Business Purchase Agreement – Digital Angel Corp.

(1)

Signature Industries Limited

(2)

McMurdo Limited

(3)

Digital Angel Corporation

Business Purchase Agreement

relating to

the Sarbe business and assets

Blake Lapthorn

New Kings Court

Tollgate

Chandler’s Ford

Eastleigh

SO53 3LG

Reference: CO.MSP.572192.1

1

Definitions and interpretation

4

2

Conditions

15

3

Agreement to Sell and Purchase

16

4

Price

17

5

Exchange

17

6

Completion

18

7

Conduct of Business prior to Completion

19

8

Warranties

21

9

The Employees

22

10

The Business Contracts

22

11

Roke Sub-Licence

24

12

Excluded Liabilities

24

13

Book Debts

25

14

Apportionments and Pre-Payments

25

15

Defective Products

26

16

Obligations of the Seller after Completion

27

17

Restrictive Covenants

28

18

Confidentiality

29

19

Guarantee

30

20

Value Added Tax

33

21

Announcements and Publicity

34

22

Notices

34

23

Successors, Assigns and Third Parties

35

24

Variation

36

25

Waiver

36

26

Costs

36

27

Severance

36

28

Further Assurance

36

29

Entire Agreement

36

30

Counterparts

37

31

Applicable Law and Jurisdiction

37

32

Post-Completion Effect

37

Schedule 1 Apportionment of the Price

Schedule 2 Stock Valuation Statement

Schedule 3 Escrow Account Provisions

Schedule 4 The Warranties

Schedule 5 Limitations to the Warranties

Schedule 6

37

Part 1 The Employees see attached schedule

Part 2 Provisions relating to Employees

Schedule 7

37

Part 1 The Excluded Assets

Part 2 The Excluded Liabilities

Schedule 8 The Business Products

Schedule 9 The Customer Contracts

Schedule 10 The Agency Agreements

Schedule 11 The Supplier Contracts

Schedule 12 The Leasing/Hire Purchase Agreements

Schedule 13

37

Part 1 The Registered Intellectual Property

Part 2 The Domain Names

Schedule 14 The Plant

(1)

Signature Industries Limited, a company incorporated under
the laws of England (registered number 2800561) whose registered office is at
Tom Cribb Road, Thamesmead, London SE28 0BH, United Kingdom (the
Seller);

(2)

McMurdo Limited, a company incorporated under the laws of
England (registered number 06952856) whose registered office is at Silver Point,
Airport Service Road, Portsmouth PO3 5PB (the Buyer); and

(3)

Digital Angel Corporation, a company incorporated under the
laws of the state of Delaware, whose registered office is 490 Villaume Avenue,
South St Paul, MN 55075 -2433 USA (the Guarantor).

1

Definitions and interpretation

1.1

In this Agreement, unless the context otherwise requires, the following words
shall have the following meanings:

(a)

all or any part of the Business and Assets (including all books, accounts,
credit reports, price lists, cost records, work tickets, catalogues,
certificates of title, correspondence with the patent and trade mark agents
relating to any registered Business Intellectual Property and all registration
certificates therefor);

(b)

any Products and Processes or services rendered by the Seller in connection
with the Business (including the Central Data Store, formulae, designs,
specifications, drawings, data, manuals or instructions, plans, product
descriptions, user or test reports, type approval papers or certificates,
instructional and promotional material and other technical material together
with any plates, blocks, negatives and similar material relating thereto);

(c)

the operations, management, administration, or financial affairs of the
Business (including all employee records and interview records, any business
plans or forecasts, information relating to future business development or
planning information relating to litigation or legal advice); and

(d)

the sale or marketing of any of the products manufactured and/or sold or
services rendered by the Business including all customer and supplier names and
lists, sales advertising and marketing information (including targets, sales and
market share statistics, market surveys and reports on research commissioned by
the Seller and terms and conditions of sale or supply);

(a)

those items of registered Intellectual Property (and applications therefor)
described in Schedule 13 Part 1;

(b)

the domain names referred to in Schedule 13 Part 2;

(c)

all other Intellectual Property used in the Products and Processes;

(d)

the Business Information;

(e)

all Intellectual Property which is needed to fulfil any Customer Contracts;

(a)

the date on which the last unsatisfied Condition has been satisfied;

(b)

the date on which the Buyer has waived the last unsatisfied Relevant
Condition in accordance with clause 2.3; or

(c)

such other date as the Buyer and Seller may agree in writing;

(a)

any products, spare parts or processes developed, assembled, manufactured
and/or sold by the Business (including any earlier or amended, modified,
improved or developed version thereof and including the products listed at
Schedule 8);

(b)

any products or processes which have been or were the subject of any research
or development undertaken predominantly by the Business (whether or not
completed or abandoned);

(c)

any processes used by the Business;

1.2

In this Agreement (except where the context otherwise requires):

1.2.1

any reference to a clause, sub-clause or schedule is to a clause, sub-clause
or schedule to this Agreement. References to paragraphs are to paragraphs of the
schedules;

1.2.2

headings are included for convenience only and do not affect the
interpretation of this Agreement;

1.2.3

use of the singular includes the plural and vice versa;

1.2.4

use of any gender includes the other genders;

1.2.5

any reference to a person includes natural persons, firms, partnerships,
companies, corporations, associations, organisations, governments, states,
foundations or trusts;

1.2.6

any reference to a person includes that person153s legal personal
representatives, successors and assigns;

1.2.7

reference to any professional firm or company includes any firm or company
effectively succeeding to the whole or substantially the whole, of its practice
or business;

1.2.8

reference to a “company” shall include any company,
corporation or other body corporate, wherever and however incorporated or
established and a “body corporate” shall be construed so as to
include any company, corporation or other body corporate and limited liability
partnership wherever and howsoever incorporated or established;

1.2.9

the terms holding company and subsidiary
mean a “holding company” and “subsidiary” as defined in section 1159 of the
Companies Act 2006 and a company shall be treated, for the purposes only of the
membership requirement contained in subsections 1159(1)(b) and (c), as a member
of another company even if its shares in that other company are registered in
the name of (a) a person (or its nominee) whether by way of security or in
connection with the taking of security or (b) its nominee;

1.2.10

“subsidiary undertaking” and “parent
undertaking” shall have the meanings given to them by section 1162
Companies Act 2006;

1.2.11

“associate” has the meaning given to it by section 435
Insolvency Act 1986 and a person is regarded as “associated”
with any person which is an associate of his and with any company of which any
director is an associate of his;

1.2.12

all references to a statutory provision shall be construed as including
references to:

(a)

any statutory modification, consolidation, replacement or re-enactment
(whether before or after the date of this Agreement) for the time being in
force;

(b)

all statutory instruments or orders made pursuant to a statutory provision;

(c)

any statutory provisions of which it is a consolidation, re-enactment,
replacement or modification;

1.2.13

any reference to any English legal term for any action, remedy, method of
judicial proceeding, legal document, legal status, court, official, person or
any other legal concept shall, in respect of any other jurisdiction, be treated
as including that which in its nature and effect most nearly approximates in
that jurisdiction to the English legal term;

1.2.14

any phrase introduced by the terms “including“,
“include“, “in particular” or
any similar expression is illustrative only and does not limit the sense of the
words preceding those terms.

1.3

In this Agreement, unless expressly stated otherwise, all warranties,
representations, indemnities, covenants, agreements and obligations entered into
by more than one person are given or entered into jointly and severally.

1.4

The parties have participated jointly in the negotiating and drafting of this
Agreement. In the event that an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favouring or
disfavouring any party by virtue of the authorship of any of its provisions.

2

Conditions

2.1

Completion of the sale and purchase of the Business and Assets under this
Agreement is subject to the satisfaction of each of the following Conditions:

2.1.1

the Buyer receiving (conditional on Completion taking place) the Cospas
Sarsat type product certification approval;

2.1.2

the Buyer receiving the consent of the UK Ministry of Defence to the novation
of the following Customer Contracts:

(a)

contract number AVCOMM2/1455 dated 24 June 2005;

(b)

contract number NWE11A/0980 dated 11 November 2010;

(c)

contract number CSA/4002 dated 11 August 2009

2.1.3

the Seller and its auditors signing the Accounts;

2.1.4

the Stock Valuation being agreed by the Seller and the Buyer in accordance
with Schedule 2;

2.1.5

the Completion Documents and the Agreed Form Schedules being in Agreed Form.

2.2

The Buyer and Seller shall use reasonable endeavours and co-operate fully in
all actions necessary to procure the satisfaction of the Conditions as soon as
possible so far as it is within their power to do so.

2.3

The Buyer may waive in writing at any time all or any of the Relevant
Conditions.

2.4

The Buyer shall give notice in writing to the Seller of the satisfaction of
the Relevant Conditions within 2 Business Days of becoming aware of the same.

2.5

Without prejudice to clause 2.2, if all the Conditions are not satisfied to
the reasonable satisfaction of the Buyer or (in the case of the Relevant
Conditions) waived in accordance with clause 2.3, in either case on or before 30
June 2011 or such other date as the Seller and the Buyer in their absolute
discretion may agree in writing, this Agreement shall become null and void and
no party shall be entitled to make a claim against any other party in connection
with this Agreement save for any claim which arises in respect of the surviving
clauses listed at clause 2.6.

2.6

The following provisions shall continue to have effect notwithstanding
failure to waive or satisfy the Conditions:

2.6.1

clause 1 (Definitions and Interpretation);

2.6.2

clause 2.2 (Conditions);

2.6.3

clause 18 (Confidentiality);

2.6.4

clause 24 (Variation);

2.6.5

clause 25 (Waiver); and

2.6.6

clause 29 (Entire Agreement).

3

Agreement to Sell and Purchase

3.1

Subject to clause 2, with effect from the Transfer Date the Seller will sell
and the Buyer (relying on the Warranties) will purchase the Business as a going
concern together with the following assets:

3.1.1

the Goodwill;

3.1.2

the Plant;

3.1.3

the Stock;

3.1.4

the benefit (subject to the burden) of the Business Contracts;

3.1.5

the Business Intellectual Property;

3.1.6

the Business Information;

3.1.7

all the Seller153s rights against third parties including all rights under any
of the warranties, conditions, guarantees or indemnities or under the Sale of
Goods Act 1979 relating to any of the Assets and the benefit of all sums to
which the Seller is entitled from third parties or insurers in respect of damage
to the Assets; and

3.1.8

all the Seller153s other assets, property or rights relating to or connected
with or belonging to or required for or used in the Business and which are not
described in clauses 3.1.1 to 3.1.7 inclusive;

3.2

The Seller will sell the Business and the Assets with full title guarantee
free from all Security Interests (save that the Buyer acknowledges that the
Business Intellectual Property described in the AAPLB Licence has been licensed
to the UK Ministry of Defence in perpetuity for nominal consideration) and so
that:

3.2.1

the provisions of section 6(2) of the Law of Property (Miscellaneous
Provisions) Act 1994 shall not apply to the Buyer; and

3.2.2

the covenant set out in section 3(1) of that Act shall not be qualified by
the words other than any charges, encumbrances or rights which that person does
not and could not reasonably be expected to know about153.

3.3

Title to and beneficial ownership of each of the Assets will pass to the
Buyer and assignment of the Goodwill to the Buyer will hereby be effected on
Completion.

4

Price

4.1

The Price shall be the aggregate of:

4.1.1

700,000; and

4.1.2

the Stock Value as determined under Schedule 2.

4.2

The Price shall be apportioned as set out in Schedule 1.

5

Exchange

5.1

Exchange will take place at the offices of the Seller’s Solicitors on the
date of this Agreement (or such other place as the Buyer and Seller may agree),
when the following will take place:

5.1.1

the Seller will deliver, or procure delivery to the Buyer of a certified copy
of an extract from the minutes of the meeting of the directors of the Seller in
the Agreed Form authorising the execution by the Seller of this Agreement and of
any other documentation that may be necessary or desirable arising out of or in
connection with this Agreement and appointing the relevant signatory or
signatories to sign the same;

5.1.2

the Guarantor will deliver, or procure delivery to the Buyer of a certified
copy of an extract from the minutes of the meeting of the directors of the
Guarantor in the Agreed Form authorising the execution by the Guarantor of this
Agreement and of any other documentation that may be necessary or desirable
arising out of or in connection with this Agreement and appointing the relevant
signatory or signatories to sign the same;

5.1.3

the Buyer will deliver, or procure delivery to the Seller of a certified copy
of the minutes of a meeting of the directors of the Buyer in the Agreed Form
authorising the execution by the Buyer of this Agreement and of any other
documentation that may be necessary or desirable arising out of or in connection
with this Agreement and appointing the relevant signatory or signatories to sign
the same.

6

Completion

6.1

Subject to clause 2, Completion will take place at the offices of the
Seller’s Solicitors (or such other place as the Buyer and Seller may agree) on
the Completion Date when the following will take place:

6.1.1

the Seller will deliver, or procure delivery, to the Buyer of:

(a)

all the Assets capable of passing by delivery including a copy of the Central
Data Store (and title to those assets will pass by delivery);

(b)

such documents as are required by the Buyer153s Solicitors to complete the sale
and purchase of the Assets and vest title to the Assets in the Buyer;

(c)

all documents of title and certificates for the lawful operation and use of,
and all service documents pertaining to, the Plant and the Stock;

(d)

all documents of title, certificates, deeds, licences, agreements and other
documents relating to the Business Intellectual Property (including all
correspondence with the patent and trade mark agents relating to any registered
Business Intellectual Property and all registration certificates therefor) and
all manuals, drawings, plans, documents and other materials and media on which
the Business Information is recorded;

(e)

the Business Contracts (to the extent they are written);

(f)

duly executed releases in the Agreed Form in respect of all Security
Interests on or affecting any of the Assets;

(g)

the Completion Documents duly executed;

(h)

the Agreed Form schedules duly initialled by or on behalf of the Seller; and

(i)

all records required to be kept under the Working Time Regulations 1998
relating to the Employees.

6.1.2

the Buyer will deliver, or procure delivery, to the Seller of:

(a)

the Completion Documents duly executed;

(b)

the Agreed Form schedules duly initialled by or on behalf of the Buyer;

6.1.3

against compliance by the Seller with its obligations under clause 6.1.1 the
Buyer will pay the Price by electronic transfer to the Seller153s Solicitors (who
are hereby authorised to receive the same and whose receipt shall be an absolute
discharge of the Buyer) and which shall be distributed on Completion by the
Seller’s Solicitors as follows:

(a)

the Retention by electronic transfer to the Escrow Account which shall be
dealt with in accordance with Schedule 3; and

(b)

the balance of the Price to the account of the Seller.

6.2

The Buyer will not be obliged to complete the purchase of any of the Assets
unless the purchase of all the Assets is completed in accordance with this
Agreement.

6.3

The Buyer may, in its absolute discretion, waive any requirement contained in
clause 6.1.1.

7

Conduct of Business prior to Completion

7.1

Pending the Transfer Date, ownership of the Assets shall be retained by and
risk in the Assets shall remain with the Seller.

7.2

Subject to the provisions of clause 7.3, the Seller shall continue to carry
on the Business for its own benefit and at its own risk up to the Transfer Date.

7.3

Save in circumstances where in the Seller’s reasonable opinion a failure to
take or make the relevant act or omission may prejudice the interests of any
company in the Seller’s Group, the Seller undertakes to the Buyer that pending
the Completion Date unless it has obtained the prior written consent of the
Buyer to the contrary (such consent not to be unreasonably withheld or delayed):

7.3.1

the Business will in all material respects continue to be carried on in the
same manner as it is presently carried on as regards the nature, scope and
manner of conducting it and so as to maintain it as a going concern;

7.3.2

the Seller will not enter into a long term contract (being a contract which
cannot be terminated by the Seller on less than 3 months notice) or a contract
with an aggregate contract value of more than 10,000 in relation to the
Business or any onerous or unusual agreements or obligations;

7.3.3

the Seller will not engage any person as an employee of the Business other
than the Employees;

7.3.4

the Seller will not create, issue or grant or agree to create, issue or grant
any Security Interest over any of the Assets unless, the Assets will be released
from such Security Interest on or prior to the Completion;

7.3.5

there shall be no merger or amalgamation of the Business with any other
company or business;

7.3.6

the Seller shall not (and shall procure that no member of the Seller’s Group)
directly or indirectly acquire any business which is competitive with any
business carried on by the Business;

7.3.7

no scheme of arrangement will be entered into in relation to the Seller;

7.3.8

there shall be no change to the corporate and/or trading names currently used
by the Seller;

7.3.9

no resolution for the cessation of business or the winding-up of the Seller
shall be proposed, made or take place except in the event of the insolvency of
the Seller;

7.3.10

the Seller will not directly request or procure the appointment of a receiver
or an administrative receiver of the whole or any part of the Assets;

7.3.11

the Seller will not commence any legal or arbitration proceedings (other than
routine debt collection) in relation to the Business; and

7.3.12

the Seller will not sell or dispose of any part of the Business or the Assets
or other assets or property of the Business to any third party other than any
such assets or goods intended to be sold in the ordinary course of business.

7.4

Pending Completion or earlier termination of the Agreement pursuant to this
Agreement, the Buyer and the Seller will use reasonable endeavours to resolve
constructively any issues that arise in relation to the Business so as to
achieve an orderly transfer under this Agreement.

7.5

Pending Completion the Seller will, on the Buyer’s reasonable request, give
to the Buyer or its professional advisers such facilities and information and
assistance (including access to Employees and premises) regarding the Business
and Assets as the Buyer may reasonably require.

7.6

Pending Completion the Seller will immediately notify the Buyer in writing of
all material adverse events or circumstances arising in connection with or
relating to any Business Contracts of which the Seller becomes aware.

8

Warranties

8.1

The Seller warrants to the Buyer with effect from the Completion Date that
each of the statements in Schedule 4 is true and accurate in all respects and
acknowledges that the Buyer is entering into this Agreement in reliance on the
Warranties.

8.2

The Warranties are given subject to all matters Disclosed.

8.3

Where any Warranty is qualified by “to the best of the Seller153s knowledge and
belief” or “so far as the Seller is aware” or other similar qualification, such
warranty shall be deemed to include additional statements that it has been made
after all diligent enquiries of Parke Hess, Mike Cook, Dave Stelling, Steve
Foster, Glen Greer and Janet Millard and the Seller shall be deemed only to have
knowledge of any information which such enquiry would have revealed.

8.4

Each of the Warranties is separate and independent of other Warranties and
undertakings in this Agreement.

8.5

Any information supplied by or on behalf of any of the Employees to the
Seller or its advisers in connection with the Warranties will not constitute a
warranty, representation or guarantee as to the accuracy of such information in
favour of the Seller and the Seller waives any and all claims which it might
otherwise have against the Buyer, the Business or any of the Employees in
respect of such claims.

8.6

None of the Warranties shall be deemed in any way modified or discharged by
reason of any investigation or inquiry made or to be made by or on behalf of the
Buyer, and no information relating to the Business or to any of the Assets of
which the Buyer has knowledge (actual or constructive) will:

8.6.1

prejudice any claim which the Buyer may be entitled to bring; or

8.6.2

operate to reduce any amount recoverable by the Buyer under this Agreement

8.7

All sums payable by the Seller to the Buyer for breach of any of the
Warranties will be paid free and clear of all deductions or withholdings
whatsoever, save only as may be required by law.

8.8

If any deduction or withholding in respect of Tax or otherwise is required by
law to be made from any of the sums payable for breach of any of the Warranties
the Seller will pay to the Buyer such greater sum as will, after such deduction
or withholding, leave the Buyer with the same amount as it would have been
entitled to receive in the absence of any such requirement to make a deduction
or withholding.

8.9

If any sum (the first sum) payable by the Seller to the
Buyer for breach of any of the Warranties is subject to Tax in the hands of the
Buyer then the Seller will pay to the Buyer such additional sum or sums as will
after such Tax (and any Tax on such additional sums or sums) leave the Buyer
with an amount equal to the first sum.

8.10

The parties agree that any claims under the Warranties will be limited in
accordance with Schedule 5.

9

The Employees

9.1

The parties agree that the provisions of Schedule 6, Part 2 will apply in
relation to the Employees.

10

The Business Contracts

10.1

With effect from the Transfer Date the Buyer will:

10.1.1

become entitled to the benefit of the Seller under the Business Contracts;
and

10.1.2

carry out and perform and complete all the obligations and liabilities
created by or arising under the Business Contracts (except for any obligations
or liabilities attributable to a breach on the part of the Seller or its
employees, agents or sub-contractors prior to the Transfer Date).

10.2

With effect from the Transfer Date the Seller hereby assigns to the Buyer all
the Business Contracts which are capable of assignment without the consent of
other parties.

10.3

If any of the Business Contracts cannot be assigned to the Buyer without the
agreement of or novation by or consent to the assignment from another party this
Agreement shall not constitute an assignment or attempted assignment if the same
would constitute a breach of such Business Contracts. In the event that consent
or novation is required other than in respect of the MOD Contracts to such
assignment:

10.3.1

at the Buyer153s request the Seller will use all reasonable endeavours with the
co-operation of the Buyer to procure such novation or assignment on terms
reasonably satisfactory to the Buyer;

10.3.2

unless and until any such Business Contract shall be novated or assigned the
Seller will continue its corporate existence and will hold such Business
Contract on trust for the Buyer and its successors in title absolutely and the
Buyer will perform all the obligations of the Seller under such Business
Contract as the Seller153s sub-contractor (if such sub-contracting is permissible
and lawful under the Business Contract in question);

10.3.3

unless and until any such Business Contract is novated or assigned the Seller
will (so far as it lawfully may) give all such assistance to the Buyer as the
Buyer may reasonably require to enable the Buyer to enforce its rights under
such Business Contract and without limitation will provide access to all
relevant books, documents and other information in relation to such Business
Contract as the Buyer may require from time to time.

10.4

If such consent or novation is refused or is not obtained on terms reasonably
satisfactory to the Buyer within 60 Business Days of the Completion Date the
Buyer shall be entitled to require the Seller to serve proper notice to
terminate that Business Contract and the Seller will fully and effectively
indemnify and keep so indemnified the Buyer from and against all losses,
damages, costs, actions, proceedings, claims, demands, liabilities (including
reasonable and properly incurred expenses) which the Buyer may incur as a result
of the termination of such Business Contract.

10.5

If the Seller receives any payment in respect of the Business Contracts on or
after the Transfer Date the Seller will hold the same as trustee, record such
payment separately in its books and will account to the Buyer for the same
within 7 Business Days of receipt.

10.6

The Seller will indemnify the Buyer in respect of the non-performance or
defective or negligent performance by the Seller of any of the Business
Contracts prior to the Transfer Date.

10.7

The Seller shall indemnify the Buyer against the late delivery penalties
under clause 35 of the undated contract made between the Seller and the
International Civil Aviation Organization on behalf of Fuerza A rea Argentina
(as Disclosed).

10.8

In the event that the Buyer becomes aware of any claim or potential claim by
the International Civil Aviation Organisation on behalf of the Fuerza A rea
Argentina in respect of such late delivery penalties, the Buyer undertakes:

10.8.1

to promptly notify the Seller of the same when it comes to the Buyer’s
attention;

10.8.2

not to do anything in relation to the claim or potential claim without prior
consultation with the Seller; and

10.8.3

to comply with the Seller’s reasonable instructions in respect of the same.

11

Roke Sub-Licence

11.1

The Seller hereby sub-licences any Intellectual Property which may be
licensed to the Seller by Roke in relation to any of the Products and Processes
including any background Intellectual Property arising from the design and
development agreements between Roke and the Seller contained in the Disclosure
Documents.

12

Excluded Liabilities

12.1

The Seller remains solely responsible for all the Excluded Liabilities and
will:

12.1.1

discharge the Excluded Liabilities promptly; and

12.1.2

fully and effectively indemnify (and keep so indemnified) the Buyer against
all losses, damages, costs, actions, proceedings, claims, liabilities, demands,
and expenses which the Buyer may incur:

(a)

in connection with the Excluded Liabilities; and/or

(b)

as a result of the Seller153s failure to comply with its obligations under
clause 12.1.1.

12.2

The Seller will promptly notify the Buyer of any complaint, claim or dispute
or alleged complaint, claim or dispute received by it in respect of any goods
manufactured or services supplied by it and the Seller will not, without the
Buyer153s written consent (not to be unreasonably withheld and/or delayed), take
any other steps in relation to such complaint, claim or dispute.

12.3

If the Buyer (acting reasonably) considers that it is desirable in order to
protect its legitimate business interests to take preventative action with a
view to avoiding such complaint claim or dispute the Buyer will consult with the
Seller with a view to deciding what preventative action may be taken and in the
event that the Seller agrees (such agreement not to be unreasonably withheld
and/or delayed) the Seller will take, and will bear the reasonable cost of, that
action.

13

Book Debts

13.1

The Seller is entitled, for its own account, to collect the Book Debts. The
Buyer is under no obligation to collect the Book Debts.

13.2

The Buyer will promptly account to the Seller for any payment which it
receives after the Completion Date in respect of the Book Debts.

13.3

The Seller will not, without the prior written consent of the Buyer (such
consent not to be unreasonably withheld and/or delayed), institute any legal
proceedings to recover the Book Debts if the debtor in question is a continuing
debtor and/or customer of the Business after the Completion Date.

14

Apportionments and Pre-Payments

14.1

All periodical charges and outgoings of the Business or related to the Assets
(including salaries, wages and other expenses paid or payable to the Employees)
that are not otherwise dealt with under this Agreement shall be apportioned on a
time basis so that:

14.1.1

any part of any such outgoings which is attributable to the period up to and
including the Transfer Date shall be borne by the Seller and the Seller will
indemnify the Buyer in respect of the same; and

14.1.2

any part of any such outgoings which is attributable to the period commencing
immediately after the Transfer Date shall be borne by the Buyer and the Buyer
will indemnify the Seller in respect of the same.

14.2

All licence fees, royalties and other periodical receipts of the Business
relating to the Assets shall be apportioned between the Seller and the Buyer on
a basis equivalent to that set out in clause 14.1.

14.3

Where any product or service is to be provided by the Buyer under any
Business Contract after the Transfer Date, but any payment (whether by way of
deposit, pre-payment or otherwise) in respect of the price or cost of such
product or service has been received by the Seller before the Transfer Date, the
Seller shall pay an amount equal to the amount of that payment (excluding any
amount in respect of VAT for which the Seller is required to account) to the
Buyer and shall hold such sum in trust for the Buyer until it is paid.

14.4

All money or other assets belonging to the Buyer in connection with the
Business or any of the Assets , which are received by the Seller on or after the
Transfer Date in respect of the Business or the Assets, shall be held on trust
for the Buyer and shall be paid promptly to the Buyer.

14.5

All money or other assets belonging to the Seller in connection with the
Retained Business or any of the Excluded Assets (including the Book Debts),
which are received by the Buyer on or after the Transfer Date in respect of the
Retained Business or the Excluded Assets, shall be held on trust for the Seller
and shall be paid promptly to the Seller.

14.6

Immediately after Completion, the Seller and the Buyer shall prepare a
Schedule of Apportionments reflecting the terms of clauses 14.1 to 14.5 (and
both the Seller and the Buyer shall act reasonably and in good faith in
preparing such Schedule of Apportionments).

14.7

The Schedule of Apportionments will be delivered to the Buyer by the Seller
as soon as reasonably practicable after Completion and in any event not later
than 30 Business Days after Completion. Before delivery, the Seller and the
Buyer will so far as reasonably practicable consult with each other with a view
to reducing the potential areas of future disagreement.

14.8

If the Buyer does not within 30 Business Days of receiving the Schedule of
Apportionments give written notice to the Seller that it disagrees with the
Schedule of Apportionments or any item or any item in them, this notice to state
the reasons for the disagreement in reasonable detail (“Apportionments
Objection Notice“), the Schedule of Apportionments will be final and
binding on the parties. If the Buyer gives an Apportionments Objection Notice
within the 30 Business Day period, the Buyer and the Seller will attempt in good
faith to reach agreement in respect of it and, if they are unable to do so
within 30 Business Days of the notification, either party may refer the matter
to the Independent Accountant.

14.9

The balancing payment agreed in the Schedule of Apportionments shall be paid
by the Buyer to the Seller or vice versa (as appropriate) within 10 Business
Days of agreement or determination of the Schedule of Apportionment.

15

Defective Products

15.1

Subject to the remainder of this clause 15, all Remedial Costs shall be the
responsibility of the Seller and the Seller will indemnify the Buyer in respect
of such Remedial Costs.

15.2

If the Buyer receives notice from a customer (past or present) of the
Business of any defect or alleged defect in a product which will or may incur
Remedial Costs, the Buyer shall be entitled to or at the request of the Seller
be obliged to carry out repair or replacement work on behalf of the Seller in
relation to such defect or alleged defect provided always that the Remedial
Costs do not exceed 250 excluding VAT. In calculating the Remedial Costs parts
and stock will be charged at cost price and labour shall be charged at the rates
the Buyer is entitled to charge under the Transitional Services Agreement for
the relevant work. For the avoidance of doubt, the Buyer will require the
consent of the Seller (such consent not to be unreasonably withheld and/or
delayed) before it initiates a product recall in respect of goods or parts of
goods sold or supplied in the course of the Business prior to the Transfer Date.

15.3

If following Completion the Buyer receives notice of claims relating to any
defect or alleged defects in a product which will or may incur Remedial Costs,
it shall promptly give notice of such claims to the Seller. Save where the
relevant Remedial Costs fall within clause 15.2, the Buyer shall not take any
preventative action in order to avoid claims relating to defects or alleged
defects of the kind covered by Remedial Costs or carry out any maintenance
and/or repair work and will replace any items in connection with such claims
without the prior written approval of the Seller (such approval not to be
unreasonably withheld and/or delayed). The Buyer shall be under no obligation to
carry out repair or replacement of obsolete or quarantine stocks.

15.4

To the extent that the Buyer carries out work in accordance with clauses 15.2
and 15.3 it shall be entitled to recover the costs from the Seller by submitting
a monthly invoice at the end of each month together with papers reasonably
supporting such invoice and a statement of the work carried out in the period to
which the invoice relates. The Seller shall pay such invoice within 30 Business
Days of receipt.

15.5

The Buyer shall indemnify the Seller against any increase in its liability
arising under claims relating to defects or alleged defects incurring Remedial
Costs where such increased liability arises as a result of the work carried out
by the Buyer pursuant to this clause 15.

16

Obligations of the Seller after Completion

16.1

The Seller for 12 months following Completion:

16.1.1

will pass to the Buyer forthwith upon receipt any orders or enquiries in
relation to the Business which it may receive at any time after Completion;

16.1.2

will give to the Buyer reasonable access to the books, accounts, records and
returns of the Seller relating predominantly to or predominantly in connection
with the Business as the Buyer may reasonably require (including the right to
take copies and extracts on reasonable advance notice) and will keep them in
good order to the extent reasonably required for the continuation of the
Business; and

16.1.3

will cease in any manner whatsoever to use or display any trade or service
marks, trade or service names, domain names or logos used or held by the
Business (including any Business Intellectual Property) or any confusingly
similar marks, domain name, name or logo.

16.2

On and at any time for a period of 12 months after Completion the Seller will
give or procure to be given to the Buyer all such information and other
assistance (including particulars of customers, suppliers and others who have
dealt with the Seller in connection with the Business and details and terms and
conditions of Employees) as the Buyer may reasonably require for the conduct of
the Business and for the purpose of implementing the provisions of this
Agreement.

16.3

Promptly following Completion the Seller will notify in writing in the Agreed
Form any third parties who may hold any Assets for or on behalf of the Seller
that ownership of such Assets has passed to the Buyer.

17

Restrictive Covenants

17.1

The Seller covenants with the Buyer that it will not and will procure that
any other member of the Seller153s Group will not either on its or their own
account or through or in conjunction, association or by arrangement with or on
behalf of any person or persons whether for its own benefit or that of others
and whether directly or indirectly for the period of five years from Completion:

17.1.1

supply products or provide services (or enter into any transaction to do the
same) for any person, firm or company who or which was either at Completion or
during the period of 24 months prior to Completion a client or customer of the
Business where such goods or services are the same as or similar to or compete
with products sold or services provided by the Business to that person, firm or
company at or during the period of 24 months prior to Completion;

17.1.2

solicit or endeavour to solicit the custom of or canvas or approach any
person, firm or company who or which was either at Completion or during the
period of 24 months prior to Completion had been a client or customer of the
Business, for the supply of products or the provision of services which are the
same as or similar to or compete with those products sold or services provided
by the Business to that person, firm or company at or during the period of 24
months prior to Completion;

17.1.3

solicit or entice away or endeavour to solicit or entice away from the Buyer
any officer, manager, consultant or other senior employee who was either at
Completion or during the period of 24 months prior to Completion engaged in the
Business whether or not such person would commit a breach of his contract of
employment by reason of leaving;

17.1.4

carry on or be engaged, concerned or interested in any business which
competes with the Business as the same was carried on at Completion (other than
as a holder of securities listed on a recognised investment exchange or provided
that such holding shall not exceed one per cent of the class of securities of
which the said holding forms part); or

17.1.5

employ or conclude any contract for services with any director, manager,
consultant or senior employee who worked in the Business either at Completion or
during the period of 24 months prior to Completion.

17.2

Each restriction in clause 17.1 constitutes an entirely independent
restriction on the Seller.

17.3

If any restriction in clause 17.1 is determined to be unenforceable in whole
or in part, its unenforceability shall not affect the enforceability of the
remaining restrictions or (in the case of restrictions enforceable in part) the
remainder of that restriction.

17.4

Nothing in this clause prevents the Seller from carrying on the Retained
Businesses, dealing with any Excluded Assets, Creditors or Book Debts in
accordance with this Agreement or complying with the provisions of the
Transitional Services Agreement.

18

Confidentiality

18.1

The Seller undertakes and will procure that any member of the Seller153s Group
will undertake to keep the Business Information confidential and not, at any
time, disclose any Business Information or make the same known to anyone
whatsoever or use for their own or any other person153s benefit.

18.2

The Buyer undertakes to keep confidential and not any time, disclose any
information (excluding the Business Information) regarding the Seller or
Seller’s Group or make the same known to anyone whatsoever or use it for their
own or any other person’s benefit.

18.3

The obligations imposed by the provisions of clauses 18.1 and 18.2 shall not
apply to the extent that the Business Information or information in question:

18.3.1

is or comes into the public domain without fault on the part of the party to
whom the same was disclosed, or to whose attention the same has come;

18.3.2

was already known to the relevant party at the time the same was disclosed to
it or came to its attention; or

18.3.3

has been lawfully disclosed to the relevant party by a third party.

19

Guarantee

19.1 In consideration of the Buyer entering into this Agreement the Guarantor
unconditionally and irrevocably guarantees to the Buyer and their respective
successors, transferees and assigns:

19.1.1 the due and punctual performance and observance by the Seller of all
the Seller’s obligations; and

19.1.2 the punctual discharge by the Seller of all the Seller’s liabilities
to the Buyer;

19.2

If the Seller defaults in the payment when due of any amount payable to the
Buyer under the Transaction Agreements, the Guarantor will immediately on demand
by the Buyer pay to the Buyer (or as the Buyer may direct from time to time) the
amount payable by the Seller and perform and discharge all obligations of the
Seller in the manner prescribed in the relevant Transaction Agreement and as if
the Gurantor were the principal obligor in respect of that amount.

19.3

As an independent and primary obligation and without prejudice to clauses
19.1 and 19.2, the Guarantor will unconditionally and irrevocably indemnify the
Buyer against any failure of the Seller to comply with any of its obligations or
discharge any of its obligations under the Transaction Agreements.

19.4

The guarantee and indemnity contained in this clause 19 (Guarantee
Obligations):

19.4.1

is a continuing guarantee and indemnity and will continue in full force and
effect until all liabilities or purported liabilities of the Seller arising
under, and all monies owing or payable or purported to be owing or payable by
the Seller under the Transaction Agreements have been paid, discharged or
satisfied in full and notwithstanding any insolvency of the Seller or any change
in name or status of the Seller; and

19.4.2

is in addition to and is not in any way prejudiced by any other security now
or subsequently held by the Buyer.

19.5

The Guarantee Obligations will not be discharged, diminished or in any way
adversely affected as a result of any of the following:

19.5.1

any time, consent or waiver given to, or composition made with, the Seller or
any other person;

19.5.2

any amendment to, or replacement of, any Transaction Agreement (however
fundamental) or any other agreement or security entered into by the Seller;

19.5.3

the taking, variation, compromise, exchange, renewal, release or refusal or
neglect to take, perfect or enforce any rights or remedies against or security
over the assets of the Seller or any other person or any non-observance of any
formality or other requirement under any Transaction Agreement or any failure to
realise the full value of any security;

19.5.4

the release of the Seller, any other guarantor or other person under the
terms of any composition or arrangement, including any corporate or individual
voluntary arrangement;

19.5.5

any incapacity, lack of power, authority or legal personality of or
dissolution or change in the members or status of the Seller or any other
person;

19.5.6

any unenforceability, illegality or invalidity of any obligation of any
person under any Transaction Agreement or any other document or security;

19.5.7

any insolvency or similar proceedings including the winding up, liquidation
or dissolution of the Seller, the making of an administration order in relation
to the Seller or the appointment of a receiver or administrator in respect of
some or all of the assets of the Seller; and

19.5.8

any other act, omission, circumstance, matter or thing which, but for this
clause 19.5 might operate to release, reduce or otherwise exonerate the
Guarantor but which would not have discharged a person primarily liable in
respect thereof.

19.6

The Guarantor may not determine its liabilities under the guarantees and
indemnities given in this clause 19.

19.7

The Buyer will not be obliged to enforce any other rights, security or claims
it may have against the Seller or any other person before claiming under the
guarantees and indemnities given by this clause 19.

19.8

Until all amounts which may be or become payable by the Seller under or in
connection with the Transaction Agreements have been irrevocably paid in full
the Guarantor agrees that it will not exercise any rights which it may have:

19.8.1

to be subrogated to or otherwise to share in any security or monies held,
received or receivable by the Buyer or, to claim any right of contribution in
relation to any payment made by the Guarantor under this Agreement;

19.8.2

to enforce any of its right of subrogation, indemnity, or to make any
application for quia timet relief against or in respect of the Seller or the
Guarantor;

19.8.3

following a claim made on the Guarantor under the Guarantee Obligations, to
demand or accept repayment of any monies due from the Seller or to claim any set
off or counter claim against the Seller; or

19.8.4

to claim or prove in any liquidation or other insolvency proceeding of or
affecting the Seller or any co-surety in competition with the Buyer.

19.9

Following the making of a demand on the Guarantor under the Guarantee
Obligations, the Guarantor will (at its own cost) promptly take such steps or
action as are referred to in clause19.8 as the Buyer may from time to time
stipulate.

19.10

Following the making of a demand on the Guarantor under the Guarantee
Obligations, the Guarantor will (at its own cost) promptly take such steps or
action as are referred to in clauses 19.2 and 19.8 as the Buyer may from time to
time stipulate.

19.11

For the avoidance of doubt, in no event shall the Guarantee Obligations
impose any greater obligation or liability on the Guarantor than if the
Guarantor were jointly and severally liable with the Seller under the
Transaction Agreements.

19.12

All amounts payable in respect of the Guarantee Obligations will be paid by
the Guarantor without set off, deduction or counterclaim of any kind being made.

19.13

The Guarantor warrants to the Buyer as follows:

19.13.1

the Guarantor is duly incorporated under the laws of Delaware and has full
power and authority and has taken all necessary corporate action to enable it to
enter into, complete and perform this Agreement and all agreements to which it
is a party and entered into pursuant to this Agreement;

19.13.2

the Guarantor does not require the consent, approval or authority of any
other person to enter into or perform its obligations under this Agreement and
all agreements to which it is a party and entered into pursuant to this
Agreement;

19.13.3

the Guarantor is not engaged in any litigation or arbitration proceedings
which might have an effect upon its capacity or ability to perform its
obligations under this Agreement and all agreements to which it is a party and
entered into pursuant to this Agreement;

19.13.4

the Guarantor’s entry into and performance of this Agreement and all
agreements to which it is a party and entered into pursuant to this Agreement
will not constitute any breach of or default under any contractual, governmental
or public obligation binding upon it;

19.13.5

the Guarantor is solvent and able to pay its debts as they fall due; and

19.13.6

the Guarantor’s obligations under the Transaction Agreements and all
ancillary documents to be entered into pursuant to this Agreement are and will
be valid, binding and enforceable.

19.14

Notwithstanding the foregoing, all obligations of the Guarantor under this
clause 19 shall be subordinated in right of payment and priority to the payment
in full of the Guarantor’s obligations to primary group of lenders, led by
Hillair Capital Investments LLC, pursuant to a Securities Purchase Agreement and
Senior Secured Debenture dated February 4, 2011.

20

Value Added Tax

20.1

All amounts expressed in this Agreement as being payable by the Buyer are
expressed exclusive of any VAT which may be chargeable and the Buyer will pay to
the Seller in addition to such amounts an amount equal to any VAT for which the
Seller is liable to account to HM Revenue and Customs in respect of any supply
made by it to the Buyer under or in connection with this Agreement.

20.2

The parties intend that section 49, VATA and paragraph 5 of the Special
Provisions Order will apply to the transfer of the Business and the Seller and
the Buyer will each use their reasonable endeavours to secure that pursuant to
the provisions referred to above the sale of the Business is treated as neither
a supply of goods nor a supply of services for the purposes of VAT but as the
transfer of a business as a going concern, but nothing in this clause 20.2 shall
require the Seller to appeal or request any review of any determination made by
HM Revenue and Customs that section 49, VATA and paragraph 5 of the Special
Provisions Order do not apply in whole or in part to the transfer of the
Business.

20.3

If HM Revenue and Customs do not agree that the sale of the Business pursuant
to this Agreement falls within section 49, VATA and paragraph 5 of the Special
Provisions Order the Seller shall issue to the Buyer a valid VAT invoice in
respect of the sale of the Business. The Buyer shall forthwith on receipt of
such invoice pay to the Seller the VAT charged on the sale of the Business in
addition to the Price.

20.4

The Seller and the Buyer shall give to HM Revenue and Customs such notice of
the sale and purchase of the Assets pursuant to this Agreement as may be
required by paragraph 11 of Schedule 1 VATA or as may otherwise be required by
law.

20.5

The Buyer hereby notifies the Seller that Article 5(2B) of the Value Added
Tax (Special Provisions) Order 1995 (as amended) does not apply to the Buyer and
will not apply on Completion.

21

Announcements and Publicity

21.1

No announcement or circular or other publicity in connection with the subject
matter of this Agreement (other than as permitted by this Agreement) will be
made by or on behalf of the Seller and the Buyer without the approval of the
other as to its content, form and manner of publication (such approval not to be
unreasonably withheld or delayed) save for an announcement by the Buyer that the
sale has taken place and save that any announcement, circular or other publicity
required to be made or issued by the Seller or the Buyer pursuant to any legal
or regulatory authority may be made or issued by the Seller or the Buyer without
such approval. The parties will consult together upon the form of any such
announcement, circular or other publicity.

22

Notices

22.1

Any notice or other communication required to be given under this Agreement
or in connection with the matters contemplated by it shall, except where
otherwise specifically provided, be in writing in the English language and shall
be addressed as provided in clause 22.2 and may be:

22.1.1

personally delivered, in which case it shall be deemed to have been given
upon delivery at the relevant address; or

22.1.2

if within the United Kingdom, sent by first class pre-paid post, in which
case it shall be deemed to have been given two Business Days after the date of
posting; or

22.1.3

if from or to any place outside the United Kingdom, sent by pre-paid priority
airmail, in which case it shall be deemed to have been given seven Business Days
after the date of posting; or

22.1.4

sent by fax, in which case it shall be deemed to have been given when
despatched, subject to confirmation of uninterrupted transmission by a
transmission report provided that any notice despatched by fax after 5 pm (at
the place where such fax is to be received) on any day shall be deemed to have
been received at 8am on the next Business Day.

22.2

The addresses and other details of the parties referred to in clause 22.1
are, subject to clause 22.3:

22.2.1

Seller: Signature Industries Limited

22.2.2

Buyer: McMurdo Limited

22.2.3

Guarantor: Digital Angel Corporation

22.3

Any party to this Agreement may notify the other parties of any change to its

address or other details specified in clause 22.2, provided that such
notification

22.4

For the avoidance of doubt, any notice or communication given under this
Agreement will not be validly served if sent by email.

23

Successors, Assigns and Third Parties

23.1

This Agreement will be binding upon and enure for the benefit of each party153s
successors and shall be assignable by the Buyer to the extent that the rights
and benefits under this Agreement shall enure for the benefit of the Buyer153s
assigns. Save as aforesaid this Agreement will not be assignable.

23.2

The parties agree that (save where may be expressly stated otherwise in this
Agreement) for the purposes of the Contracts (Rights of Third Parties) Act 1999
they do not intend any person other than a party to this Agreement to be able to
enforce any term of this Agreement.

24

Variation

24.1

No variation of this Agreement will be valid unless made in writing and
signed by or on behalf of each of the parties.

25

Waiver

25.1

Any waiver of any provision of this Agreement must be in writing and signed
by or on behalf of each of the parties. No failure or delay by any party in
exercising any right, power or privilege under this Agreement will operate as a
waiver thereof nor will any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.

25.2

Any waiver by any party of a breach of any provision of this Agreement will
not be a waiver of any subsequent breach of the same or any other provision.

26

Costs

26.1

The parties shall pay their own costs and expenses in relation to the
negotiation, preparation, execution and implementation of this Agreement.

27

Severance

27.1

If any provision of this Agreement shall be found by any court or
administrative body of competent jurisdiction to be invalid or unenforceable
such invalidity or unenforceability shall not affect the other provisions of
this Agreement which shall remain in full force and effect.

28

Further Assurance

28.1

The Seller will do, execute and perform and will procure to be done, executed
and performed all such further acts, deeds, documents and things as the Buyer
may require from time to time effectively to vest the beneficial ownership of
the Assets in the Buyer or as it directs free from all liens, charges, options,
encumbrances or adverse rights or interests of any kind and otherwise to give to
the Buyer the full benefit of this Agreement.

29

Entire Agreement

29.1

The Transaction Agreements, other documents in the Agreed Form and all
agreements entered, or to be entered into, pursuant to the terms of this
Agreement or entered into between the parties in writing and expressly referring
to this Agreement:

29.1.1

together constitute the entire agreement and understanding between the
parties with respect to the subject matter of this Agreement; and

29.1.2

(in relation to such subject matter) supersede all prior discussions,
understandings and agreements between the parties and their agents (or any of
them) and all prior representations and expressions of opinion by any party (or
its agent) to any other party (or its agent).

29.2

Each of the parties acknowledges that it is not relying on any statements,
warranties or representations given or made by any of them in relation to the
subject matter hereof, save those expressly set out in this Agreement, the
Disclosure Letter and other documents referred to in clause 29.1, and that it
shall have no rights or remedies with respect to such subject matter otherwise
than under this Agreement (and the documents executed at the same time as it or
referred to in it) save to the extent that they arise out of the fraud,
fraudulent misrepresentation or fraudulent concealment of any party.

30

Counterparts

30.1

This Agreement may be entered into in any number of counterparts, each of
which when executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same agreement.

31

Applicable Law and Jurisdiction

31.1

English law governs this Agreement. Each party irrevocably agrees to submit
to the exclusive jurisdiction of the courts of England over any claim or matter
arising out of or in connection with this Agreement and waives any objection to
proceedings in such courts on the grounds of venue or on the grounds that the
proceedings have been brought in an inconvenient forum.

32

Post-Completion Effect

32.1

This Agreement shall remain in full force and effect after and
notwithstanding Completion in respect of all obligations, agreements, covenants,
undertakings or conditions contained in or implied by this Agreement which have
not been done, observed or performed at or prior to Completion and all
warranties contained in or implied by this Agreement (including the Warranties)
shall continue in full force and effect after and notwithstanding Completion and
the parties may take action for any breach of non-fulfilment of any of them
after Completion.

Executed as a Deed by Signature Industries Limited acting by
a director in the presence of:

Director /s/ MIKE COOK

Witness signature

Name

(in block capitals)

Address

Executed as a Deed by McMurdo Limited acting by a director
in the presence of:

/s/ CHRISTOPHE FRANCOIS

Witness signature

Name

(in block capitals)

Address

Executed as a Deed by Digital Angel Corporation acting by a
director in the presence of:

/s/ JOSEPH GRILLO

Witness signature

Name

(in block capitals)

Address