to the
best of the Company’s knowledge, neither the Company nor its affiliates has
rights to any Intellectual Property necessary to the design, development,
manufacturing,
use,
sale or offer for sale
of the
Developed Products in the Exclusive Market which have not been granted to
VeriChip herein, and (v) to the best of the Company’s knowledge, no third party
is currently infringing the rights of the Company in any of the patents set
forth on Schedule 4 by engaging in sales in the Exclusive Market.
(b) The
Developed Products sold by Company to VeriChip (X) shall be free from defects
in
design, workmanship and materials under normal use and service for a period
of
24
months
from the date of shipment by Company, and (Y) with respect to Developed Products
intended for use in Approved Medical Uses, have been manufactured at a facility
that complied in all material respects with the applicable Quality System
Regulations under the Act as amended from time to time; provided that in no
event shall Company be responsible for rules in relation to Quality System
Regulations with respect to labeling, installing and servicing of Developed
Products, all such activities being the responsibility of VeriChip.
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(c) Company’s
sole obligation under the foregoing warranty shall be, at Company’s option, to
either repair or replace any Developed Product which fails during this period
(and any batch of Products from which such defective Developed Product came,
if
Company believes other Developed Products within such batch are defective),
provided VeriChip has promptly reported the failure to Company in writing,
and
Company has upon inspection found that such product is, in fact, defective.
VeriChip shall obtain instructions and a return material authorization from
Company for the return of any item under this warranty provision. Compliance
with such instructions shall be a condition precedent to Company’s repair or
replacement obligation hereunder. Subject to subsection (d) below, if Company
finds the product to be within the warranty period and defective, Company will
reimburse VeriChip for the freight cost in returning the product from
VeriChip.
(d) The
warranties set forth in this Section 8 are contingent upon proper use in the
application for which the Developed Products were intended and do not cover
Developed Products which have been modified without Company’s approval or which
have been subjected to unusual physical or electrical stress or on which the
original identification marks have been removed or altered except with
VeriChip’s own private label as long as such change does not otherwise alter or
affect the Developed Products. This warranty will not apply if adjustment,
repair or parts replacement is required due to accident, neglect, misuse of
electric power, air conditioners, humidity control, transportation or causes
other than ordinary use.
(e) EXCEPT
FOR THE EXPRESS WARRANTY STATED ABOVE, COMPANY DISCLAIMS ALL WARRANTIES WITH
REGARD TO DEVELOPED PRODUCTS SOLD HEREUNDER, INCLUDING ALL IMPLIED WARRANTIES
OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND THE STATED EXPRESS
WARRANTIES ARE IN LIEU OF ALL OBLIGATIONS OR LIABILITIES ON THE PART OF COMPANY
FOR DAMAGES. COMPANY SHALL NOT BE LIABLE TO ANY PARTY FOR ANY SPECIAL OR
CONSEQUENTIAL DAMAGES, WHETHER BASED UPON LOST GOODWILL, LOST RESALE PROFITS,
WORK STOPPAGE, OR IMPAIRMENT OF OTHER GOODS OR ARISING OUT OF BREACH OF
WARRANTY, BREACH OF CONTRACT, STRICT LIABILITY, OR NEGLIGENCE.
(f) Company
shall indemnify and hold harmless VeriChip and the VeriChip Group and their
respective agents, directors, officers and employees from and against only
those
losses, liabilities, judgments, awards, settlements, damages and costs
(including reasonable legal fees and expenses), whether based upon tort, breach
of contract, breach of warranty (either express or implied) or strict liability
(collectively “Damages”) resulting from any claim: (i) for personal injury
(including death) or property damage, caused by or arising from defects in
design, materials or workmanship of any Developed Product, (ii) that the use,
sale, offer for sale and manufacture of any
Developed Product or any sub system or part thereof and the methods used to
design or manufacture any Developed Product infringe upon or misappropriate
the
U.S. patent, or any copyright, trademark or trade secret of any third party,
(iii)
that any
Developed Product intended for Approved Medical Uses was manufactured
at a facility which did not comply
in
all
11
material
respects with Applicable
Laws, (iv) Company’s breach of its obligations, representations, or warranties
under this Agreement, and (v)
Company’s
negligence, errors, or omissions, provided
that in no event shall Company’s indemnity obligation extend to claimed
non-compliance or non-compliance in fact in relation to Applicable Laws
with
respect to labeling,
installing and servicing of Products, all such activities being the
responsibility of VeriChip. Notwithstanding any provision herein to the
contrary, Company shall never be responsible, and shall have no indemnity
obligation, for any other claims relating to the Developed
Products.
(g) VeriChip
shall indemnify and hold harmless Company and its agents, directors, officers
and employees from and against any and all Damages resulting from: (i) a claim
for personal injury (including death) or property damage, caused by or arising
from the use of Developed Products in humans, unless the claim arises from
a
defect in materials or workmanship of the Developed Products, (ii) a claim
that
the use or sale of any Developed Product does not comply with Applicable Law,
(iii) VeriChip’s breach of its obligations, representations, or warranties under
this Agreement, and (iv)
VeriChip’s negligence, errors, or omissions.
(h) The
party
desiring indemnification in accordance with Sections 8(b)(iii), (g) or (h)
(the
“Indemnified Party”) shall promptly notify the other party (the “Indemnifying
Party”) of all claims that may be subject to indemnification by it under such
Section. If the Indemnified Party fails to provide such notice, the Indemnifying
Party will be excused from its indemnity obligation but only to the extent
that
its position is materially
prejudiced
by such failure. The Indemnifying Party shall have an affirmative duty to
provide a defense to the Indemnified Party. The Indemnified Party will give
all
reasonable cooperation to the Indemnifying Party in defending or otherwise
resolving any such claim. The Indemnifying Party will have full control of
the
defense of all such claims; provided it is conducting such defense with
reasonable diligence. Before settling any such claim, the Indemnifying Party
shall obtain the written consent of the Indemnified Party; provided, however,
the Indemnifying Party shall have full authority to enter into any settlement
or
compromise on behalf of the Indemnified Party without the prior written consent
of the Indemnified Party if such settlement or compromise (i) involves only
the
payment by the Indemnifying Party of cash consideration and (ii) does not
constitute an admission of liability, culpability or the like as to the
Indemnified Party, or otherwise create precedent unreasonably adverse to the
Indemnified Party.
9. Marketing
and Trademarks.
During
the Term of this Agreement, VeriChip is hereby granted a license to Company’s
trademarks and
trade
dress so as to assist it in selling the Developed
Products and other products that may come within the scope of this Agreement.
VeriChip shall not make any statements, claims, representations or warranties
regarding the Developed Products that are false, misleading or which violate
any
Applicable Law. VeriChip acknowledges that in order to avoid the dissemination
of unapproved marketing or promotional information, including use of the
Company’s trademarks and trade dress, the Company has established a standard
operating procedure with respect to the review and approval of labeling and
advertising materials (the “Promotional SOP”), a copy of which is attached
hereto as Exhibit
A
and
incorporated herein by reference. The Company shall have the right to amend
the
12
Promotional
SOP from time to time (provided
that any such amendment to the Promotional SOP shall not impose additional
limitations which adversely affect VeriChip’s ability to market the Developed
Products except to the extent necessary to conform to applicable law),
and
shall
promptly provide a copy of such revised SOP to VeriChip. Upon receipt of a
revised Promotional SOP by VeriChip, such revised Promotional SOP shall be
deemed to be incorporated into this Agreement for all purposes. VeriChip shall
provide to Company all advertising and printed materials regarding VeriChip’s
sale and marketing of the Developed Products prior to dissemination thereof
by
submitting Promotional Material Review and Approval Form in the manner
contemplated by the Promotional SOP. The Company
will promptly review the proposed materials in accordance with the Promotional
SOP and will advise VeriChip of its determination whether such proposed
materials are acceptable for release, and if the Company determines that such
materials are not acceptable for release in the form submitted, shall advise
VeriChip in as much detail as practicable of the reasons why such materials
are
unacceptable. Further, Company shall have the right to review and approve
VeriChip’s website materials pertaining to the Developed Products. VeriChip
shall maintain ownership of those Intellectual Property rights relating to
its
Website. VeriChip retains all rights in and to, and Company shall have no right
to use, display or refer to, VeriChip’s marks (including the designation
“VeriChip”) without VeriChip’s advance written approval, which approval shall
not be unreasonably withheld or delayed.
10. Publicity.
If
either Party wishes to make a public disclosure concerning this Agreement or
the
relationship established hereunder and such disclosure mentions the other Party
by name or description, such other Party shall be provided with an advance
copy
of the disclosure and shall have five (5) business days within
which to approve or disapprove such use of its name or description (including
mention of the name of the Developed Product). Approval shall not be
unreasonably withheld or delayed by either Party. Absent approval, no public
disclosure shall use the name of or otherwise describe such Party except to
the
extent required by law, or to the extent that the description of the other
party
is limited to public information about the availability of the Developed
Product. Notwithstanding the foregoing, each party acknowledges that the other
Party is
or is
affiliated with, a
publicly-traded company, and hereby consents to its disclosure of this Agreement
and its relationship with the other Party in its filings with the Securities
and
Exchange Commission and its disclosures to stockholders; provided, however,
that
each Party shall use commercially
reasonable efforts not to disclose the specific financial terms and conditions
of this Agreement except when such disclosure is required by law.
11. The
Intellectual Property License.
(a) Subject
to the terms of Section 5 hereof, Company hereby grants VeriChip, for the Term,
an irrevocable exclusive license to use and market the Developed Products and
the related Intellectual Property with respect to the Exclusive Market. All
rights in the Developed Products and any of the Company’s related designs,
technology or Intellectual Property, other than those granted by this Agreement,
are hereby reserved by Company. Upon
execution of this Amended and Restated Agreement, Company shall enter into
a
third party escrow arrangement providing for the escrow of a complete copy
of
the Documentation, in substantially the form attached hereto as Exhibit
B.
VeriChip agrees that it will not (i) manufacture the Developed Products, (ii)
sublicense the Intellectual
13
Property,
or (iii) otherwise transfer its interest in the Intellectual Property to any
person or entity other than an Affiliate without prior consent, so long as
there
has been no Event of Default (as defined below).
(b) VeriChip’s
license of Company’s Intellectual Property shall include the right, except as to
the Company, to use the Documentation to manufacture or have manufactured,
use,
sell and offer to sell the Developed Products for the Exclusive Market (i)
upon
an Event of Default, until such time as the underlying Event of Default has
been
cured or until expiration of the Term, (ii) in the event of a Force Majeure
Event, but only so long as that event continues or so long as Company is unable
to supply Developed Products as a result of said Force Majeure Event or until
expiration of the Term, whichever occurs first, or (iii) upon its prior written
notice, upon the terms set forth in subsection (d) below. Except as set forth
in
Section 8, the Company makes no warranties and shall have no indemnification
or
other obligations with respect to the products produced pursuant to this
manufacturing license.
(c) For
purposes of this Section 11, an “Event of Default” shall be: (i) material breach
by Company of the provisions of Section 2 of this Agreement (Supply and Purchase
Requirements) which breach is not cured within 90 days of receiving written
notice thereof, or (ii) Company files a petition in bankruptcy, applies for
or
consents to the appointment of a receiver or trustee, makes an assignment for
the benefit of creditors, becomes subject to an attachment of, execution upon,
or other judicial seizure of, all or substantially all of its assets, or becomes
subject to involuntary proceedings under any bankruptcy or insolvency law (which
proceedings are not dismissed within sixty (60) days); provided, however, that,
if (x) Company’s breach was due to a Force Majeure Event or (y) Company cures
(or in the case of breaches which cannot be cured within such 90 day period,
fails to take such steps as are reasonably necessary to commence such cure)
such
breach within such 90 day period, then there shall be no Event of
Default.
(d) In
the
event that VeriChip desires to have a third party manufacture Developed
Products, Improvements or New Products, VeriChip shall have the right to do
so
upon providing the Company at least ninety (90) days’ prior written notice. In
such event, (a) VeriChip shall pay the Company a royalty (the “Royalty”) on each
product manufactured by the third party(ies) which would otherwise infringe
a
valid and enforceable claim of the Company’s patented Intellectual Property in
an amount equal to the lesser of: (i) ,* and (ii) if the price of the Developed
Product is reduced in accordance with of the provisions of Section 2 above,
an
amount equal to the Company’s gross margin on the Developed Product following
such price reduction (but only during such period of price reduction pursuant
to
Section 2), (b) VeriChip shall require the third party to sign a confidentiality
agreement which shall govern such third party’s use of the Intellectual Property
materially consistent with the confidentiality terms contained in Section 7
of
this Agreement, (c) VeriChip shall require the third party to periodically
report to the Company its manufacturing activities and to permit the Company
to
inspect the third party’s records
from time to time as requested by the Company to verify compliance with the
Intellectual Property license, this Agreement and the payment of Royalties,
as
soon as practicable after such request and in any event within fifteen (15)
business days after such request, and
(d)
VeriChip shall indemnify the Company for any infringements upon or
*
Confidential
Treatment requested.
14
disclosures
of the Company’s Intellectual Property by such third party(ies). In
consideration of the Royalty, the Company shall provide the same database
services for Developed Products manufactured by third parties as for the
Developed Products supplied by the Company.
(e) In
the
event VeriChip is required to incur costs and expenses as a result of any
interruption of supply of Developed Products, or Event of Default as aforesasid,
then VeriChip may, upon request, obtain reimbursement of said costs or expenses
from the Company, provided that (i) VeriChip shall have an affirmative duty
to
mitigate its damages, and (ii) if VeriChip desires to engage a third party
to
manufacture the Developed Products, VeriChip shall (x) notify the Company in
advance, (y) require such third party to agree to be bound by the
confidentiality and market restrictions set forth in this Agreement, and (z)
ensure that such third party’s use of the Intellectual Property is limited
solely to manufacturing the Developed Products exclusively for VeriChip.
VeriChip shall assist Company, to the extent reasonably requested by Company,
and at Company’s expense, in the procurement of any protection or defense of any
of Company’s rights to (i) trademarks, (ii) copyrights, and (iii) patents owned
by Company that relate to the Developed Products produced pursuant to this
Agreement. Company shall assist VeriChip, to the extent reasonably requested
by
VeriChip, and at VeriChip’s expense, in the procurement of any protection or
defense of any of VeriChip’s rights to (i) trademarks, (ii) copyrights, or (iii)
patents licensed by VeriChip pursuant hereto. Except as set forth in Section
8,
if there shall be an Event of Default and VeriChip shall produce Developed
Products pursuant hereto, VeriChip shall assume all responsibility for the
Developed Products so produced.
(f) In
addition to its indemnification obligations hereunder, in the event the
Developed Products, including without limitation any sub system or part thereof,
becomes the subject of any claim, action, or allegation of the type specified
in
Section 8 (g)(ii),
the Company shall promptly use all reasonable efforts at its expense:
(i) to procure for VeriChip the right to continue using the applicable Developed
Products (or the applicable sub system or part thereof); or (ii) if such
continued use cannot be so procured, to modify it to become non infringing
without adversely affecting its performance or capability; or (iii) if such
modification cannot be so implemented at a reasonable cost, to provide
substitute products of similar performance and capability acceptable to and
approved by VeriChip (which approval shall not be unreasonably withheld or
delayed).
(g) Except
as
set forth in Section 8 of this Agreement, in no event shall VeriChip be liable
to the Company for any amounts pursuant to this Agreement or any related
maintenance or license agreement for the maintenance or license of the Developed
Products, or any sub system or part thereof, after the date, if any, that
VeriChip is no longer legally permitted to use the Developed Products.
12. Regulatory
Matters.
(a) VeriChip
shall have the right, upon reasonable notice to Company and not more frequently
than once in any 90 day period and during regular business hours, to inspect
and
audit the facilities being used by Company (or any third party) for production
of the
15
Developed
Products to assure compliance by Company with current GMP (21 CFR Part 820)
and
applicable FDA, ISO 13485, and other rules and regulations and with other
provisions of this Agreement. Company shall notify VeriChip immediately of
any
existing or proposed FDA or other government regulatory inspections or actions
relative to products or services supplied to VeriChip by Company. Company shall
maintain on file all manufacturing and inspection records of all products
supplied to VeriChip for a minimum of seven (7) years unless otherwise agreed
in
writing. Company shall within ten (10) business days remedy or cause the remedy
of any deficiencies which may be noted in any such audit or, if any such
deficiencies cannot reasonably be remedied within such ten (10) day period,
present to VeriChip a written plan to remedy such deficiencies as soon as
possible; and the failure by Company to remedy or cause the remedy of any such
deficiencies within such ten (10) day period or to present such a plan within
such ten (10) day period and then use its best efforts to remedy or cause the
remedy of such deficiencies in accordance with such written plan, as the case
may be, shall be deemed a material breach of this Agreement. Company
acknowledges that the provisions of this Section 12 granting VeriChip certain
audit rights shall in no way relieve Company of any of its obligations under
this Agreement, nor shall such provisions require VeriChip to conduct any such
audits.
(b) VeriChip
and the VeriChip Group will keep and maintain accurate distribution records
and
other relevant information regarding the customers to whom the Developed
Products were sold, including batch numbers and such other information as the
Company may reasonably request from time to time. VeriChip shall maintain on
file such distribution records for a minimum of seven (7) years
unless otherwise agreed in writing, and shall make such records reasonably
accessible to Company during such timeframe. Company recognizes and agrees
that
such documents relating to distribution and sales of products by VeriChip to
third parties constitutes Confidential
Information of VeriChip and that any such information regarding its customers
belongs solely to VeriChip. In the event such information is needed for FDA
or
other traceability purposes, VeriChip retains the option to either disclose
the
information to Company so that the Company can effectuate such recall or other
FDA action, or implement such recall procedures itself as it relates to its
own
customers at the Company’s sole cost and expense.
(c) VeriChip,
at its sole cost and expense, will investigate all complaints relating to the
Developed Products, and shall provide the Company with all documentation
regarding any such complaint and VeriChip’s response thereto. Company shall
maintain all required complaint files relating to the Developed
Products.
(d) Company
will immediately communicate to VeriChip verbally and in writing any technical
or medical reason that might result in a correction, removal or systematic
recall of a Developed Product supplied to VeriChip.
(e) VeriChip
shall notify Company promptly of any inspection
by any federal, state or local regulatory representative concerning any
Developed Products and shall provide Company with a summary of the results
of
such inspection and such actions, if any, taken to remedy conditions cited
in
such inspections.
16
(f) Each
party agrees to inform the other party promptly (but in no event later than
forty-eight (48) hours after becoming aware of same) of any information
concerning any complaint involving a Developed Product or any adverse
event as
defined in 21 CFR Part 803 and 804) associated with the medical use of the
Developed Products, whether or not considered related to the Developed Products.
A complaint is any written, electronic or oral communication that alleges
deficiencies related to the safety, effectiveness, identity, labeling quality,
durability, reliability or performance of a Developed Product after it is
released for commercial distribution.
(g) If
the
adverse reaction is serious, as defined in 21 CFR 314.80 (including an adverse
reaction that is fatal or life-threatening, is permanently disabling, requires
inpatient hospitalization, or is a congenital anomaly, cancer or overdose),
then
each party shall notify the other party within twenty-four (24) hours. All
notifications to either party shall be by facsimile and on such party’s
designated adverse event forms.
(h) If
there
is a recall or withdrawal of a Developed Product within a particular
jurisdiction within the Territory, then VeriChip agrees to stop shipping
recalled lots to that jurisdiction immediately, and in no event later than
twenty-four (24) hours after VeriChip receives written notification of such
recalls or withdrawal. VeriChip shall cooperate fully in any such recall or
withdrawal.
(i) VeriChip
agrees to cooperate, at its sole cost and expense, with any inspection of a
Developed Product shipment conducted by a Governmental Authority.
(j)
The
Company shall conduct such product recalls and withdrawals as are reasonably
requested by VeriChip, at the Company’s expense. In the event that VeriChip
determines to conducts any product recalls or withdrawals, VeriChip shall be
responsible for its own costs and expenses (including reasonable attorneys’
fees).
(k)
VeriChip
shall at all times during the Term of the Agreement comply, in all material
respects, with all federal and state laws, regulations and orders applicable
to
its operations as a wholesale and/or retail distributor.
(l)
VeriChip
agrees not to sponsor or support any clinical study involving Developed
Products for
applications other than secure, human identification
without
Company’s prior written consent. VeriChip will inform Company in writing of any
research it supports or sponsors involving the Developed Products. Any adverse
event that occurs during a clinical study shall be promptly reported by VeriChip
to Company.
(m)
VeriChip
shall participate in annual GMP/Quality Systems training and shall maintain
appropriate records of such training.
(n) VeriChip
will not sell any Developed Products for Approved Medical Uses where the shelf
life of such Developed Products has expired; provided, however, that VeriChip
may return such Developed Products to Company for refurbishment and then sell
such refurbished Products for Approved Medical Uses. The cost of refurbishing
Developed Products will be Company’s current cost, which is * per unit based on
a minimum
*
Confidential
Treatment requested.
17
of
3,000
units, provided that Company will use commercially reasonable efforts to reduce
this cost.
13. Data
Collection, Warehousing and Management.
Company
shall set up and operate a computer database to provide data collection,
storage, manipulation for a complete identification and retrieval service to
the
Exclusive Market. If requested by VeriChip, for any, some or all of VeriChip’s
customers, Company shall provide data collection, storage, manipulation and
retrieval using the standards as described on Schedule
3
and any
modifications thereto that are commercially reasonable in light of advancements
in technology and changes in the manner in which VeriChip markets the Developed
Products. With respect to VeriChip’s customers for which Company provides this
service, VeriChip shall pay Company a monthly fee equal to 50% of the Services
Gross Profit per subscriber. The “Services Gross Profit” means the amount
collected by VeriChip from such customers specifically for such data storage,
manipulation and retrieval minus VeriChip’s costs of providing such services to
such customers (VeriChip may include in its costs the salaries of those VeriChip
employees whose sole responsibility is to provide such services). Within 45
days
following the end of each fiscal quarter, VeriChip shall send Company such
fee
for such quarter and a report detailing: (i) the amount collected during such
quarter from the VeriChip customers for whom the Company is warehousing data
and
(ii) VeriChip’s costs in providing the collection, warehousing and retrieval of
such data for such customers. The report shall not be required if the Company
is
not providing any such warehousing services. 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 Services Gross Profit. Any such
inspection shall be made at the Company’s expense, unless such examination
and/or audit discloses a shortfall in excess of 5% in the amount paid by
VeriChip to the Company, in which case VeriChip shall be responsible for the
costs of the examination and/or audit. The records required by this paragraph
shall be maintained and available for inspection during the Term.
Notwithstanding
anything to the contrary in this Section 13, VeriChip shall have the option,
exercisable at any time during the term of this Agreement, to provide written
notice to Company that VeriChip wishes to operate the database itself and cease
Company’s provision of the database services described herein. Upon transfer of
the database to VeriChip, Company shall be relieved of all liability associated
with the database and VeriChip hereby agrees to indemnify and hold harmless
Company and its agents, directors, officers and employees from and against
any
and all Damages resulting from VeriChip’s use of the database.
14. No
Agency.
Neither
Party is the agent, legal representative, partner or a joint venturer of the
other Party for any purpose and the employees of one Party are not and shall
not
be deemed employees of the other Party for any purpose.
15. Assignment.
Neither
Party may assign its rights hereunder without the written consent of the other
Party, provided that, even without such written consent, a Party may assign
its
rights hereunder to an Affiliate of such Party, provided that such Affiliate
agrees to be bound by all of the provisions of this Agreement, and provided
further that in the event said Affiliate ceases to be an Affiliate of the
assigning Party, this Agreement shall revert to the original (assigning) Party
without any action of the Parties. This Agreement shall remain in full force
and
effect in the event of a “change
of control” of either Party. For purposes herein “change of control”
shall
18
mean
(i)
the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)), other than any affiliate of such Party, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act)
of fifty-one percent (51%) or more of the then outstanding shares of common
stock of such Party; (ii) consummation of a reorganization, merger or
consolidation or sale (in each case where substantially all of the assets or
stock of the Party are transferred) or other disposition of all or substantially
all of the assets of such Party; (iii) approval by the shareholders of such
Party of a complete liquidation or dissolution of such Party; or (iv) the filing
of a bankruptcy petition, or similar act, voluntarily or
involuntarily.
16. Notices.
Any
notice required or permitted to be given with respect to this Agreement shall
be
deemed given (a) upon receipt when delivered personally, by registered mail
return receipt requested or by reputably overnight courier or (b) on completion
of apparently successful transmission by a facsimile transmission device that
conforms to industry standards applicable at the time and generates
automatically a printed diagnostic report with respect to each attempted
transmission, in each case directed to the addressee in accordance with the
following, provided that the preferred method of providing notice shall be
that
set forth in clause (a) above:
|
If
to Company:
|
Digital
Angel Corporation
▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
CEO
Facsimile
Number: ▇▇▇-▇▇▇-▇▇▇▇
|
|
With
a copy to:
Winthrop
& Weinstine, P.A.
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile
Number: ▇▇▇-▇▇▇-▇▇▇▇
|
|
|
If
to VeriChip:
|
VeriChip
Corporation
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Chief Financial Officer
Facsimile
Number:
|
|
With
a copy to:
Applied
Digital Solutions, Inc.
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
General Counsel
Facsimile
Number: ▇▇▇-▇▇▇-▇▇▇▇
|
19
Either
party may change its address for notices or copies of notice by notice to the
other party in accordance with the provisions of this Section.
17. Governing
Law and Language; Jurisdiction and Venue.
(a) This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Minnesota.
(b) Any
claim
or action for breach of this Agreement shall be brought in the state or federal
courts in the State of Minnesota.
(c) The
United Nations Convention on Contracts for the International Sale of Goods
shall
not apply in construing or interpreting this Agreement, a breach of this
Agreement or the relationship between the parties.
18. Dispute
Resolution.
(a) Any
question, difference or dispute which may arise concerning any matter arising
out of or in connection with this Agreement, including, without limitation,
(i)
the construction, meaning or effect of this Agreement, (ii) to matters where
“mutual agreement” or “good faith” or “reasonableness” is required, or (iii)
concerning the rights and liabilities of the Parties hereunder shall first
be
submitted to the then acting Chief Executive Officer of VeriChip and the then
acting Chief Executive Officer of the Company who may call on others to advise
them as they see fit.
(b)
If the
discussions under section (a) above should fail to resolve the question,
difference or dispute within thirty (30) days, the Parties agree to try in
good
faith to settle the matter by mediation before a mediator agreed to by the
parties. The place of mediation shall be Minnesota. The mediation shall take
place not later than thirty days after the failure to resolve the matter
pursuant to section (a) above.
(c) Any
controversy or claim which cannot be resolved as aforesaid shall be settled
by
arbitration to be held in the City of St. ▇▇▇▇, Minnesota, administered by
the
American Arbitration Association (“AAA”) under its Commercial Arbitration Rules,
and judgment on the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. The Arbitration Panel shall consist of three
arbitrators. Each party shall select one arbitrator within thirty (30) days
from
the date of filing of any demand for arbitration and the third arbitrator shall
be appointed by the first two arbitrators. It is the parties’ desire that all
arbitration be concluded speedily, with the hearing to take place and the award
to be made within ninety (90) days of the filing of any demand for arbitration.
Judgment upon the award of a majority of the arbitrators shall be binding upon
the parties hereto and may be entered in any court having jurisdiction. Specific
performance and injunctive relief may be ordered by the award. Costs and
attorneys’ fees shall be paid as the arbitrators’ award shall specify. As the
sole exception to arbitration, each party shall have the right to obtain
injunctive relief, only, from any court having jurisdiction so as to preserve
that party’s rights for resolution in any pending or imminent arbitration
proceedings; but no such injunction shall prohibit or postpone such
arbitration
20
proceedings,
and any such injunction may be modified or vacated as a result of the
arbitration award.
(d) Notwithstanding
the foregoing, and notwithstanding anything to the contrary in this Agreement,
any Party may seek immediate injunctive or other interim relief from any court
of competent jurisdiction with respect to any matter for which monetary damages
would not adequately protect such Party’s interests or otherwise to enforce and
protect intellectual property rights owned or licensed to such
Party.
19. Amendment.
This
Agreement may be amended or modified only by a written modification signed
by
the parties hereto.
20. Unenforceability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced under any rule of law or public policy, all other conditions
and
provisions of this Agreement shall nevertheless remain in full force and
effect.
21.
Entire
Agreement.
This
Agreement sets forth the entire agreement of the parties concerning the subject
matter hereto and supersedes and replaces any and all other agreements or
understandings, written or oral, between the parties concerning the subject
matter hereof, including without limitation any letters of intent or letters
of
understanding.
22.
Remedies
Cumulative.
The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies that a party would otherwise have.
23.
Counterparts.
This
Agreement may be executed in a number of counterparts, all of which together
shall for all purpose constitute one Agreement, binding on both parties hereto,
notwithstanding that both parties may not have signed the same
counterpart.
24.
Binding
Effect.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns.
(The
remainder of this page is intentionally left blank.)
21
25.
Heading;
Disclaimer.
The
headings or captions used in this Agreement are for reference purposes only
and
are not intended to be used or relied upon in interpreting or enforcing this
Agreement.
IN
WITNESS WHEREOF, this Agreement has been executed as of the day and year first
above written.
|
DIGITAL
ANGEL CORPORATION,
a
Delaware corporation
By:
/s/
▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
Title:
CEO
|
|
|
VERICHIP
CORPORATION,
a
Delaware corporation
By:
/s/
▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇
Title:
CEO
|
22
SCHEDULE
1
DEVELOPED
PRODUCTS
|
(Attached
to and forming a part of the Agreement)
|
|
|
Product
|
DA
price to VeriChip each in quantities of 1
|
|
VeriChip
TXQ400L 12mm RF/ID tag: 128 bit data capacity, factory encoded unique
16-digit
number, introducer,
reply card, bar code label, sterile packaged for human applications*
|
**
|
|
Pocket
Reader EX
|
**
|
|
2100
Portable Reader
|
**
|
|
Custom-manufactured
portal readers
|
Quote
|
*
Including the injectable radio frequency transponder for which Company has
obtained United States Patent No 5,211,129.
Pocket
Reader EX Specifications
|
|
|
|
Operating
Frequency
|
125
kHz or ISO 134.2 kHz
|
|
Case
|
|
|
·
Size:
|
285
mm L x 80 mm W x 32 mm H
|
|
·
Weight:
|
406
g
|
|
·
Color:
|
RAL
7032
|
|
·
Material:
|
ABS
Plastic
|
|
Operating
Temperature:
|
0°-50°C
or 32°-122°F
|
|
Humidity:
|
10
- 90% (non-condensing)
|
|
Storage
Temperature:
|
-20°
to 65°C or -4° to 149°F
|
|
Batteries:
|
4
size AAA 1.5-volt alkaline batteries
|
|
Display:
|
18-character
LCD
|
|
Output
Port:
|
Serial
field-programmable port
|
|
RS
232 Port
|
Industry
Compatible (PC, for example)
|
Schedule
1 / Page 1
**
Confidential
Treatment requested.
Long-Range
Handheld Reader Specifications
|
Operating
Frequency
|
134.2
kHz
|
|
2001F
Case
|
|
|
·
Weight:
|
5.0
lbs. 2.3 Kg
|
|
·
Color:
|
Yellow/Black
|
|
·
Material:
|
Aluminum/Polyurethane
|
|
Tabletop
Antenna
|
|
|
·
Weight:
|
2.1
lbs. .96 Kg
|
|
·
Color:
|
Yellow
|
|
·
Material:
|
Polyurethane
|
|
Racket
Antenna
|
|
|
·
Weight:
|
1.3
lbs. .6 Kg
|
|
·
Color:
|
Yellow
|
|
·
Material:
|
Polyurethane
|
|
Operating
Temperature:
|
-5°
to 50°C or 23°-122°F
|
|
Humidity:
|
10
- 90% (non-condensing)
|
|
Storage
Temperature:
|
-20°
to 65°C or -4° to 149°F
|
|
Batteries:
|
Nickel-metal-hydride
10 cells (12 Vdc)
|
|
Display:
|
2
lines by 16 characters backlight LCD display
|
|
RS
232 Port
|
User
defineable COM port baud rate setting at 2400, 9600, 19200 or 57600
BPS
|
This
equipment has been tested and complies with the limits for a “Class A’’ digital
device. pursuant to part 15 of the FCC rules and has CE approval where
applicable, UL Information: Battery Charger and power supply are UL approved
(110 VAC)
Schedule
1 / Page 2
SCHEDULE
2
PRICE
AND TERMS SCHEDULE
(Attached
to and forming a part of the Agreement)
1. ORDERS
1.1 All
orders shall each be for not less than US $1,500 total sales value, excluding
any applicable taxes.
1.2 All
orders for Developed Products shall be in writing and given not less than one
(1) month before the date of expected shipment. If production of the quantity
ordered is not possible during the time ordered, (i) Company shall immediately
notify VeriChip and shall use its best efforts to satisfy the order as quickly
as possible, and (ii) Company shall increase its production ability so that
if
such quantity is ordered thereafter, such order can be produced and delivered.
All orders shall be deemed to be upon the terms and conditions of this Agreement
which may not be modified by the conditions stated on the orders
themselves.
1.3 Any
queries concerning an order shall be raised by Company before proceeding to
execute the order.
2. PRICES
2.1 See
Schedule
1.
Prices
for Improvements shall be determined as set forth in Section 3 of the
Agreement.
2.2 Except
as
provided herein, VeriChip shall be liable for all customs duties, sales taxes,
and insurance. VeriChip shall not be responsible for any business taxes levied
upon Company.
2.3 Pricing
is based on FOB Company’s point of shipment. All freight expenses shall be the
responsibility of VeriChip.
3. PACKAGING
Company
shall ensure proper packaging of Developed Products to ensure delivery of such
products in good order and condition.
4. EXPORT
At
VeriChip’s expense and if required, Company shall apply for any necessary
approvals or licenses for the export of Developed Products from the United
States and Company shall do all such things and sign all such applications
or
documents as may be necessary to obtain such approvals or licenses.
5. DELIVERY
5.1 Company
shall procure the delivery of Developed Products F.O.B. Company’s point of
shipment to airfreight shipment within four (4) months after the receipt of
the
order, or the scheduled delivery as specified, whichever is longer.
5.2 VeriChip
shall bear all proper costs including freight and insurance in respect of the
delivery of Developed Products to VeriChip. Such method of delivery to be in
a
proper and suitable manner and in accordance with the proper requirements for
carriers.
6. TITLE
AND RISK OF LOSS
Title
to
and risk of loss of the Developed Products shall pass to VeriChip at the time
of
delivery to the designated carrier.
7. INVOICES
Company
shall on shipping of Developed Products mail to VeriChip an invoice for such
product. Each invoice shall specify the contents of each package against
separate package numbers.
8. RETURN
OF PRODUCTS
Upon
the
authorized return of any Developed Products in the same condition as shipped
F.O.B. Company’s point of shipment, Company shall reimburse or credit VeriChip
for any amounts paid by VeriChip for the purchase price of returned
products.
9. PAYMENTS
9.1 Payment
terms are net 60 days after date of invoice (the “Net Due Date”). Payments must
be received by Company on or before the Net Due Date and at the location
specified on the invoice. In the event VeriChip fails to pay in full the balance
due in accordance with the invoice on or before the Net Due Date, Company at
its
option may suspend further deliveries.
9.2 Under
no
circumstances will Company be responsible for failure to ship Developed Products
due to a Force Majeure Event. Should any such delay occur, Company will use
its
best efforts to complete the shipment as soon as practicable.
10. PRODUCT
LIABILITY
10.1 At
VeriChip’s expense, VeriChip shall maintain product liability insurance with a
limit of not less than $1,000,000.00 per occurrence and not less than
$ 3,000.000.00
in
the
annual aggregate, and the Company shall be named as an additional insured.
The
Company shall be notified in writing at the anniversary of the renewal of such
liability insurance policy.
10.2 At
Company’s expense, Company shall maintain product liability insurance with a
limit of not less than $1,000,000.00 per occurrence and not less than
$ 3,000.000.00
in
the
annual aggregate, and
VeriChip shall be named as an additional insured. VeriChip shall be notified
in
writing at the anniversary of the renewal of such liability insurance
policy.
SCHEDULE
3
DATA
WAREHOUSING
(Attached
to and forming a part of the Agreement)
Global
VeriChip Subscriber Registry Hosting Facility
Demonstration
System Hosting
|
Hosting
Facility Requirements
|
Min.
Config.
|
|
Server
System
|
|
|
Internet
Connectivity SQL Server 2000
|
|
|
Microsoft
Internet Information Server
|
|
|
GVS
Registry Software (provided by VeriChip)
|
Production
System Hosting
|
Hosting
Facility Requirements
|
Min.
Config.
|
|
Server
system (Facility and Server HIPPA-
Certified,
FDA-Compliant)
|
Dedicated
Server
|
|
Internet
Connectivity
|
T1
|
|
SQL
Server 2000
|
Storage
for
up
to
30
million customer transactions
|
|
Microsoft
Internet Information Server
|
|
|
GVS
Registry Software (provided by VeriChip)
|
SCHEDULE
4
PATENTS
(Attached
to and forming a part of the Agreement)
|
1.
|
5,211,129
|
Syringe-Implantable
Identification Transponder
|
|
2.
|
5,952,935
|
Programmable
Channel Search Reader
|
|
3.
|
6,400,338
|
Passive
Integrated Transponder with Unitary Antenna Core
|
|
4.
|
US2002/0154065
A1
|
Continuation
of Passive Integrated Transponder with
Unitary Antenna Core
|
SCHEDULE
5
MINIMUM
PURCHASE COMMITMENTS
(to
and
forming a part of the Agreement)
|
Calendar
Year 2006
|
no
minimum
|
|
Calendar
Year 2007
|
*
|
|
Calendar
Year 2008
|
*
|
|
Calendar
Year 2009
|
*
|
|
Calendar
Year 2010
|
*
|
Unless
the Parties agree to a different Minimum Unit Commitment for Calendar Years
2011
and after,
the Minimum Unit Commitment applicable to Calendar Years 2011 and after shall
be
*
units
per year.
*
Confidential
Treatment requested.