Stock Purchase Agreement – Digital Angel Corp. and Allflex USA, Inc.

STOCK PURCHASE AGREEMENT

by and between

ALLFLEX USA, INC.

and

DIGITAL ANGEL CORPORATION

dated as of

May 6, 2011

TABLE OF CONTENTS

ARTICLE I. PURCHASE AND SALE OF SHARES		1
Section 1.1.	Sale and Transfer of Shares	1
Section 1.2.	Consideration; Purchase Price	1
ARTICLE II. THE CLOSING		2
Section 2.1.	The Closing	2
Section 2.2.	Post-Closing Adjustment	3
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER		4
Section 3.1.	Organization	4
Section 3.2.	Authorization	5
Section 3.3.	Execution; Validity of Agreement	5
Section 3.4.	Consents and Approvals; No Violations	5
Section 3.5.	Ownership of Shares	6
Section 3.6.	Capitalization	6
Section 3.7.	Subsidiaries	6
Section 3.8.	Financial Statements	7
Section 3.9.	Absence of Certain Changes	8
Section 3.10.	Property and Assets	8
Section 3.11.	Leases, Contracts and Commitments	9
Section 3.12.	SEC Documents	9
Section 3.13.	Ethical Practices	10
Section 3.14.	Insurance	10
Section 3.15.	Litigation; Other Proceedings	10
Section 3.16.	Environmental and Health and Safety Matters	10
Section 3.17.	Compliance with Laws	11
Section 3.18.	Employee Benefit Employee Plans	12
Section 3.19.	Tax Matters	14
Section 3.20.	Intellectual Property	16
Section 3.21.	Labor Matters	18
Section 3.22.	Affiliate Transactions	19
Section 3.23.	Information Supplied	19
Section 3.24.	Condition of Physical Assets	19
Section 3.25.	Accounts Receivable	19
Section 3.26.	Inventory	19
Section 3.27.	Material Customers and Suppliers	19
Section 3.28.	Product Warranties	20
Section 3.29.	Information Technology.	20
Section 3.30.	Brokers or Finders	20
Section 3.31.	No Retained Assets	20
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER		21
Section 4.1.	Organization	21
Section 4.2.	Authorization; Validity of Agreement	21
Section 4.3.	Consents and Approvals; No Violations	21
Section 4.4.	Litigation	21
Section 4.5.	Brokers or Finders	21
Section 4.6.	Financing	22
Section 4.7.	Purchaser Status	22
Section 4.8.	Experience of Such Purchaser	22
Section 4.9.	Company and Subsidiary Information	22

Section 4.10.	No Other Representations and Warranties	22
ARTICLE V. COVENANTS OF SELLER AND PURCHASER		22
Section 5.1.	Interim Operations of the Company	22
Section 5.2.	Access	24
Section 5.3.	Preparation of the Proxy Statement; Stockholders Meeting	25
Section 5.4.	No Solicitation	26
Section 5.5.	Pre-Closing Transfers	28
Section 5.6.	Indebtedness	28
Section 5.7.	Efforts and Actions to Cause Closing to Occur	29
Section 5.8.	Tax Matters	30
Section 5.9.	Publicity	34
Section 5.10.	Transition Services	34
Section 5.11.	Intercompany Arrangements	34
Section 5.12.	Books and Records	34
Section 5.13.	Insurance Policies	35
Section 5.14.	Bank Accounts	35
Section 5.15.	Notices of Certain Events	35
Section 5.16.	Further Assurances	36
Section 5.17.	Confidentiality	36
Section 5.18.	Non-Competition; Non-Solicitation	36
Section 5.19.	Non-Compete Agreement	38
Section 5.20.	Qualified Employee Plans	38
Section 5.21.	Use of Digital Angel Name	38
ARTICLE VI. CONDITIONS		39
Section 6.1.	Conditions to Each Party153s Obligation to Effect the Closing	39
Section 6.2.	Conditions to Obligations of Purchaser to Effect the Closing	39
Section 6.3.	Conditions to Obligations of Seller to Effect the Closing	40
ARTICLE VII. TERMINATION		40
Section 7.1.	Termination	40
Section 7.2.	Effect of Termination	41
Section 7.3.	Termination Fees	42
ARTICLE VIII. INDEMNIFICATION		42
Section 8.1.	Indemnification; Remedies	42
Section 8.2.	Notice of Claim; Defense	44
Section 8.3.	Reductions for Insurance Proceeds and Other Recoveries	44
Section 8.4.	Rights Under Escrow Agreement	45
Section 8.5.	Tax Treatment of Payments	45
Section 8.6.	Change in Control Payments	45
Section 8.7.	Payment of Direct Claims	45
ARTICLE IX. DEFINITIONS AND INTERPRETATION		45
Section 9.1.	Definitions	45
Section 9.2.	Interpretation	53
ARTICLE X. MISCELLANEOUS		54
Section 10.1.	Fees and Expenses	54
Section 10.2.	Amendment and Modification	54
Section 10.3.	Notices	54
Section 10.4.	Counterparts; Facsimile	55
Section 10.5.	Entire Agreement; No Third Party Beneficiaries	55
Section 10.6.	Severability	55
Section 10.7.	Governing Law	56
Section 10.8.	Jurisdiction	56

Section 10.9.	Waiver of Trial by Jury.	56
Section 10.10.	Time of Essence	56
Section 10.11.	Extension; Waiver	56
Section 10.12.	Assignment	56
Section 10.13.	Specific Performance	57

iii

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement, dated as of May 6, 2011, is by and between
Allflex USA, Inc., a Delaware corporation (“Purchaser“), and Digital
Angel Corporation, a Delaware corporation (“Seller“). Certain capitalized
terms used in this Agreement have the meanings assigned to them in Article
IX.

WHEREAS, Seller is the holder of all the capital stock of Destron Fearing
Corporation, a Delaware corporation (the “Company“);

WHEREAS, the Company and its Subsidiaries are engaged in the business of
developing, manufacturing, distributing and selling RFID and visual
identification tags, readers and related software for animals, including cattle,
livestock, swine, horses, sheep, goats, deer, llamas, companion animals and fish
(the “Business“);

WHEREAS, Seller wishes to sell, and Purchaser wishes to acquire, all of the
outstanding capital stock of the Company, which consists exclusively of the
Shares, upon the terms and subject to the conditions set forth herein;

WHEREAS, Seller does not intend to transfer to Purchaser, and Purchaser does
not intend to be the transferee of or otherwise assume, any liabilities or
assets related to the Seller153s Emergency Locator Business conducted by Seller153s
Subsidiary Signature Industries Limited; and

WHEREAS, the Board of Directors of Seller has approved and adopted, and
recommends that the stockholders of Seller approve and adopt this Agreement and
the transactions contemplated hereby, upon the terms and subject to the
conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows:

ARTICLE I.

PURCHASE AND SALE OF SHARES

Section 1.1. Sale and Transfer of Shares. Subject to the terms and
conditions of this Agreement, at the Closing, Seller shall sell, convey, assign,
transfer and deliver to Purchaser all of the issued and outstanding Shares, free
and clear of all Encumbrances, and Purchaser shall, or shall cause its
designated Subsidiary to, purchase, acquire and accept the Shares from Seller.

Section 1.2. Consideration; Purchase Price.

(a) As consideration for the Shares and the covenants and undertakings
contained herein, Purchaser shall pay to Seller, in the manner described herein,
an amount equal to: (i) $25,000,000 less the Assumed Debt; as adjusted
in accordance with Section 2.2 (the “Purchase Price“).

(b) At least five Business Days prior to the anticipated Closing Date, Seller
shall deliver to Purchaser Seller153s good faith estimate, together with
reasonable supporting detail, of the Assumed Debt (the “Estimated Assumed
Debt“).

ARTICLE II.

THE CLOSING

Section 2.1. The Closing.

(a) The closing of the sale and transfer of the Shares by Seller to Purchaser
(the “Closing“) shall take place at the offices of Winthrop &
Weinstine, P.A. at 10:00 am (Minneapolis time), not later than four Business
Days following the satisfaction or waiver of all conditions set forth in
Article VI (other than those conditions that are to be satisfied at
Closing, but subject to the waiver or fulfillment of those conditions), unless
another date or place is agreed in writing by each of the parties hereto.

(b) At the Closing, Purchaser shall:

(i) deliver an amount in immediately available funds equal to $25,000,000
less the Estimated Assumed Debt, less the sum of (A) the
Escrow Amount, (B) the Adjustment Escrow Amount and (C) the Payoff Amount, by
wire transfer of immediately available U.S. funds to an account(s) specified in
writing by Seller at least four Business Days prior to the Closing Date;

(ii) deposit a cash amount equal to $2,500,000 (the “Escrow Amount“)
in an escrow account (the “Escrow Account“), to be retained and
distributed by Wells Fargo Bank, National Association (or such other Person as
is mutually agreed by Seller and Purchaser), as escrow agent (the “Escrow
Agent“), pursuant to the terms of this Agreement and an escrow agreement
substantially in the form attached hereto as Exhibit A (the “Escrow
Agreement“);

(iii) deposit a cash amount equal to $1,200,000 (the “Adjustment Escrow
Amount“) in an escrow account (the “Adjustment Escrow Account“), to
be retained and distributed by the Escrow Agent, pursuant to the terms of this
Agreement and the Escrow Agreement;

(iv) deliver an amount equal to each of the payoff amounts indicated on the
payoff letters delivered by Seller in accordance with Section 5.6 by wire
transfer of immediately available funds (or as otherwise specified in such
payoff letters) to the creditors identified in such payoff letters, the
aggregate of such amounts not to exceed the Payoff Amount;

(v) deliver to Seller the certificate specified in Section 6.3(c);

(vi) deliver to Seller a copy of the Escrow Agreement duly executed by
Purchaser; and

(vii) deliver to Seller a copy of the Transition Services Agreement duly
executed by the Company.

(i) deliver to Purchaser, or its Affiliate designated in writing by
Purchaser, one or more certificates representing all the Shares, each such
certificate to be duly and validly endorsed in favor of Purchaser or accompanied
by a separate stock power duly and validly executed by Seller and otherwise
sufficient to vest in Purchaser or its designated Affiliate legal and beneficial
ownership of such Shares, free and clear of all Encumbrances;

(ii) deliver to Purchaser duly executed resignations and releases from the
directors of the Company and its Subsidiaries, the Seller, and the following
officers of the Company: Joseph J. Grillo and Patricia M. Petersen, each
effective as of the Closing;

(iii) deliver to Purchaser the certificate specified in Section
6.2(c);

(iv) deliver to Purchaser a copy of the Escrow Agreement duly executed by
Seller;

(v) deliver to Purchaser a copy of the Transition Services Agreement duly
executed by Purchaser; and

(vi) deliver to Purchaser the executed payoff letters, UCC-3 termination
statements, and other documents referred to in Section 5.6.

Section 2.2. Post-Closing Adjustment.

(a) Within 60 calendar days following Closing, Purchaser will deliver to
Seller a consolidated balance sheet of the Business as of the Closing Date (the
“Closing Date Balance Sheet“), and a certificate (the “Closing
Certificate“), together with reasonable supporting detail, setting forth
Purchaser153s calculation of the Assumed Debt and the Closing Date Net Working
Capital. Purchaser will provide Seller and its accountants reasonable access to
the books and records and personnel of the Business during the period of the
preparation of the Closing Date Balance Sheet, Closing Certificate and the
Closing Date Net Working Capital and the resolution of any disputes that may
arise under this Section 2.2. The calculation of Closing Date Net Working
Capital shall be prepared in accordance with (i) GAAP, consistently applied, and
using the same GAAP accounting, principles, practices and policies that were
used to prepare the Carve-Out Statements, and (ii) the illustrative calculation
of the Closing Date Net Working Capital, which is attached hereto as Exhibit
B.

(b) Seller shall have 120 calendar days following receipt of the Closing
Certificate to deliver to Purchaser a written notice (a “Notice of
Dispute“) that Seller disputes Purchaser153s calculation of any of the amounts
or any portion of the amounts set forth therein, which Notice of Dispute shall
set forth in reasonable detail the basis for each element of such dispute. If
Seller does not deliver a Notice of Dispute on or before the expiration of such
120-day period (or if Seller notifies Purchaser in writing that there is no such
dispute), the calculation of the Assumed Debt and the Closing Date Net Working
Capital set forth in the Closing Certificate shall be deemed to be final,
binding and conclusive as to the parties. In the event that Seller delivers a
Notice of Dispute with respect to only certain of the amounts or certain
portions of the amounts set forth in the Closing Certificate but not others,
then any undisputed amount or portion thereof shall be deemed to be final,
binding and conclusive as to the parties. In the event Seller delivers a Notice
of Dispute to Purchaser, Seller and Purchaser shall cooperate in good faith to
resolve any such dispute as promptly as possible.

(c) In the event that Purchaser and Seller are unable to resolve all such
disputes on or before the 30th calendar day following the delivery of the Notice
of Dispute, then Purchaser and Seller shall retain a partner at the accounting
firm of Grant Thornton LLP to resolve such dispute, or if no partner at Grant
Thornton LLP is willing and able to take on such assignment, a mutually
acceptable third party firm, the retention of which will not give rise to
present or potential future auditor independence problems for any party or any
of their respective Affiliates as determined in each party153s reasonable
discretion (Grant Thornton LLP or such firm being referred to as the
“Accounting Arbitrator“). The Accounting Arbitrator may only resolve
disagreements as to matters covered by the Notice of Dispute. All matters not
covered by the Notice of Dispute shall be deemed to be final, binding and
conclusive. The determination by the Accounting Arbitrator shall be final,
binding and conclusive on Seller and Purchaser. Purchaser and Seller each shall
promptly provide their assertions regarding the Assumed Debt and the Closing
Date Net Working Capital, as applicable, in writing to the Accounting Arbitrator
and to each other. The Accounting Arbitrator shall consider only those items and
amounts which are identified in the Notice of Dispute as being items which
Seller and Purchaser are unable to resolve. The Accounting Arbitrator153s
determination will be based solely on the calculation of the Assumed Debt and
the Closing Date Net Working Capital. Further, the Accounting Arbitrator153s
determination shall be based solely on the presentations by Purchaser and Seller
which are in accordance with the terms and procedures set forth in this
Agreement (i.e., not on the basis of an independent review). The fees, costs and
expenses of the Accounting Arbitrator shall be borne one half by Purchaser and
one half by Seller; provided, however, if the Accounting Arbitrator
determines that one party153s position is completely correct, then such party
shall pay none of the fees, costs and expenses of the Accounting Arbitrator and
the other party shall pay all such fees, costs and expenses. The Accounting
Arbitrator shall be instructed to render its determination as soon as reasonably
possible (which the parties agree should not be later than 60 calendar days
following the day on which the disagreement is referred to the Accounting
Arbitrator). The Accounting Arbitrator shall conduct its determination
activities in a manner wherein all materials submitted to it are held in
confidence and shall not be disclosed to third parties. The parties agree that
judgment may be entered upon the determination of the Accounting Arbitrator in
any court having jurisdiction over the party against which such determination is
to be enforced.

(d) Within five (5) Business Days after the Assumed Debt and the Closing Date
Net Working Capital shall have become final, binding and conclusive in all
respects, in accordance with this Section 2.2, then (i) if the Closing
Date Net Working Capital is less than $1,000,000, Seller and Purchaser shall
jointly instruct the Escrow Agent to release the difference to the Purchaser
from the Adjustment Escrow Account, and if the difference is greater than the
balance in the Adjustment Escrow Account, the Seller shall pay any such
shortfall to the Purchaser; (ii) if the Closing Date Net Working Capital is
greater than $4,000,000, the Purchaser shall pay the difference to the Seller,
(iii) if the Assumed Debt is greater than the Estimated Assumed Debt, the Seller
and Purchaser shall jointly instruct the Escrow Agent to release the difference
to the Purchaser from the Adjustment Escrow Account, and if the difference is
greater than the remaining balance in the Adjustment Escrow Account, the Seller
shall pay any such shortfall to the Purchaser, and (iv) after taking into
account any payments under Subsections 2.2(d)(i) or 2.2(d)(iii),
the Seller and Purchaser shall jointly instruct the Escrow Agent to release the
balance, if any, of the Adjustment Escrow Account to the Seller.

(e) All payments under Section 2.2(d) shall be made by wire transfer
of immediately available funds to an account specified in writing by the
receiving party, and such wire transfer shall include, in addition to the amount
specified in Section 2.2(d), an amount equal to interest accrued on such
amount at the annual Prime Rate as announced by Wells Fargo Bank, National
Association on the Closing Date (compounded quarterly) for the period from the
Closing Date through the date of payment.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the corresponding numbered Schedules of the Disclosure
Schedule (provided, however, that a matter disclosed with respect to
one representation or warranty shall also be deemed to be disclosed with respect
to each other representation or warranty to which the matter disclosed
reasonably relates, to the extent such relationship is readily apparent on the
face of the disclosure contained in the Disclosure Schedule), Seller represents
and warrants to Purchaser as follows:

Section 3.1. Organization. Each of Seller and the Company (a) is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware; (b) has all requisite corporate power and authority to carry on its
business and the Business as they are now being conducted and to own, lease and
operate the properties and assets that such Person now owns or that are used in
the Business; and (c) is duly qualified or licensed to do business in, and is in
good standing (or the equivalent) under the laws of, every jurisdiction in which
such qualification is required, except where the failure to be so qualified or
licensed would not, individually or in the aggregate, have a Material Adverse
Effect. Seller has heretofore delivered to Purchaser complete and correct copies
of the certificate of incorporation and by-laws of the Company as presently in
effect. Schedule 3.1 contains a list that, to the Knowledge of Seller,
sets forth each jurisdiction in which the Company is qualified or licensed to do
business.

Section 3.2. Authorization.

(a) Seller has the requisite corporate power and authority to execute,
deliver and perform this Agreement and, subject to receipt of Stockholder
Approval, to consummate the Closing. The execution, delivery and performance by
Seller of this Agreement and the consummation by Seller of the Closing have been
duly authorized by the Board of Directors of Seller, and no other corporate
action on the part of Seller is necessary to authorize the execution, delivery
and performance by Seller of this Agreement or the consummation by Seller of the
Closing, subject in the case of the consummation by Seller of the Closing to
obtaining the Stockholder Approval.

(b) Seller153s Board of Directors has (i) approved and adopted this Agreement
and approved the transactions contemplated hereby, (ii) determined that the
transactions contemplated hereby are advisable, fair to, and in the best
interests of Seller and its stockholders, and (iii) resolved to submit this
Agreement to the stockholders of Seller for approval, file the Proxy Statement
with the SEC and recommend that the stockholders of Seller approve and adopt
this Agreement.

(c) The affirmative vote (in person or by proxy) of the holders of at least a
majority of the outstanding shares of common stock of Seller at the Stockholders
Meeting, or any adjournment or postponement thereof, in favor of the approval of
this Agreement and the transactions contemplated hereby (the “Stockholder
Approval“) is the only vote or approval of the holders of any class or
series of capital stock of Seller or any of its Subsidiaries that is necessary
to approve this Agreement, approve the transactions contemplated hereby, and
perform and consummate the transactions contemplated by this Agreement.

Section 3.3. Execution; Validity of Agreement. This Agreement has been
duly executed and delivered by Seller, and, assuming due and valid
authorization, execution and delivery hereof by Purchaser, is a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
Law, now or hereafter in effect, relating to or limiting creditors153 rights
generally and (ii) equitable remedies of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.

Section 3.4. Consents and Approvals; No Violations. Except for: (i)
the filing by Seller with, and the receipt of the approval (or the SEC does not
comment on within the required timeframe) of, the SEC of a proxy statement
relating to the Stockholders Meeting (as amended or supplemented from time to
time, the “Proxy Statement“), (ii) the receipt of Stockholder Approval,
(iii) other filings required under, and other applicable requirements of, the
Exchange Act and the rules and regulations promulgated thereunder, and (iv)
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, state securities or blue sky laws
the execution and delivery of this Agreement by Seller or the performance of any
of Seller153s obligations hereunder will not require any filing with or notice by
Seller or the Company to, or the issuance or provision to Seller or the Company
of, any permit, authorization, consent or approval of, any Governmental Entity.
None of the execution, delivery or performance of this Agreement by Seller or,
except as set forth on Schedule 3.4, the consummation by Seller of the
Closing will (a) conflict with, violate or result in any breach of any provision
of the certificate of incorporation or by-laws of Seller or any organizational
document of the Company or any of its Subsidiaries, (b) result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
or adverse modification of any terms or rights under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation (“Contract“) to
which Seller, the Business, or the Company is a party or by which any of them or
any of their respective properties, assets or rights may be bound, (c) violate
any statute, law, constitutional provision, code, regulation, ordinance, rule,
ruling, judgment, decision, order, writ, injunction, decree, issued guidance or
other requirement of any Government Entity (“Law“) applicable to Seller,
the Company, the Company153s Subsidiaries or any of their respective properties or
assets, (d) cause the Company or any Subsidiary of the Company to become subject
to or liable for any Tax (other than as set forth in Section 5.8(g)), or
(e) result in any Encumbrance on any of the properties or assets of the Company
or any of the Material Company Subsidiaries.

Section 3.5. Ownership of Shares. Seller is the sole record, legal and
beneficial owner of the Shares, free and clear of all Encumbrances, except for
any Encumbrances created by this Agreement. Upon the Closing, Purchaser will
acquire full legal and beneficial ownership of the Shares free of any
Encumbrance.

Section 3.6. Capitalization. The authorized capital stock of the
Company consists of 1,000 shares of common stock. As of the date hereof, the
issued and outstanding capital stock of the Company consists exclusively of
1,000 shares of common stock, par value $.01 per share, all of which are owned
by Seller (the “Shares“). All of the Shares have been duly authorized and
validly issued, and are fully paid and non-assessable. None of the Shares were
issued in violation of any preemptive or similar right of any Person or in
violation of any Contract. There are no outstanding or authorized options,
warrants, rights or agreements to which either Seller or the Company is a party
or by which either of them may be bound obligating either of them (a) to issue,
deliver or sell, or refrain from issuing, delivering or selling, any shares of
capital stock of the Company, or to grant, extend or enter into any such option,
right or agreement, (b) to repurchase, redeem or otherwise acquire, or to
refrain from repurchasing, redeeming or otherwise acquiring, any shares of
capital stock of the Company, or to grant, extend or enter into any such option,
right or agreement or (c) to vote, or to refrain from voting, any shares of
capital stock of the Company.

Section 3.7. Subsidiaries.

(a) Each of the Subsidiaries of the Company, and each such Subsidiaries that
own more than nominal assets and liabilities related to the Business (the
“Material Company Subsidiaries“), are listed on Schedule 3.7(a).
Schedule 3.7(a) identifies the Subsidiaries of the Company that are
Material Company Subsidiaries. Except for the Material Company Subsidiaries, the
Company153s Subsidiaries own only nominal assets and liabilities, none of which
are material to the Business. Other than as set forth in the previous sentence,
the Company does not own, directly or indirectly, any capital stock or other
ownership interests, or have any obligations to acquire any capital stock or
other ownership interests or make any investment, in any corporation,
partnership, joint venture or other Person.

(b) Each of the Material Company Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate power and authority to carry on
the Business as now being conducted and to own, lease and operate the properties
and assets that it now owns or that are used in the Business; and (c) is duly
qualified or licensed to do business in, and is in good standing (or the
equivalent) under the laws of, every jurisdiction in which such qualification is
required, except where the failure to be so qualified or licensed would,
individually or in the aggregate, have a Material Adverse Effect. Seller has
heretofore delivered to Purchaser complete and correct copies of the
organizational documents of each Material Company Subsidiary as presently in
effect. Schedule 3.7(b) indicates each jurisdiction in which each
Material Company Subsidiary is qualified or licensed to do business and which
entity owns the equity of each Material Company Subsidiary.

(i) all of the authorized and outstanding equity interests in the Subsidiary
is owned of record and beneficially by the Company or another of its Material
Company Subsidiaries, free of any Encumbrance (other than Permitted
Encumbrances);

(ii) all of the outstanding equity interests in the Material Company
Subsidiary were validly issued in exchange for consideration required for valid
issuance, if any, all of which such consideration has been fully paid;

(iii) none of the equity interests in the Material Company Subsidiary was
issued in violation of a preemptive or similar right of any Person or in
violation of any Contract; and

(iv) there are no outstanding or authorized options, warrants, rights or
agreements to which the Material Company Subsidiary is a party or by which it
may be bound obligating it (a) to issue, deliver or sell, or refrain from
issuing, delivering or selling, any equity interests of the Material Company
Subsidiary, or to grant, extend or enter into any such option, right or
agreement, (b) to repurchase, redeem or otherwise acquire, or to refrain from
repurchasing, redeeming or otherwise acquiring, any equity interests of the
Material Company Subsidiary, or to grant, extend or enter into any such option,
right or agreement or (c) to vote, or to refrain from voting, any equity
interests of the Material Company Subsidiary.

Section 3.8. Financial Statements.

(a) The Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis and fairly present the financial position and the
results of operations and cash flows of the Seller and the Business, as
applicable, as of the dates and for the periods referred to therein.

(b) The Company does not have any liabilities or obligations of any nature,
whether accrued, absolute, fixed, known or unknown, contingent, or otherwise,
whether due or to become due and whether or not required to be recorded or
reflected on a balance sheet under GAAP, other than (a) liabilities that are set
forth in the Carve-Out Statements, (b) liabilities (including Taxes) incurred in
the ordinary course of business consistent with past practice since the Balance
Sheet Date, (c) liabilities under contractual obligations to be performed after
the date hereof under Contracts entered into the ordinary course of business,
and (d) as of the date hereof, the Excluded Liabilities. Schedule 3.8(b)
sets forth all Indebtedness of the Company and its Subsidiaries related to the
Business, including the names of the parties to which such Indebtedness is owed
and the principal amount outstanding as of the date hereof.

(c) The books and records of each of the Company and the Material Company
Subsidiaries are correct and complete in all material respects. The books and
records of each of the Company and the Material Company Subsidiaries have been
maintained in accordance with sound business practices, including the
maintenance of a system of internal controls adequate for the size, operations
and business of each of the Company and the Material Company Subsidiaries to
ensure that (i) all transactions related to each of the Company and the Material
Company Subsidiaries are executed in accordance with management153s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
the preparation of financial statements in conformity with GAAP applied on a
consistent basis and to maintain proper accountability for assets, (iii) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences, and (iv) access to the properties and assets of each of the Company
and the Material Company Subsidiaries is permitted only in accordance with
management153s general or specific authorizations. Seller has provided Purchaser
with correct and complete copies of or access to the books and records of each
of the Company and the Material Company Subsidiaries.

Section 3.9. Absence of Certain Changes. Except as set forth on
Schedule 3.9, since the Balance Sheet Date, there has not been any
change, effect, event or circumstance that has had or would reasonably be
expected to have a Material Adverse Effect. Except as set forth on Schedule
3.9, since the Balance Sheet Date, the Company has not taken action that, if
taken after the date hereof, would require Purchaser153s consent under Section
5.1.

Section 3.10. Property and Assets.

(a) Other than as set forth in Schedule 3.10(a), the Company has, or
on the Closing Date will have, good title to, or a valid lease, license or right
to use, all assets, properties and rights used in the conduct of the Business
and sufficient to conduct the Business as it was conducted during the periods
covered by the Financial Statements and is currently conducted, free of any
Encumbrances other than Permitted Encumbrances.

(b) Except as set forth in Schedule 3.10(b), those real and other
tangible properties purported to be owned by the Company are held free and clear
of all Encumbrances other than (i) Encumbrances for Taxes not yet due and
payable, (ii) mechanics153, materialmen153s, carriers153, warehousemen, workers153,
repairers153, landlords153 and similar liens arising or incurred in the ordinary
course of business consistent with past practice, (iii) zoning, entitlement,
building and other land use regulations that are not violated by current
occupancy or use, (iv) customary covenants, conditions, restrictions, easements
and similar restrictions of record affecting title that do not impair current
occupancy or use, (v) Encumbrances for Taxes that the Company is contesting in
good faith, and (vi) purchase money liens and liens securing rental payments
under capital lease arrangements; provided, however, the underlying
obligation is paid in the ordinary course of business consistent with past
practice when due; (clauses (i) through (vi) being “Permitted
Encumbrances“).

(c) Schedule 3.10(c) sets forth a complete list of all real property
that is owned (the “Owned Real Property“) or leased (the “Leased Real
Property“) by the Company or any of its Subsidiaries as identified on the
Schedule.

(d) Each parcel of Owned Real Property is owned by the party identified on
Schedule 3.10(c) and such owner has good and marketable indefeasible fee
simple title to such parcel, free and clear of all Encumbrances except Permitted
Encumbrances. The facilities located on each parcel of Owned Real Property do
not encroach any adjacent real property or any easement, right of way or other
Encumbrance that burdens any portion of such Owned Real Property. No structure
or other improvement on any land adjacent to any parcel of Owned Real Property
encroaches onto any portion of such Owned Real Property. There is no outstanding
Contract to purchase, or option or right of first refusal to purchase, any
parcel of Owned Real Property.

(e) With respect to Leased Real Property, Seller has delivered to Purchaser a
correct and complete copy of every lease and sublease (including all amendments,
extensions, renewals, guaranties and other agreements with respect to them)
pursuant to which the Company or any of its Subsidiaries is a party or by which
it is bound (each, a “Real Property Lease“). As to each Real Property
Lease: (i) the Company or Company Subsidiary designated as lessee has peaceful
and undisturbed possession of the related Leased Real Property and there is no
material claim or material Proceeding pending with respect to the Real Property
Lease, (ii) the Real Property Lease is legal, valid, binding, enforceable and in
full force and effect as to all parties to it, and contains the entire agreement
of the parties with respect to its subject matter, and (iii) neither the Company
nor any of its Subsidiaries is in material breach of the Real Property Lease,
and to the Knowledge of Seller, no other party is in material breach of the Real
Property Lease.

Section 3.11. Leases, Contracts and Commitments.

(a) Schedule 3.11(a) sets forth a complete list as of the date hereof
of executory Contracts to which the Company or any of the Material Company
Subsidiaries is a party (or by which the Business or any of the assets,
properties or rights of the Company, or the Business is bound) and that (i)
provides for or is reasonably likely to result in future payments by the Company
or the Business, or to the Company or the Business, of more than $100,000 per
annum (excluding purchase orders for inventory entered into or incurred in the
ordinary course of business consistent with past practice); (ii) was entered
into by the Company or the Business with Seller, any Affiliate of Seller (other
than the Company) or with any officer or director of Seller or any Affiliate of
Seller (including the Company); (iii) is a partnership, limited liability
company, joint venture or similar agreement, or pursuant to which the Company or
the Business has an obligation to make an investment in or loan to any Person;
(iv) under which the Company or the Business has created incurred, assumed,
guaranteed or secured Indebtedness; (v) contains outstanding obligations
relating to the settlement of any Proceeding; (vi) relates to the acquisition or
disposition of any business, operations or division (whether by merger, sale of
stock, sale of assets or otherwise) to the extent any unresolved claims or
actual or contingent obligations of any party thereunder remain; (vii) restricts
the Company or the Business (including any Contract that would restrict
Purchaser or any of its Subsidiaries at any time from and after the Closing)
from engaging in any business activity anywhere in the world; (viii) is a
written employment, consulting or collective bargaining agreement; or (ix)
assuming the Company were a reporting company under the Exchange Act, would need
to be filed as an exhibit pursuant to Item 601 of Regulation S-K (any such
Contract, whether or not listed in Schedule 3.11(a), a “Material
Contract“).

(b) There is not and, to the Knowledge of Seller, there has not been claimed
or alleged by any Person, with respect to any Material Contract, any existing
breach or event that, with notice or lapse of time or both, would constitute a
breach or event of default thereunder on the part of the Company or the
Business. Each of the Material Contracts is in full force and effect and is
valid and binding on the Company, and, to the Knowledge of Seller, each other
party thereto.

Section 3.12. SEC Documents. Since December 31, 2008, Seller has filed
all reports, registrations, and statements it was required to file with the SEC
under the Securities Act, or under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act, including, but not limited to Seller153s Annual Reports on Form
10-K, Forms 10-Q, Form 8-K, registration statements, definitive proxy
statements, and information statements (collectively, the “Seller SEC
Documents“). Seller has provided or made available, via EDGAR, to Purchaser
copies of the Seller SEC Documents, each in the form (including exhibits and any
amendments thereto) filed with the SEC (or, if not so filed, in the form used or
circulated). Except to the extent amended or superseded by a subsequent filing
with the SEC made prior to the date hereof, as of their respective dates or if
so amended or superseded, then on the date of such subsequent filing, each of
the Seller SEC Documents, including the financial statements, exhibits and
schedules thereto, filed or circulated prior to the date hereof complied (and
each of the Seller SEC Documents filed prior to the Closing will comply) as to
form with applicable securities Laws and did not (or in the case of reports,
statements, or circulars filed after the date of this Agreement, will not)
contain any untrue statement of a material fact regarding the Company or omit to
state a material fact regarding the Company required to be stated or
incorporated by reference therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading.

Section 3.13. Ethical Practices. Except as permitted under applicable
Law, no current or former director, officer, manager, agent or employee of the
Company or any Subsidiary of the Company has offered or given anything of value
to any official or employee of a Governmental Entity, any political party or
official thereof, or any candidate for political office (i) with the intent of
inducing such Person to use such Person153s influence with any Governmental Entity
to affect or influence any act or decision of such Governmental Entity to assist
the Company in obtaining or retaining business for, or with, or directing
business to, any Person in contravention of any Law applicable to the Company,
(ii) constituting a bribe, kickback or illegal or improper payment to assist the
Company in obtaining or retaining business for or with any Governmental Entity,
or (iii) otherwise in violation of the U.S. Foreign Corrupt Practices Act of
1977, as amended, or any similar Law of a non-U.S. jurisdiction in which the
Business is conducted.

Section 3.14. Insurance. Seller has provided Purchaser with true and
accurate copies of all insurance policies in effect as of the date hereof that
provide coverage with respect to the Business or any properties or assets used
in the Business. No written notice of default, cancellation or termination has
been received with respect to any such insurance policy, and to the Knowledge of
Seller, no event has occurred that, with the lapse of time or the giving of
notice or both, would constitute a default under any such insurance policy.
There are no historical gaps in coverage with respect to any such policy, and no
such limitations of liability have been exhausted under any such policy.

Section 3.15. Litigation; Other Proceedings. Except as set forth in
Schedule 3.15, there is no Proceeding pending (or, to the Knowledge of
Seller, threatened) (a) by, against or relating to the Company, the Business or
any properties, assets or rights of the Company or the Business or (b) as of the
date hereof, relating to this Agreement or any Related Document or any of the
transactions contemplated hereby or thereby. The Company is not subject to any
outstanding order, writ, injunction or decree of any Governmental Entity (an
“Order“).

Section 3.16. Environmental and Health and Safety Matters.

(a) During the three years preceding the Closing Date, each of the Company
and the Material Company Subsidiaries has been and is currently in material
compliance with all applicable Environmental Laws. Any past violations have been
resolved without any pending, ongoing or future costs, obligations or
liabilities.

(b) During the three years preceding the Closing Date, neither the Company
nor any Material Company Subsidiary is conducting or funding any investigation,
cleanup, mitigation, restoration or reparation, or remedial or corrective action
or has agreed to assume the liability of any other Person (including without
limitation agreements to indemnify or hold harmless any such other Person) with
respect to any Release of Hazardous Materials, whether voluntarily or as
required by Environmental Law.

(c) During the three years preceding the Closing Date, each of the Company
and the Material Company Subsidiaries has (i) maintained and has been and is in
material compliance with all Permits required for the Business pursuant to
Environmental Laws, (ii) has filed all applications and made any required
payments for the renewal of such Permits, in each case, in a timely manner, and
(iii) made all other filings and reports required by such Permits with the
appropriate Governmental Entity in a timely manner.

(d) There is no Proceeding pending (or, to the Knowledge of Seller,
threatened) by, against or relating to the Company or any of the Material
Company Subsidiaries either (i) pursuant to Environmental Laws or (ii) arising
from the Release or presence of or exposure to Hazardous Substances, whether on
or off the property owned or operated by the Company or any of the Material
Company Subsidiaries.

(e) There are no conditions or circumstances, including without limitation
the Release or presence of or exposure to any Hazardous Substances, reasonably
anticipated to result in liabilities or obligations to, or requirements for
notification, investigation or remediation by, the Company or any of the
Material Company Subsidiaries pursuant to Environmental Laws.

(f) All waste materials generated by the Company or any of the Material
Company Subsidiaries have been properly stored, transported, treated and
disposed of in accordance with all applicable Environmental Laws.

(g) Seller has provided to Purchaser with true and complete copies of all
written environmental, health or safety assessments, audits, investigations, and
sampling or similar reports directed to or obtained by the Company or any of the
Material Company Subsidiaries since January 1, 2009, including any documents
relating to the Release or presence of or exposure to Hazardous Substances.

(h) No Encumbrances pursuant to Environmental Laws have been or are imposed
on the Owned Real Property or the Leased Real Property (or any other property
operated by the Company or any of the Material Company Subsidiaries), and to the
Knowledge of Seller, no such Encumbrances have been threatened.

Section 3.17. Compliance with Laws.

(a) The Company or its Subsidiaries are in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders (“Permits“) of any
Governmental Entity that is necessary for it to carry on the Business as it is
now being conducted and is in material compliance with the terms and
requirements of all such Permits and no suspension or cancellation of any of the
foregoing is pending or, to the Knowledge of Seller, threatened. Schedule
3.17(a) contains a list that, to the Knowledge of Seller, is a true and
complete list of all Permits material to the Business, the Company or any of the
Material Company Subsidiaries.

(b) Since January 1, 2009, none of the Company or its Subsidiaries (i) has
been in material violation of any applicable Law or (ii) has received written
notice of any violation or alleged violation of any Law, except violations or
alleged violations that have been resolved prior to the date hereof without any
continuing obligation or liability of the Company or its Subsidiaries. To the
Knowledge of the Seller, no Law has been enacted but is not yet effective, or
has been proposed, that, if and when effective, would require a material
modification to the conduct of the Business in the same manner in which it was
conducted during the periods covered by the Financial Statements and as
conducted since. Each of the Company and its Subsidiaries has complied at all
times since January 1, 2009 with all Laws of the United States and any other
country that restrict or prohibit the export, import, re-export, trade or
transfer of products of the Business or technical data or other information,
including: the U.S. Export Administration Regulations; the Arms Export Control
Act; the Export Administration Act of 1979; the International Emergency Economic
Powers Act; the International Traffic in Arms Regulations; the Munitions List;
the National Defense Authorization Act; the National Emergencies Act; and the
Trading with the Enemy Act, each as amended.

Section 3.18. Employee Benefit Employee Plans.

(a) Schedule 3.18(a) contains a true and complete list of all Employee
Plans. The Company has delivered to Purchaser a true and complete copy of (i)
each written Employee Plan and all amendments thereto and each agreement
creating or modifying any related trust or other funding vehicle, (ii) the three
most recent annual reports (including schedules and attachments) with respect to
each Employee Plan (if any such report was required by applicable Law); (iii)
the most recent summary plan description (or similar document) for each Employee
Plan, along with any summary of material modifications; (iv) all determination,
opinion and advisory letters received from the IRS with respect to each Employee
Plan, if applicable (and a complete set of plan and trust documents (including a
complete set of plan and trust documents of any plans merged into such Employee
Plan) since January 1, 1989 or, if later, the date of the last determination
letter for such Employee Plan); (v) financial statements and actuarial reports
for each Employee Plan for the past three years, if applicable; (vi) any pending
determination letter application, or if none, a complete set of the last
determination letter application submitted to the Internal Revenue Service with
respect to each Employee Plan, along with any subsequent correspondence
regarding such determination letter, and (vii) all material correspondence with
any Governmental Entity regarding any Employee Plan.

(b) No Employee Plan has been a “multi-employer plan,” as defined in Section
3(37) of ERISA or under the provisions of any other applicable Law nor has any
Employee Plan been subject to Section 302 or 303 or Title IV of ERISA or Section
412 or 430 of the Code. No liability under Title I or IV or Section 302 or 303
of ERISA, the penalty, excise Tax or joint and several liability provisions of
the Code or under any Law or regulation relating to the Employee Plans has been
incurred by the Company or any ERISA Affiliate. The PBGC has not instituted
proceedings to terminate any Title IV Employee Plan and no condition exists that
presents a risk that such proceedings will be instituted. Neither the Company
nor any ERISA Affiliate has ever had any liability or obligation under Title IV
of ERISA, Section 302 or 303 of ERISA or Section 412 or Section 430 of the Code,
including, but not limited to, any contribution obligation to a “multiemployer
plan,” as defined in Section 3(37) of ERISA. No Employee Plan is a “multiple
employer plan” (within the meaning of Section 413(c) of the Code or Section
4001(a)(3) of ERISA). Except as disclosed in Schedule 3.18(b) neither the
Company nor Purchaser (or its Subsidiaries) will on or after Closing have any
liability or obligation for any Employee Plan.

(c) None of the Employee Plans provide, and the Company has no liability with
respect to, any post-employment life or health insurance or other welfare
benefits except as may be required by Section 4980B of the Code or other
applicable Law.

(d) Each Employee Plan has been, to the extent applicable, established,
registered, qualified, funded, invested, operated and administered in accordance
with, and is in good standing under, its terms and applicable Law, including
ERISA and the Code. Seller and Company have not been notified of any, and to the
Knowledge of Seller, there are no investigations by any Governmental Entity,
termination proceedings or other claims (except routine claims for benefits
payable under the Employee Plans) against or involving any Employee Plan or
asserting any rights to or claims for benefits under any Employee Plan. All
contributions or premiums required by Law or by the terms of the Employee Plan
have been made. There are no Taxes, penalties or fees owing under any of the
Employee Plans and no facts or circumstances exist with respect to any such
Employee Plan which would lead to such Taxes, penalties or fees. All liabilities
of the Company (whether accrued, absolute, contingent or otherwise) related to
all Employee Plans have been fully and accurately disclosed in accordance with
GAAP in the Financial Statements and no changes have occurred to any Employee
Plan or are reasonably expected to occur which could adversely affect the report
related to such Employee Plan, if any, or the Financial Statements.

(e) Each Employee Plan which is intended to meet the requirements of a
“qualified plan” under Code Section 401(a) (“Qualified Employee Plan“)
either (A) has received a determination letter from the IRS to the effect that
such Employee Plan is so qualified and meets the requirements of Code Section
401(a) and its trust is exempt from federal income taxation under Section 501(a)
of the Code, or (B) is a prototype plan or volume submitter plan subject to an
opinion letter or advisory letter issued by the IRS on which letter the Company
is permitted to rely from January 1, 1989, forward. Each of the Qualified
Employee Plans (including but not limited to any plan merged into such Qualified
Employee Plan) has been timely amended by the appropriate parties to comply with
all applicable legislation and IRS guidance, as required by ERISA, the Code and
other applicable law. Each Qualified Employee Plan that is (a) individually
designed or (b) a prototype/volume submitter plan has a favorable determination
letter from the IRS which covers all amendments to the Code, as amended by the
Tax Reform Act of 1986, and as further amended by subsequent legislation (or has
timely submitted an application to the IRS requesting that such a letter be
issued). No favorable determination letter (or if applicable, opinion letter)
has been revoked with respect to any Qualified Employee Plan, and revocation has
not been threatened, nor has any event or omission occurred that would adversely
affect the qualification under Section 401(a) of the Code of each Qualified
Employee Plan. There has been no termination or, except as set forth on
Schedule 3.18(e), partial termination, as defined in Section 411(d) of
the Code and regulations thereunder, with respect to any Qualified Employee
Plan.

(f) Except as listed on Schedule 3.18(f), neither the execution or
delivery of this Agreement nor the consummation of the transactions contemplated
by this Agreement will, either alone or in conjunction with any other event
(whether contingent or otherwise) (i) result in any payment or benefit becoming
due or payable or required to be provided, to any director, employee or
independent contractor of the Company, (ii) increase the amount or value of any
benefit or compensation otherwise payable or required to be provided to any such
director, employee or independent contractor, (iii) result in the acceleration
of the time of payment, vesting or funding of any such benefit or compensation
or (iv) result in any amount failing to be deductible under Section 280G or
subject to any tax under Section 4999 of the Code.

(g) Except as listed on Schedule 3.18(g), there exists no liability in
connection with any Employee Plan that has terminated, and all procedures for
termination of each Employee Plan have been properly followed in accordance with
the terms of such terminated Employee Plan and applicable Law.

(h) None of the assets of any Employee Plan include any securities issued by
the Company or any ERISA Affiliate. None of the assets of any Employee Plan is
or has been invested in any property constituting employer real property within
the meaning of Section 407(d) of ERISA. Except as listed on Schedule
3.18(h), each Employee Plan covers only employees of the Company (or former
employees or beneficiaries with respect to service with the Company), so that
the transaction contemplated by this Agreement will require no spin-off of
assets or other division or transfer of rights with respect to any such plan.

(i) Each Employee Plan that is a “nonqualified deferred compensation
plan” (as determined under Section 409A of the Code) is exempt from the
substantive provisions of Section 409A of the Code.

(j) Since the date such Employee Plans were supplied to Purchaser, the
Company and its ERISA Affiliates have not modified, changed or terminated any
Employee Plan, and none of the Company and its ERISA Affiliates have any such
commitment, other than with respect to a modification, change or termination
required by ERISA, the Code or other applicable Law.

(k) No Employee Plan documentation or agreement, summary plan description or
other written communication distributed generally to employees, in any way
restricts, impairs or prohibits (whether legally binding or not) the Company,
any ERISA Affiliate or the Purchaser or any successor thereof from amending,
merging, terminating or otherwise discontinuing any Employee Plan in accordance
with the express terms of any such plan and applicable Law at or after Closing.

(l) The Company has no obligation or liability to, maintain, establish,
sponsor, participate in, or contribute to any International Benefit Employee
Plan. “International Benefit Employee Plan” means each Employee Plan that
has been adopted or maintained by Seller, Company or any of its ERISA
Affiliates, whether informally or formally, or with respect to which Seller,
Company and any of its ERISA Affiliates will or may have any liability, for the
benefit of employees who perform services outside the United States.

Section 3.19. Tax Matters.

(a) Except as set forth on Schedule 3.19(a), the Company and its
Subsidiaries have timely filed with appropriate Governmental Entities all Tax
Returns required to be filed by the Company and its Subsidiaries, and such Tax
Returns are correct, accurate and complete in all material respects. No
extension of time in which to file any such Tax Returns is currently in effect.

(b) All Taxes of the Company and its Subsidiaries to the extent due and
payable have been timely paid except to the extent of amounts that are being
contested in good faith. Any Taxes of the Company and its Subsidiaries that are
being contested in good faith are set forth on Schedule 3.19(f) and are
adequately reserved for in the Financial Statements and will be adequately
reserved for on the Closing Date Balance Sheet.

(c) All consolidated, combined or unitary Tax Returns that include the
Company or its Subsidiaries that are required to have been filed, have been
timely filed with appropriate Governmental Entities on or prior to the date
hereof, and such Tax Returns are correct in all material respects. No extension
of time in which to file any such Tax Returns is currently in effect. All Taxes
due with respect to such consolidated, combined or unitary Tax Returns that
include the Company or its Subsidiaries have been paid, except to the extent of
amounts that are being contested in good faith are set forth on Schedule
3.19(f), are adequately reserved for in the Financial Statements and will be
adequately reserved for in the Closing Date Balance Sheet.

(d) The Company and its Subsidiaries have withheld and paid timely all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or other third
party, and all Tax Returns required with respect thereto have been properly
completed and timely filed.

(e) There are no Encumbrances for Taxes upon any property or assets of the
Company and its Subsidiaries, except for Encumbrances for Taxes not yet due and
payable and except to the extent of amounts that are being contested in good
faith.

(f) Except as set forth in Schedule 3.19(f), no federal, state, local,
or foreign audits, examinations, investigations, reassessments, or other
administrative proceedings (such audits, examinations, investigations and other
administrative proceedings referred to collectively as “Audits“) or court
proceedings are presently pending or, to the Knowledge of Seller, being
initiated or considered with regard to any Taxes or Tax Returns filed by or on
behalf of the Company or any of its Subsidiaries, and there are no outstanding
issues that have been raised and communicated to Seller or the Company or any of
its Subsidiaries by any Governmental Entity for any fiscal period in respect of
which a Tax Return of the Company or any of its Subsidiaries has been audited.
Since January 1, 2004, no Governmental Entity has challenged or disputed a
filing position taken by the Company or its Subsidiaries or a Company
Predecessor in any Tax Return. Neither Seller nor the Company or any of its
Subsidiaries is aware of any contingent liabilities for Taxes or any grounds for
an assessment or reassessment of the Company or any of its Subsidiaries,
including unreported benefits conferred on any stockholder of the Company.
Neither Seller nor the Company nor any of the Company153s Subsidiaries has
received any indication from any Governmental Entity that an assessment or
reassessment of the Company or any of its Subsidiaries is proposed in respect of
any Taxes, regardless of its merits.

(g) There are no outstanding requests, agreements, consents or waivers to
extend the statutory period of limitations applicable to the assessment of any
Taxes or deficiencies against the Company or any of its Subsidiaries or with
respect to which the Company or any of its Subsidiaries could be held liable.

(h) There is no obligation of the Company or any of its Subsidiaries to
contribute to the payment of any Tax or any portion of a Tax (or any amount
calculated with reference to any portion of a Tax) of any Person other than the
Company and its Subsidiaries, including as transferee or successor, by Contract
or otherwise. Schedule 3.19(h) lists all consolidated, combined or
unitary groups that the Company in which the Company or any of its Subsidiaries
has been a member since January 1, 2004.

(i) No claim has been made in writing by any authority in a jurisdiction
where the Company or any of its Subsidiaries does not file Tax Returns that the
Company or any of its Subsidiaries is or may be subject to taxation by that
jurisdiction.

(j) Prior to the date hereof, Company has made available to Purchaser
complete and accurate copies of all Tax Returns filed prior to the date hereof
by Company or any of its Subsidiaries for all Tax periods beginning on or after
January 1, 2007. As of the Closing Date, Company has provided to Purchaser
complete and accurate copies of all Tax Returns filed after the date hereof and
prior to the Closing Date.

(k) Prior to the date hereof, the Company and its Subsidiaries have made
available to Purchaser complete and accurate copies of all Audit reports,
statements of deficiency, and similar documents received from any Governmental
Entity since January 1, 2004 relating to federal, state, local, or foreign Taxes
due from or with respect to the Company or any of its Subsidiaries.

(l) Except for any agreement with Seller or an Affiliate, neither the Company
nor any of its Subsidiaries is a party to or bound by any Tax-sharing agreement,
Tax indemnity obligation in favor of any Person or similar agreement in favor of
any Person with respect to Taxes (including any advance pricing agreement or
other similar agreement relating to Taxes with any Governmental Entity). The
Company has provided a copy of any Tax-sharing or other agreement with respect
to Taxes between the Company or any of its Subsidiaries on the one hand, and the
Seller or an Affiliate of the Seller on the other hand.

(m) Neither the Company nor any of its Subsidiaries is a party to any
agreement, contract, arrangement, or plan that has resulted or would result,
separately or in the aggregate, in the payment of any “excess parachute payment”
within the meaning of Code § 280G (or any corresponding provision of state,
local, or foreign Tax law).

(n) The Company has not been a United States real property holding
corporation within the meaning of Code §897(c)(2) during the applicable period
specified in Code §897(c)(1)(A)(ii). Except as set forth on Schedule
3.19(n), the Company has not been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common parent of
which was the Seller).

(o) Neither the Company nor any of its Subsidiaries will be required to
include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of any: (A) change in method of accounting for a taxable period
ending on or prior to the Closing Date; (B) “closing agreement” as described in
Code § 7121 (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date; intercompany
transactions or any excess loss account described in Treasury Regulations under
Code § 1502 (or any corresponding or similar provision of state, local or
foreign income Tax law); (D) installment sale or open transaction disposition
made on or prior to the Closing Date; (E) prepaid amount received on or prior to
the Closing Date; or (F) election under Code § 108(i).

(p) Neither the Company nor any of its Subsidiaries has distributed stock of
another Person, and has not had its stock distributed by another Person, in a
transaction that was purported or intended to be governed in whole or in part by
Code §355 or Code §361.

(q) Neither the Company nor any of its Subsidiaries is or has ever been a
party to any “listed transaction” as defined in §6707A(c)(2) and Treas. Reg.
§1.6011-4(b)(2). The Seller and the Company and each of its Subsidiaries have
properly disclosed all “reportable transactions” (within the meaning of Treasury
Regulations § 1.6011-4(b)(1), any predecessor regulation, or any similar
provision of state or foreign law) with respect to the Company or any of its
Subsidiaries on the applicable Tax Return of the reporting entity.

(r) Schedule 3.19(r) lists all entities, the Company153s ownership
percentage and the classification of each such entity for federal and state
income tax purposes that are owned in whole or in part directly or indirectly by
the Company that are treated as: (i) a corporation (including an association
taxable as a corporation); (ii) a partnership; or (iii) a disregarded entity. If
a “check-the-box” election under Treas. Reg. §301.7701-3 has been made with
respect to any of the entities listed on Schedule 3.19(r), Schedule
3.19(r) also indicates that a “check-the-box” election has been made with
respect to the applicable entity and the date of each check-the-box election.

(s) To the Knowledge of Seller and without regard to any limitation that may
be imposed by the Closing, Schedule 3.19(s) accurately sets forth the
amount of all loss and Tax credits of the Company and its Subsidiaries eligible
to be carried forward as of December 31, 2009 and as estimated as of December
31, 2010 and, to the Knowledge of Seller as set forth on such schedule, lists
whether these losses or credits are or will be immediately prior to the Closing
Date subject to any limitations under Code §382 , §383 or any other applicable
provision of federal, state, or foreign Tax Law.

Section 3.20. Intellectual Property.

(a) The Intellectual Property held under Licenses, together with the Owned
Intellectual Property (collectively, the “Material Intellectual
Property“), constitutes all of the material Intellectual Property used or
held for use in the conduct and operation of the Business as currently
conducted. Immediately following the Closing Date, no Intellectual Property
relating to the Business will be owned or licensed by Seller. The Company or its
Subsidiaries are the sole and exclusive owners of all right, title and interest
in or have the valid right to use, the Material Intellectual Property, free and
clear of all Encumbrances (other than Permitted Encumbrances) and shall have
such rights immediately after the Closing Date. Excluding all packaged,
commercially available “off-the-shelf” licensed software programs sold to the
public, Schedule 3.20(a) contains an accurate and complete list and
description of all Material Intellectual Property including, where applicable,
the name of the owner or licensee, registration or application numbers and dates
of registration or application. Except as set forth on Schedule 3.20(a),
neither the Company nor any Subsidiary of the Company has granted to any third
party, by License or otherwise, any right or interest in such Intellectual
Property, other than non-exclusive licenses to customers of the Business that
are software related, in the ordinary course of business consistent with past
practice.

(b) The conduct and operation of the Business as currently conducted,
including the use of the Material Intellectual Property therein, does not
infringe upon, misappropriate, violate or conflict in any way with any rights
(including rights in Intellectual Property) held by any Person. Neither Seller,
the Company nor any of their Affiliates have received any written demand,
written claim or written notice with respect to the Material Intellectual
Property which alleges that the Company or its Subsidiaries infringes upon,
misappropriates, violates or conflicts with the Intellectual Property rights of
any Person or which challenges the ownership, validity or enforceability of any
Material Intellectual Property. There is no pending or, to the Knowledge of
Seller, threatened written assertion or written claim that the use or
exploitation of any Material Intellectual Property by the Company or its
Subsidiaries or the conduct of the Business infringes upon, misappropriates,
violates or conflicts with the rights of any Person. None of the Material
Intellectual Property is subject to any outstanding Order or agreement adversely
affecting the use thereof in the Business or rights thereto of the applicable
owner. The Company is not party to any Proceeding which involves a claim of
infringement or misappropriation of any Intellectual Property of any third party
or of any Material Intellectual Property.

(c) To the Knowledge of Seller, (i) there are no unauthorized uses,
disclosures, infringements or misappropriations of any Material Intellectual
Property by any third party; (ii) there is not any fact or matter which would or
may create any such unauthorized use, disclosure, infringement or
misappropriation; (iii) registered Owned Intellectual Property is valid,
subsisting, in full force and effect and has not been cancelled, expired or
abandoned; (iv) there is no existing or threatened default under or violation of
any of the Licenses included in Schedule 3.20(a); and (v) there are no
material problems or defects in any software within the Owned Intellectual
Property that prevent such software from operating substantially as described in
its related documentation or specifications. Each of Seller, the Company and the
Material Company Subsidiaries is taking and has taken reasonable precautions to
protect the secrecy, confidentiality and value of any of its Material
Intellectual Property that constitutes a Trade Secret or confidential
information.

(d) Neither this Agreement nor the transaction contemplated hereunder will
result in: (i) the Company, a Material Company Subsidiary or Purchaser granting
to any third party any right to or with respect to any Intellectual Property
owned by, or licensed to, the Company or any of its Subsidiaries, or (ii) the
Company, a Material Company Subsidiary or Purchaser being bound by, or subject
to, any non-compete or other material restriction on the operation or scope of
their respective businesses or of the Business.

(e) The Company and the Material Company Subsidiaries have required each
employee and independent contractor of the Business, that has had material
involvement in the development of Intellectual Property used in the Business, to
execute an agreement relating to the confidentiality of their Business-related
work with the Company or the relevant Material Company Subsidiary, and execute
written assignments of any Business-related inventions to the Company or the
relevant Material Company Subsidiary.

Section 3.21. Labor Matters.

(a) Schedule 3.21(a) contains a correct and complete list of the
following information for each employee of the Business employed by the Company
or a Subsidiary of the Company as of the date hereof, including each employee on
leave of absence or layoff status (with benefit accruals or credits, as of the
most recent month-end): (i) employer; (ii) name; (iii) job title; (iv) vacation
accrued; (v) service credited for purposes of vesting and eligibility to
participate under any Employee Plan, (vi) the base compensation of each employee
whose base compensation for the current fiscal year exceeds $50,000, and (vii)
for each employee who has a target or other bonus or commission for the current
fiscal year in excess of $20,000, the target or other bonus amount. The
employees listed on Schedule 3.21(a) constitute all the employees
sufficient to conduct the Business as it is currently conducted.

(b) Except as set forth on Schedule 3.21(b), the employment of the
employees of the Business is “at will” and is terminable on such notice as is
required by Law, including common law notice.

(c) There is no labor strike, dispute, slowdown, stoppage or lockout actually
pending, or to the Knowledge of Seller, threatened against the Company or any of
the Material Company Subsidiaries.

(d) Except as set forth on Schedule 3.21(d), (i) no employee of the
Business is represented by a labor union or labor organization, and (ii) none of
the Company or the Material Company Subsidiaries is a party to or bound by any
collective bargaining agreement, labor contract, letter of understanding, letter
of intent, voluntary recognition agreement or legally binding commitment or
written communication with any labor organization, labor union, trade union or
employee organization and there are no pending, or to the Knowledge of Seller,
threatened representation campaigns, elections or proceedings concerning union
representation involving any employee of the Business.

(e) There is no unfair labor practice charge or complaint against the Company
pending or, to the Knowledge of Seller, threatened before the National Labor
Relations Board. Each of the Company and the Material Company Subsidiaries is in
compliance with all applicable Laws relating to labor and employment, including
but not limited to Laws relating to discrimination, disability, labor relations,
hours of work, payment of wages and overtime wages, pay equity, immigration,
workers compensation, working conditions, employee scheduling, family and
medical leave, and employee terminations.

(f) Since January 1, 2009, neither the Company nor any of the Material
Company Subsidiaries has effectuated a “plant closing” (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Business, and there has
not occurred a “mass layoff” (as defined in the WARN Act) affecting any site of
employment or facility of the Business. Within the last six months, neither the
Company nor any of the Material Company Subsidiaries has incurred any liability
or obligation which remains unsatisfied under the WARN Act or any other
applicable Laws regarding the termination or layoff of employees.

(g) To the Knowledge of Seller, none of the employees of the Company is in
violation of any non-competition, non-solicitation, non-disclosure or any
similar agreement with any third party.

(h) Schedule 3.21(h) contains a description of the workers153
compensation claims experience of the Business since September 30, 2008, as well
as, to the Seller153s Knowledge, any injury to or illness of any employee that
could become the subject of a workers153 compensation claim.

Section 3.22. Affiliate Transactions. None of (i) Seller, (ii) any
Affiliate of the Seller (other than the Company and its Subsidiaries) or (iii)
any director or officer of (x) the Seller or (y) any Affiliate of the Seller
(other than the Company and its Subsidiaries) (each of the foregoing, a
“Related Party“) has any interest in any Contract with, or relating to,
the Business or any of the properties, assets or rights of the Business, except
for those listed in Schedule 3.22 and for normal compensation for
services as an officer, director or employee of the Business.

Section 3.23. Information Supplied. The Proxy Statement will not, on
the date it is first mailed to stockholders of Seller and at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement, when filed with the SEC, will comply
as to form with the applicable requirements of the Exchange Act. The
representations and warranties contained in this Section 3.23 will not
apply to statements or omissions included in the Proxy Statement based upon
information furnished in writing to Seller by Purchaser specifically for use
therein.

Section 3.24. Condition of Physical Assets. Except as set forth in
Schedule 3.24, all tangible personal property used in the Business is in
good operating condition and repair (subject to normal wear and tear) and is
suitable for the purposes for which it is currently used in the Business. The
Owned Real Property and the Leased Real Property is structurally sound and in
suitable condition for the conduct of the Business in the same manner as it was
conducted during the periods covered by the Financial Statements, as conducted
since. Except for the foregoing warranty, Seller makes no warranties with
respect to the tangible personal property of the Company.

Section 3.25. Accounts Receivable. All accounts receivable of the
Business that are reflected on the accounting records of the Company as of the
Closing Date (collectively, the “Accounts Receivable“) represent or will
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. Unless paid prior to the
Closing, the Accounts Receivable are, or will be as of the Closing, current and
collectible, net of the reserves shown on the accounting records of the Company
as of the Closing. Subject to such reserves, each of the Accounts Receivable
either has been or will be collected in full, without any set-off, within one
hundred twenty (120) days after the day on which it first becomes due and
payable. To the Knowledge of Seller, there is no contest, claim, or right of
set-off, other than returns, customary reconciliation adjustments and customer
disputes in the ordinary course of business, under any Contract with any obligor
of an Accounts Receivable relating to the amount or validity of such Accounts
Receivable.

Section 3.26. Inventory. All inventory of the Company consists of a
quality and quantity usable and salable in the ordinary course of business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value on the accounting
records of the Company as of the Closing. All inventories of the Company not
written off have been priced at the lower of cost or market value on a first in,
first out basis.

Section 3.27. Material Customers and Suppliers. None of the five
largest customers (by revenue) of the Business (“Material Customers153),
and none of the five largest suppliers (by sales to the Business) of the
Business (“Material Suppliers“), in each case in the most recently
completed fiscal year, has delivered to Seller, the Company or any of the
Material Company Subsidiaries any notice which (a) terminated or materially
decreased its relationship with the Business, (b) changed the material terms of
its business arrangements with the Business, or (c) indicated its intention to
do so. Schedule 3.27 sets forth a list of the Material Customers and
Material Suppliers of the Business for the most recently completed fiscal year
(listing, for each such Material Customer and Material Supplier, the total
annual sales thereto or therefrom (as applicable) during such time period).
Neither the Company nor any Material Company Subsidiary is engaged in a material
dispute with any Major Customer or Major Supplier.

Section 3.28. Product Warranties. Each product sold, leased or
otherwise distributed by the Company and its Subsidiaries in connection with the
Business, whether manufactured by them or by another Person (each, a
“Company Product“), (i) has been manufactured in compliance with
applicable Law and (ii) has conformed to all requirements of quality or
condition in the applicable Contract and with any related implied warranty.
Neither the Company nor any Material Company Subsidiary has any liability (and
there is no basis for any claim) for replacement or repair of Company Products
or other damages in connection with Company Products in excess of the reserve
for product warranty or product liability claims shown on the Carve-Out
Statements, as such reserve would be adjusted for the passage of time through
the Closing Date in an amount consistent with the past warranty claim reserve
experience of the Business during the periods covered by the Carve-Out
Statements.

Section 3.29. Information Technology.

(a) Other than databases created by employees in the ordinary course of
business, as of the Closing Date, there will be no unlicensed software or
database is used by the Business or stored on any system or premises used or
occupied by any of the Company or Material Company Subsidiaries without the
Company or relevant Material Company Subsidiary paying for same or otherwise
accessing same lawfully in accordance with the terms under which access is
granted.

(b) The Company and Material Company Subsidiaries maintain commercially
reasonable disaster recovery plans and security procedures, taking into account
the nature of the Business.

(c) There have been no material interruptions, data losses or similar
incidents attributable to the Company Systems used by the Business. The Company
Systems have the capacity and performance necessary to meet the requirements of
the Business as currently conducted in all material respects, with respect to
the usage of the Company Systems.

(d) As used herein, “Company Systems” shall mean the material computer
and data processing systems, servers, software, databases, maintenance service
agreements, information and communications technologies used in the Business.
Schedule 3.29(d) sets forth a complete and correct list of all Company
Systems, including expiration or termination dates, if applicable, and
indicating whether such Company Systems are owned or licensed by the Company or
a Material Company Subsidiary.

Section 3.30. Brokers or Finders. Other than AgriCapital Corporation,
whose fees and expenses will be paid by Seller, no agent, broker, investment
banker, financial advisor or other firm is or will be entitled to any brokers153
or finder153s fee or other commission or similar fee in connection with the
transactions contemplated by this Agreement except for any agent, broker,
investment banker, financial advisor or other firm or Person engaged by
Purchaser.

Section 3.31. No Retained Assets. Effective as of the Closing, Seller
shall have, and caused each of its Subsidiaries to, transfer all assets owned by
Seller, directly or indirectly, that are used in the operation of the Business
to the Company or one of its Subsidiaries. Immediately after Closing, Seller
shall not, directly or indirectly, retain any assets that are used in the
operation of the Business.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller that:

Section 4.1. Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, (b) has all
requisite corporate or other legal entity power and authority to carry on its
business as it now being conducted and to own the properties and assets it now
owns and (c) is duly qualified or licensed to do business in every jurisdiction
in which such qualification is required, except where the failure to be so
qualified or licensed would, individually or in the aggregate, have a material
adverse effect on the Purchaser.

Section 4.2. Authorization; Validity of Agreement. Purchaser has the
requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the Closing. The execution, delivery and performance
by Purchaser of this Agreement and the consummation by Purchaser of the Closing
have been duly authorized by the Board of Directors of Purchaser, and no other
corporate action on the part of Purchaser is necessary to authorize the
execution, delivery and performance by Purchaser of this Agreement or the
consummation by Purchaser of the Closing. This Agreement has been duly executed
and delivered by Purchaser, and, assuming due and valid authorization, execution
and delivery hereof by Seller, is a valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar Law, now or hereafter in
effect, relating to or limiting creditors153 rights generally and (ii) equitable
remedies of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.

Section 4.3. Consents and Approvals; No Violations. Except for filings
required under, and other applicable requirements of, the Exchange Act and the
rules and regulations promulgated thereunder, except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, state securities or blue sky laws, none of the
execution, delivery or performance of this Agreement by Purchaser or the
consummation by Purchaser of the Closing will (a) conflict with or result in any
breach of any provision of the certificate of incorporation or by-laws or
similar organizational document of Purchaser, (b) require any filing with or
notice to, or permit, authorization, consent or approval of, any Governmental
Entity, (c) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) or any adverse modification of any
terms or rights under, any of the terms, conditions or provisions of any
Contract to which Purchaser or any of its Subsidiaries is a party or by which
any of them or any of their respective properties, assets or rights may be bound
or (d) violate any Law applicable to Purchaser, any of its Subsidiaries or any
of their respective properties or assets.

Section 4.4. Litigation. As of the date hereof, there is no Proceeding
pending or, to the knowledge of Purchaser, threatened against Purchaser or any
of its Affiliates relating to Seller, the Company, this Agreement or any Related
Document or any of the transactions contemplated hereby or thereby.

Section 4.5. Brokers or Finders. Neither Purchaser nor any of its
Subsidiaries or its Affiliates has entered into any agreement or arrangement
entitling any agent, broker, investment banker, financial advisor or other firm
or Person to any broker153s or finder153s fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement.

Section 4.6. Financing. Purchaser has sufficient funds to enable it to
consummate the transactions contemplated by this Agreement.

Section 4.7. Purchaser Status. Purchaser is either: (i) an “accredited
investor” as defined in Rule 501(a) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule 144A(a) under the Securities
Act.

Section 4.8. Experience of Such Purchaser. Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of purchasing the Shares, and has so evaluated the merits
and risks of such investment.

Section 4.9. Company and Subsidiary Information. Purchaser has had an
opportunity to discuss the Company and the Business with directors, officers and
management of Seller and the Company. Purchaser has also had the opportunity to
ask questions of and receive answers from, Seller and the Company and their
management, regarding the terms and conditions of purchasing the Shares pursuant
to this Agreement. Purchaser has used such access to its satisfaction in making
its investment decision.

Section 4.10. No Other Representations and Warranties. Purchaser
acknowledges and agrees that Seller makes no representations or warranties other
than as set forth in this Agreement and any certificates or documents delivered
pursuant to a requirement hereto or thereto.

ARTICLE V.

COVENANTS OF SELLER AND PURCHASER

Section 5.1. Interim Operations of the Company. Except as expressly
contemplated by this Agreement, during the period from the date of this
Agreement to the Closing, Seller will cause the Company and its Subsidiaries to
conduct the Business according to its ordinary course of business consistent
with past practice, and Seller will use, and will cause each of the Company and
its Subsidiaries to use, its commercially reasonable efforts to preserve intact
its business organization, to keep available the services of its current
officers and employees and to preserve the goodwill of and maintain satisfactory
relationships with those Persons having business relationships with the Company
or the Business. Without limiting the generality of the foregoing and except as
otherwise expressly provided in this Agreement, Schedule 5.1 or (after
prior notice to Purchaser) required by Law, during the period from the date of
this Agreement to the Closing, Seller will cause each of the Company and its
Subsidiaries (excluding Signature Industries Limited and Timely Technology
Corporation) not to:

(a) (i) amend its certificate of incorporation or by-laws or (ii) (A) issue,
sell, transfer, pledge, dispose of or encumber any shares of any class or series
of its capital stock, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of any class or series of its capital stock, (B) declare, set aside or
pay any non-cash dividend or any other distribution payable in stock or property
(other than cash and cash equivalents) with respect to any shares of any class
or series of its capital stock, (C) split, combine or reclassify any shares of
any class or series of its stock or (D) redeem, purchase or otherwise acquire
directly or indirectly any shares of any class or series of its capital stock,
or any instrument or security which consists of or includes a right to acquire
such shares;

(b) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other corporate
reorganization;

(c) change in any material respect any of the accounting methods used by it
unless required by a change in applicable GAAP;

(d) (i) adopt or change any accounting method relating to Taxes, (ii) make,
change or revoke any election relating to Taxes, or (iii) enter into any closing
agreement relating to Taxes, settle any claim or assessment relating to Taxes or
consent to any claim or assessment relating to Taxes or any waiver of the
statute of limitations for any such claim or assessment, without the express
written consent of the Purchaser, such consent not to be unreasonably withheld,
conditioned or delayed;

(e) make or become legally committed to any new capital lease or any other
new capital expenditure in excess of $100,000 individually or $200,000 in the
aggregate;

(f) sell, lease, license, subject to any Encumbrance (other than Permitted
Encumbrances) or otherwise dispose of any assets (including Material
Intellectual Property) other than (i) the sale of assets having a market value
not in excess of $25,000 individually or $50,000 in the aggregate and not
otherwise material to the Business, (ii) the sale of inventory or excess or
obsolete equipment, or settlement of accounts receivable; (iii) sale of products
to customers, in each case in the ordinary course of business consistent with
past practice; or (iv) the transfer of Excluded Assets in accordance with
Section 5.5;

(g) acquire or offer to acquire any corporation, partnership, limited
liability company, other business organization or division thereof or any
assets, in each case involving payments or receipt of consideration in excess of
$25,000 individually or $50,000 in the aggregate (other than acquisitions from
suppliers in the ordinary course of business consistent with past practice);

(h) make any loans or advances to any Person other than loans to employees
(who are not officers or directors) in the ordinary course of business
consistent with past practice;

(i) settle or compromise any Proceeding if such settlement or compromise (i)
involves aggregate payments by (or forgiveness of amounts payable to) the
Company after the Closing in excess of $100,000 in respect of any such
Proceedings or in excess of $200,000 in respect of all such Proceedings, (ii)
involves any relief other than money damages or (iii) relates to this Agreement,
any Related Document, or any of the transactions contemplated hereby or thereby;

(j) cancel, compromise, fail to exercise, waive or release any Indebtedness
or other right or claim, or series of related rights or claims, that have a
value that would reasonably be expected to exceed $100,000 in the aggregate;

(k) create, incur, assume, guarantee or amend the terms of any Indebtedness,
except for Indebtedness incurred pursuant to existing credit facilities in the
ordinary course of business consistent with past practice;

(l) to the extent that such transaction would be required to be disclosed
under Section 3.22 (Affiliate Transactions) if such transaction were
entered into immediately prior to the date hereof, enter into any transaction
with or for the benefit of any Related Party other than the transactions
contemplated by this Agreement;

(m) except in the ordinary course of business consistent with past practice,
enter into, assume or amend in any material respect, terminate, or waive or
assign any material rights under, any Material Contract or other Contract or
commitment that would have been a Material Contract if entered into prior to the
date hereof;

(n) fail to maintain insurance on its material assets and properties in such
amounts and of such kinds comparable to that in effect since January 1, 2011;

(o) fail to maintain an adequate stock of inventory due to a failure to place
purchase orders for inventory or continue its advertising and promotional
activities, and pricing and purchasing policies in the aggregate in accordance
with the ordinary course of business consistent with past practice;

(p) change in any material respect its policies or practices regarding its
accounts receivable or accounts payable;

(q) fail to make any applications for renewal as and when required for any
Permits necessary for the conduct of its business or the operation of its
facilities or the Business;

(r) (i) make or commit to make any change in the compensation (including
bonuses) payable or to become payable to any director, manager, officer or other
employee of the Business (other than normal recurring salary and wage increases
in the ordinary course of business consistent with past practice or pursuant to
plans, programs or agreements existing on the date hereof) or (ii) enter into,
or adopt or amend, any bonus, incentive, deferred compensation, insurance,
medical, hospital, disability or severance plan, agreement or arrangement or
enter into, adopt or materially amend any employee benefit plan or employment,
consulting or management agreement, other than any such amendment to an employee
benefit plan that is made to maintain the qualified status of such plan or its
continued compliance with applicable Law;

(s) (i) adopt, amend or terminate any Employee Plan or adopt or enter into
any plan or arrangement that would be considered an Employee Plan if it were in
existence on the date hereof or increase the benefits provided under any
Employee Plan, or promise or commit to undertake any of the foregoing in the
future or (ii) enter into, amend or extend any collective bargaining or other
labor agreement or agree to the certification of any bargaining unit without the
prior written consent of Purchaser, which consent shall not be unreasonably
withheld, conditioned or delayed;

(t) (i) hire any individual as an officer of the Company or a Material
Company Subsidiary without Purchaser153s prior written consent (not to be
unreasonably withheld or delayed), (ii) hire any other employee of the Business
except in the ordinary course of business consistent with past practice; or
(iii) terminate any employee of the Business except in the ordinary course of
business consistent with past practice, unless such employee153s employment is
terminated prior to the Closing Date for cause (as determined by Seller in its
reasonable discretion) or due to such employee153s death, disability or voluntary
resignation, or, except as otherwise provide by applicable Law;

(u) take, or agree to or commit to take, any action that would cause, or fail
to take any action that would prevent, the failure of (i) any of the
representations and warranties in Article III to be true and correct as
if made and restated during the period after the date hereof through and
including the Closing Date or (ii) any of the conditions to the Closing set
forth in Article VI to be satisfied; or

(v) enter into any agreement, contract, commitment or arrangement to do any
of the foregoing.

Notwithstanding the foregoing Sections 5.1 (a) through (v),
Seller and Company may take the actions contemplated in Section 5.5
without notice to or consent of Purchaser.

Section 5.2. Access. Seller shall and shall cause the Company and its
Subsidiaries prior to the Closing to (a) give Purchaser and its authorized
representatives, upon reasonable advance notice and during regular business
hours, reasonable access to all books, records, personnel, officers and other
facilities and properties of or related to the Business, (b) permit Purchaser to
make such copies and inspections thereof, upon reasonable advance notice and
during regular business hours, as Purchaser may reasonably request and (c) cause
the officers of the Business and the Company and the Material Company
Subsidiaries to furnish Purchaser with such unaudited financial and operating
data and other information with respect to the Business and the business and
properties of the Company as is regularly prepared in the ordinary course that
Purchaser may from time to time reasonably request and provide to Purchaser,
whether or not requested, copies of all monthly and quarterly financial reports
about the Business that are distributed to officers or directors of the Company
or Seller; provided, however, that any such access shall be conducted
at a reasonable time and not interfere with the normal operations of the
business of Seller or the Company. Any information obtained by Purchaser
pursuant to this Section 5.2 shall be subject to the terms and conditions
of the Confidentiality Agreement.

Section 5.3. Preparation of the Proxy Statement; Stockholders
Meeting.

(a) As soon as practicable following the date of this Agreement, Seller shall
prepare the Proxy Statement, and within no more than 10 days after the date
hereof and after consulting with Purchaser and giving Purchaser at least three
Business Days to review and comment (and the Seller shall give reasonable and
good faith consideration to all additions, deletions or changes suggested
thereto by Purchaser), Seller shall file the preliminary Proxy Statement with
the SEC. Seller shall thereafter use its reasonable best efforts to respond as
promptly as practicable to any comments of the SEC with respect to the Proxy
Statement and to cause the Proxy Statement to be mailed to the stockholders of
Seller as promptly as practicable after the date of this Agreement. Seller shall
promptly notify Purchaser upon the receipt of any comments from the SEC or its
staff or any request from the SEC or its staff for amendments or supplements to
the Proxy Statement, shall consult with Purchaser prior to responding to any
such comments or request or filing any amendment or supplement to the Proxy
Statement, and shall provide Purchaser with copies of all correspondence between
Seller and its representatives, on the one hand, and the SEC and its staff, on
the other hand relating to the Proxy Statement. If at any time prior to the
Closing any information in the Proxy Statement should be discovered by Seller
which should be set forth in an amendment or supplement to the Proxy Statement
so that any of such documents would not include any misstatement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, Seller shall promptly notify Purchaser and, to the extent required
by Law, file with the SEC and mail to its stockholders an appropriate amendment
or supplement describing such information.

(b) Seller shall, as soon as practicable following the date of this
Agreement, establish a record date for, duly call, give notice of, convene and
hold a meeting of its stockholders (the “Stockholders Meeting“) for the
purpose of obtaining Stockholder Approval. Subject to Section 5.4, Seller
shall, through its Board of Directors, recommend to its stockholders approval of
this Agreement and include such recommendation in the Proxy Statement.
Notwithstanding anything to the contrary contained in this Agreement, unless
this Agreement has been terminated in accordance with Section 7.1: (i)
Seller shall be required to hold the Stockholders Meeting even if its Board of
Directors has adopted an Adverse Recommendation Change, and (ii) Seller shall
not change the record date for, postpone or adjourn the Stockholders Meeting
without the prior written consent of the Purchaser. Unless the Seller153s Board of
Directors shall have effected an Adverse Recommendation Change, the Seller shall
use reasonable best efforts to solicit proxies in favor of the approval of this
Agreement. Seller shall ensure that all proxies solicited in connection with the
Stockholders Meeting are solicited in compliance with all applicable Laws.

Section 5.4. No Solicitation.

(a) Seller shall not, and shall cause its Subsidiaries respective directors,
officers and employees and each investment banker, financial advisor, attorney,
accountant and each other advisor, agent or representative retained by or acting
at the direction of Seller in connection with the transactions contemplated by
this Agreement (collectively, “Representatives“) to not, directly or
indirectly: (i) solicit, initiate, facilitate or knowingly encourage any
Takeover Proposal or any inquiry that constitutes or would reasonably be likely
to lead to a Takeover Proposal; (ii) other than to inform such third party of
the provisions of this Section 5.4, participate in any discussions or
negotiations regarding any Takeover Proposal or any inquiry that constitutes or
would reasonably be likely to lead to a Takeover Proposal, furnish to any Person
any information or data with respect to, or otherwise cooperate with or take any
action to knowingly facilitate any proposal that constitutes or would reasonably
be expected to lead to any Takeover Proposal, or requires Seller to abandon,
terminate or fail to consummate the transactions contemplated by this Agreement;
or (iii) enter into any letter of intent, memorandum of understanding, merger
agreement or other agreement or understanding (whether oral or written, binding
or nonbinding) relating to, or that would reasonably be expected to lead to, any
Takeover Proposal. Notwithstanding the foregoing, prior to Stockholder Approval,
if the Board of Directors of Seller determines, after consultation with outside
counsel, in good faith by resolution duly adopted that an unsolicited written
Takeover Proposal received after the date hereof other than in breach of this
Section 5.4 constitutes or is reasonably likely to lead to a Superior
Proposal and that it is reasonably necessary to take such action to comply with
its fiduciary duties to the stockholders of Seller under applicable Law, then
Seller, after giving Purchaser prompt written notice of such determination (and
in any event no later than 48 hours after such determination), may (A) furnish
any information with respect to Seller and the Company to the Person (and its
Representatives) making such Takeover Proposal pursuant to a confidentiality
agreement not less restrictive of such Person than the Confidentiality
Agreement; provided, however, all such information provided or
furnished to such Person has been provided or furnished previously to Purchaser
or is provided or furnished to Purchaser concurrently with it being provided or
furnished to such Person and (B) participate in discussions and negotiations
with such Person (and its Representatives) regarding a Takeover Proposal.

(b) In the event Seller receives a Takeover Proposal or request for
information or inquiry that relates to or would be reasonably likely to lead to
a Takeover Proposal, Seller shall promptly (within 48 hours) provide Purchaser
with a copy (if in writing) and summary of the material terms and conditions of
such Takeover Proposal, request or inquiry and the identity of the Person (and
its equity investors, if known by Seller) making such Takeover Proposal, request
or inquiry, and shall keep Purchaser reasonably informed of the status of any
financial or other material modifications to such Takeover Proposal, request or
inquiry, including by conveying a copy of all such modifications that are in
writing, promptly (within 48 hours) of any of Seller153s officers153, directors153 or
financial advisors153 receipt thereof.

(c) Except as expressly permitted by this Section 5.4(c), the Board of
Directors of Seller or any committee thereof shall not and shall not publicly
propose to (i)(A) withdraw or modify, in a manner adverse to Purchaser, the
approval of this Agreement or the recommendation by such Board of Directors or
committee that stockholders of Seller approve this Agreement (the “Board
Recommendation“), (B) recommend to the stockholders of Seller, or approve or
adopt, a Takeover Proposal or (C) in the event that any Takeover Proposal is
publicly announced or any Person commences a tender offer or exchange offer for
any outstanding shares of common stock of Seller, fail to issue a press release
that reaffirms the Board Recommendation and, in the case of a tender offer or
exchange offer, recommend against acceptance of such tender offer or exchange
offer by Seller stockholders, in each case within 10 Business Days of such
announcement or commencement (for the avoidance of doubt, the taking of no
position by the Board of Directors of Seller in respect of the acceptance of any
tender offer or exchange offer by its stockholders shall constitute a failure to
recommend against any such offer) (any action, publicly proposed action or
inaction described in this clause (i) being referred to as an “Adverse
Recommendation Change“); or (ii) enter into, approve or authorize Seller or
the Company to enter into any letter of intent, memorandum of understanding, or
any merger, acquisition, option, joint venture, partnership or similar agreement
(whether oral or written, binding or nonbinding) with respect to any Takeover
Proposal (other than a confidentiality agreement, subject to the requirements
set forth in Section 5.4(a)) (each, an “Acquisition Agreement“).
Notwithstanding the foregoing, (x) the Board of Directors of Seller may, subject
to compliance with this Section 5.4, withdraw or modify the Board
Recommendation if such Board determines (after receiving the advice of its
outside counsel) in good faith by resolution duly adopted that it is reasonably
necessary to do so to comply with its fiduciary duties to the stockholders of
Seller under applicable Law or (y) if the Board of Directors of Seller receives
a Takeover Proposal that such Board determines, in good faith by resolution duly
adopted, constitutes a Superior Proposal, Seller or the Company may, subject to
compliance with this Section 5.4, enter into a definitive written
Acquisition Agreement with respect to such Superior Proposal if such Board
determines (after receiving the advice of its outside counsel) in good faith by
resolution duly adopted that it is reasonably necessary to do so to comply with
its fiduciary duties to the stockholders of Seller under applicable Law and
concurrently with entering into such Acquisition Agreement terminates this
Agreement pursuant to Section 7.1(d)(ii). If Seller desires to enter into
such a Acquisition Agreement with respect to a Takeover Proposal or to make an
Adverse Recommendation Change, it shall give Purchaser written notice (an
“Adverse Recommendation Notice“) containing a description of the material
terms of such Takeover Proposal or any other basis for an Adverse Recommendation
Change, the most current version of any Acquisition Agreement relating to the
Superior Proposal, if any, any other information required by Section
5.4(b) and, if applicable, advising Purchaser that the Board of Directors of
Seller has determined that such Takeover Proposal is a Superior Proposal, that
such Board has determined (after receiving the advice of its outside counsel) in
good faith by resolution duly adopted that it is reasonably necessary to do so
to comply with its fiduciary duties to the stockholders of Seller under
applicable Law and that the Board intends to enter into a definitive written
Acquisition Agreement with respect to such Superior Proposal. Seller may make an
Adverse Recommendation Change or terminate this Agreement pursuant to
Section 7.1(d)(ii) only if during the five Business Day period following
Purchaser153s receipt of the Adverse Recommendation Notice (it being understood
and agreed that the Seller shall provide notice to Purchaser of any material
amendment to the terms of any such Superior Proposal and such five Business Day
notice period shall be extended such that five Business Days remain in the
notice period from the time the Purchaser is notified of the amendment), (i) the
Seller shall have offered to negotiate with (and, if accepted, negotiated in
good faith with), and shall have caused its respective financial and legal
advisors to offer to negotiate with (and, if accepted, negotiate in good faith
with), Purchaser in making adjustments to the terms and conditions of this
Agreement as would enable the Seller to proceed with the transactions
contemplated by this Agreement and the other transactions contemplated by this
Agreement, and (ii) the Seller153s Board of Directors shall have determined in
good faith, after the end of such five Business Day period (as so extended, if
applicable), after considering the results of any such negotiations and the
revised proposals made by Purchaser, if any, that the Superior Proposal giving
rise to such notice continues to be a Superior Proposal.

(d) For purposes of this Agreement:

(i) “Takeover Proposal” means, other than a transaction between Seller
and Purchaser, any proposal or offer, whether or not conditional, whether or not
binding, and whether or not written, from any Person (other than Purchaser and
its Affiliates) relating to any direct or indirect (A) acquisition of
substantially all of the assets of Seller (including securities of the Company),
(B) acquisition of substantially all of the assets of the Company, (C)
acquisition of more than 50% of the outstanding shares of common stock of Seller
or of the Shares, voting power of Seller or the Company or any class of equity
securities of Seller or the Company, (D) tender offer or exchange offer that if
consummated would result in any Person beneficially owning more than 50% of the
outstanding shares of common stock of Seller or (D) merger, consolidation, share
exchange, business combination, recapitalization, liquidation, dissolution or
similar transaction involving Seller or the Company.

(ii) “Superior Proposal” means a bona fide written Takeover Proposal
made by a third party, and which is otherwise on terms and conditions which the
Board of Directors of Seller determines in its good faith judgment and by
resolution duly adopted (after consultation with outside counsel and its
financial advisors and in light of all relevant circumstances that the Board of
Directors deems relevant, including all the terms and conditions of such
proposal and this Agreement and the timing and certainty of consummation) to be
more favorable to Seller153s stockholders from a financial point of view than the
terms set forth in this Agreement or the terms of any other proposal made by
Purchaser after Purchaser153s receipt of an Adverse Recommendation Notice, and
which the Board of Directors of Seller determines in good faith is reasonably
capable of being consummated on the terms so proposed, taking into account any
financing and approval requirements, timing of such consummation and all
financial, regulatory, legal and other aspects of such proposal that the Board
of Directors deems relevant.

(e) Nothing in this Section 5.4 shall prohibit the Board of Directors
of Seller from taking and disclosing to Seller153s stockholders a position
contemplated by Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation M-A
promulgated under the Exchange Act, or other applicable Law, if such Board
determines, after consultation with outside counsel, that there is a reasonable
likelihood that failure to so disclose such position would constitute a
violation of applicable Law and it understood and agreed that, for purposes of
this Agreement, any “stop, look and listen” communication by the Board of
Directors to the stockholders of Seller pursuant to Rule 14d-9(f) of the
Exchange Act or any similar communication to the stockholders shall not
constitute an Adverse Recommendation Change; provided, however, in no
event will Seller, the Board of Directors of Seller or any committee thereof (A)
recommend that the stockholders of Seller tender their shares in connection with
any tender or exchange offer (or otherwise approve or recommend any Takeover
Proposal) or (B) engage in an Adverse Recommendation Change, in each case other
than in accordance with Section 5.4(c).

Section 5.5. Pre-Closing Transfers. On or prior to the Closing, Seller
shall cause the Company to transfer all Excluded Assets and Excluded Liabilities
(including, without limitation, the Excluded Assets and Excluded Liabilities
listed on Schedule 5.5) of the Company to a Person that is not the
Company or a Subsidiary of the Company, without any liability or obligation
(including, without limitation, any indemnification obligations) of the
Purchaser, or the Company or its Subsidiaries at or after the Closing in respect
of such transfer or Excluded Liabilities. On or prior to the Closing, Seller
shall transfer any assets held by it or any of its Affiliates (other than the
Company and its Subsidiaries) used in the Business (including, without
limitation, the assets listed on Schedule 5.5) to the Company or a
Material Company Subsidiary.

Section 5.6. Indebtedness.

(a) With respect to each item of Indebtedness (other than Assumed Debt) that
would exist with respect to the Company and its Subsidiaries as of the Closing
or immediately thereafter, Seller shall deliver, at least five Business Days
prior to the Closing Date, executed payoff letters or final invoices, as
applicable, from each lender, creditor, noteholder or other counterparty to whom
such obligation is owing (whether or not then due and payable), in each case (A)
that sets forth the amount to be paid on the Closing Date, together with wire
transfer instructions, (B) evidencing that the payment of such amount would
result in the full repayment, satisfaction, release, and discharge of all
current and future obligations of the Company or its Subsidiaries (and, in the
case of hedging, swap or similar agreements, the complete unwind and settlement
of such arrangements) in respect of such item (except obligations for
indemnification and reimbursement that expressly survive repayment in full) and
of all current and future Encumbrances relating to such item and (C)
contemplating the delivery of UCC-3 termination statements and mortgage releases
that when filed or recorded, as the case may be, will be sufficient to release
any and all Encumbrances relating to such item. Seller shall arrange for
delivery of all such UCC-3 termination statements and mortgage releases, if any,
at the Closing. Prior to the Closing, Seller and Purchaser shall use reasonable
commercial efforts to ensure that all Indebtedness of the Company or its
Subsidiaries can be (i) paid by the Purchaser for the benefit of the Company and
its Subsidiaries at Closing, (ii) remain unpaid as a portion of the Assumed
Debt, or (iii) be assigned to the Seller or an Affiliate of the Seller (other
than the Company or its Subsidiaries) as part of the Excluded Liabilities.
Notwithstanding the foregoing, Purchaser may require in a written notice
provided to Seller not less than five days prior to Closing, to treat any such
Indebtedness not assigned to Seller or an Affiliate of the Seller pursuant to
clause (iii) as a portion of the Payoff Amount or a portion of the Assumed Debt,
but in all cases subject to the limitation set forth in the definition of
Assumed Debt; provided, that Seller may require that any such Assumed
Debt proposed in the notice be included in the Payoff Amount if Seller does not
receive, prior to Closing, such written releases and documentation satisfactory
to Seller in its sole discretion that all obligations and guaranties of Seller
related to such proposed Assumed Debt are released and extinguished prior to or
as of Closing.

(b) Seller and Purchaser agree to use commercially reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done and
cooperate with each other in order to do, all things necessary, proper or
advisable to release all guarantees provided by Seller for Assumed Debt,
provided that nothing in this Section 5.6(b) shall require Purchaser to,
or to cause any of its Subsidiaries to (i) provide any non-public information
concerning its or its Subsidiaries153 operations to any other party hereto, (ii)
make or agree to make any out-of-pocket payment, or (iii) agree to any
additional financial obligation including a substitution of such guarantees.

Section 5.7. Efforts and Actions to Cause Closing to Occur.

(a) Prior to the Closing, upon the terms and subject to the conditions of
this Agreement, Purchaser and Seller shall use their respective commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done and cooperate with each other in order to do, all things
necessary, proper or advisable to consummate the Closing as promptly as
practicable, including (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate the Closing and the
taking of such actions as are necessary to obtain any requisite approvals,
authorizations, consents, orders, licenses, permits, qualifications, exemptions
or waivers by any third party or Governmental Entity, (ii) defending all
lawsuits and other proceedings by or before any Governmental Entity challenging
this Agreement or the consummation of the Closing, and (iii) causing to be
lifted or rescinded any ruling, Order or other action of any Governmental Entity
adversely affecting the ability of the parties to consummate the Closing;
provided, however, that, without Purchaser153s consent, Seller shall not
enter into any settlement with holders or purported holders of any securities or
rights to acquire securities of Seller or any of its Affiliates in connection
with the transactions contemplated by this Agreement unless such settlement does
not have any adverse effect on the Business, Purchaser or on Seller153s ability to
satisfy its Closing obligations under this Agreement. In addition, no party
hereto shall take any action after the date hereof that could reasonably be
expected to materially delay the obtaining of, or result in not obtaining, any
permission, approval or consent from any Governmental Entity or other Person
required to be obtained prior to Closing.

(b) If any party hereto or Affiliate thereof receives a request for
information or documentary material from any Governmental Entity with respect to
this Agreement or any of the transactions contemplated hereby, then such party
shall endeavor in good faith to make, or cause to be made, as soon as reasonably
practicable and after consultation with the other party, an appropriate response
in compliance with such request.

(c) The parties shall keep each other apprised of the status of matters
relating to the completion of the transactions contemplated hereby and work
cooperatively in connection with obtaining the requisite approvals, consents or
Orders of each applicable Governmental Entity, including, without limitation:

(i) cooperating with each other in connection with filings under the Exchange
Act and the rules and regulations promulgated thereunder;

(ii) cooperating with each other in connection with any filings, proceedings
or discussions with any Competition Authority;

(iii) furnishing to the other party all information within its possession
that is requested by a Competition Authority, in connection with the
transactions contemplated by this Agreement;

(iv) promptly notifying each other of any communications from or with any
Competition Authority with respect to the transactions contemplated by this
Agreement, unless it consults with the other party in advance, and, to the
extent permitted by such Competition Authority, gives the other party the
opportunity to attend and participate thereat; and

(v) consulting and cooperating with one another in connection with all
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings or discussions with any Competition Authority, in connection
with the transactions contemplated by this Agreement.

(d) Prior to Closing, each party shall, and Seller shall cause the Company
to, use commercially reasonable efforts to obtain from any third party that is
not a Governmental Entity any consents, licenses, waivers, approvals or
authorizations and send any notices, in each case, which are required to be
obtained, made or sent in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated by this Agreement (the “Third-Party Consents“);
provided, however, no material modification of any Contracts or
entrance into new Contracts other than in the ordinary course of business
consistent with past practice shall be made pursuant to this Section
5.7(d) without the prior written consent of Purchaser.

(e) Notwithstanding the foregoing, this Section 5.7 shall not require
Purchaser to, or to cause any of its Subsidiaries to (i) provide any non-public
information concerning its or its Subsidiaries153 operations to any other party
hereto, or (ii) make or agree to make any out-of-pocket payment other than
application fees and other nominal payments.

Section 5.8. Tax Matters. The following provisions shall govern the
allocation of responsibility as between Seller, the Company, and Purchaser for
certain Tax matters following the Closing Date:

(a) Tax Indemnification. Seller shall indemnify the Company and
Purchaser and hold them harmless from and against (i) any breach or inaccuracy
of any representation or warranty made by Seller in Section 3.19 of this
Agreement or the Schedules thereto, (ii) all Taxes of the Company for all
taxable periods ending on or before the Closing Date and the portion through the
end of the Closing Date for any taxable period that includes (but does not end
on) the Closing Date (a “Pre-Closing Tax Period“), (iii) any and all
income or similar Taxes of any member of an affiliated, consolidated, combined,
or unitary group of which the Company (or any predecessor of the Company) or any
Subsidiary of the Company (or any predecessor of such Subsidiary of the Company)
is or was a member on or prior to the Closing Date, including pursuant to
Treasury Regulation § 1.1502-6 or any analogous or similar state, local, or
foreign law or regulation, and (iv) any and all Taxes of any Person (other than
the Company) imposed on the Company as a transferee or successor, by contract or
pursuant to any law, rule or regulation, which Taxes relate to an event or
transaction occurring before the Closing, except, in the case of any of clauses
(i), (ii), (iii), or (iv) above, to the extent that any such amount is, or
already has been, reflected in the calculation of the Closing Date Net Working
Capital. The provisions of Article VIII apply to any indemnification
pursuant to this Section 5.8.

(b) Straddle Period. In the case of any taxable period that includes
(but does not end on) the Closing Date (a “Straddle Period“), the amount
of any Taxes for the Pre-Closing Tax Period shall be determined (i) as to
income, receipts or similar Taxes, based on an interim closing of the books as
of the close of business on the Closing Date (and for such purpose, the taxable
period of any partnership or other pass-through entity in which the Company
holds a beneficial interest shall be deemed to terminate at such time), and (ii)
as to all other Taxes, based on a daily proration. For purposes of any Taxes
determined based on a daily proration basis, the amount of such Taxes allocated
to the Pre-Closing Tax Period shall be the full, actual amount of such Taxes
multiplied by a fraction the numerator of which is the number of days in the Tax
period ending on (and including) the Closing Date and the denominator of which
is the number of days in the entire Straddle Period.

(i) Seller shall prepare and file timely, or cause to be prepared and filed
timely, all Tax Returns for the Company and its Subsidiaries that are filed
after the Closing Date with respect to a Pre-Closing Period that ends on or
before the Closing Date and with respect to periods for which a consolidated,
unitary or combined income or similar Tax Return of Seller will include the
operations of the Company and its Subsidiaries (each a “Seller Tax
Returns“). All such Seller Tax Returns with respect to the Company and its
Subsidiaries shall be prepared and filed in a manner consistent with prior
practice, except as required by a change in applicable Tax Law. Seller shall
permit Purchaser to review and comment on each such Seller Tax Return (or the
allocable portions of such Seller Tax Returns that include the Company and its
Subsidiaries) at least 10 Business Days prior to the filing of such Seller Tax
Return. If such Seller Tax Returns could reasonably be expected to result in an
increase in the Company153s Tax liability for the taxable periods (or portions
thereof) after the Closing Date, then Seller shall make such revisions to such
Tax Returns as Purchaser reasonably requests.

(ii) Purchaser shall prepare and file timely, or cause to be prepared and
filed timely, all Tax Returns for the Company and its Subsidiaries other than
the Seller Tax Returns that are filed after the Closing Date. Purchaser shall
permit Seller to review and comment on each such Tax Return described in the
preceding sentence for which Seller may reasonably be expected to have liability
for some or all of the Taxes relating to such Tax Return pursuant to this
Agreement at least 10 Business Days prior to the filing of such Tax Return and
shall make such revisions to such Tax Return as Seller reasonably requests. A
Tax Return applicable to a Straddle Period shall be prepared on a consistent
basis with how the Tax Return has been prepared for prior taxable periods,
unless otherwise required by applicable Law.

(iii) Neither Seller, nor Purchaser or the Company, shall amend, without the
other parties153 prior written consent, which consent shall not be unreasonably
withheld, conditioned, or delayed, a Tax Return to which this Section
5.8(c) applies.

(iv) If the Seller or the Purchaser cannot agree as to any revisions of a Tax
Return to be filed under this Section 5.8(c)(i) or (ii), then at
least 5 Business Days prior to the filing date of such Tax Return (including
applicable extensions) any disputed item shall be resolved (within a reasonable
time, taking into account the deadline for filing such Tax Return) by a
nationally recognized independent accounting firm chosen by both Purchaser and
Seller. Upon resolution of all disputed items, the relevant Tax Return shall be
filed on that basis. The costs, fees and expenses of such accounting firm shall
be borne equally by Purchaser and Seller.

(d) Refunds and Tax Benefits. Except as described in Section
5.8(j), any Tax refunds that are received by the Company or Purchaser, and
any amounts credited against Tax to which the Company or Purchaser becomes
entitled, that relate to Pre-Closing Tax Periods shall be for the account of
Seller, and Purchaser and/or the Company shall pay to Seller the amount of any
such refund or any such credit within fifteen (15) days after receipt or
entitlement thereto.

(e) Cooperation on Tax Matters. Seller, the Company, and Purchaser
shall cooperate fully, as and to the extent reasonably requested by another
Party, in connection with the filing of Tax Returns pursuant to this Section
5.8 and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon another Party153s request)
the provision of records and information that are reasonably relevant to any
such audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Subject to Section 5.12, Seller, the
Company, and Purchaser agree to retain all books and records with respect to Tax
matters pertinent to the Company relating to any taxable period beginning before
the Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Seller, the Company, or Purchaser, any extensions thereof) of
the respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority. Seller, the Company, and Purchaser
further agree, upon request, to use their best efforts to obtain any certificate
or other document from any Governmental Entity or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated by
this Agreement). Seller, the Company, and Purchaser further agree, upon request,
to provide any other Party with all information that may be required to report
pursuant to Code § 6043A or the Treasury Regulations promulgated thereunder.

(f) Termination of Existing Tax-Sharing Agreements. Any and all
existing Tax-sharing agreements or arrangements, written or oral, between Seller
and/or an Affiliate on the one hand and the Company or any Subsidiary of the
Company on the other hand shall terminate as of the Closing Date and after the
Closing Date, the Company and its Subsidiaries shall not be bound thereby or
have any liability thereunder (whether for the current year, a future year, or a
past year).

(g) Transfer Taxes and Fees. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and all conveyance fees, recording
charges and other fees and charges (including, as to any such Taxes, fees, or
charges, any penalties and interest) incurred in connection with the
consummation of the transactions contemplated by this Agreement shall be borne
fifty percent (50%) by Seller and fifty percent (50%) by Purchaser.

(h) Amendment of Pre-Closing Tax Returns. Purchaser and the Company
agree to not amend any Tax Returns of Seller that were filed prior to the
Closing Date unless required by Law or resulting from a challenge by applicable
Tax authorities, without the written consent of Seller, such consent not to be
unreasonably withheld, conditioned or delayed.

(i) Contest Provisions.

(i) In the event Purchaser receives notice of any pending or threatened Tax
audit or assessment or other dispute concerning Taxes with respect to which
Seller may incur liability under Section 5.8(a), Purchaser shall notify
Seller promptly of such matter in writing, provided that failure of Purchaser to
comply with this provision shall not affect Purchaser153s right to indemnification
under Section 5.8(a) unless such failure materially adversely affects the
ability of Seller to challenge such Tax audits or assessments.

(ii) Seller shall control any Tax audit or administrative or court proceeding
relating to any Tax for any taxable period ending on or before the Closing Date,
and to employ counsel of its choice at Seller153s expense provided that (x)
Purchaser shall have the right to participate (at its own expense) in any such
Tax audit or administrative or court proceeding and (y) Seller shall keep
Purchaser reasonably informed of the details and status of such Tax audit or
administrative or court proceeding (including providing Purchaser with copies of
all written correspondence regarding such matter). Notwithstanding the
foregoing, Seller shall not be entitled to settle, either administratively or
after the commencement of litigation, any claim regarding Taxes with respect to
any Tax Return of the Company that adversely would affect the liability for
Taxes of Purchaser or the Company for any period beginning on or after the
Closing Date without the prior written consent of Purchaser, which consent shall
not be unreasonably conditioned, withheld or delayed; provided,
however, that such consent shall not be necessary to the extent that Seller
indemnifies Purchaser against the effects of such settlement.

(iii) Purchaser shall have the sole right to represent the interests of the
Company in any Tax audit or administrative or court proceeding relating to Taxes
with respect to taxable periods including (but not ending on) the Closing Date
and to employ counsel of its choice at its expense; provided, however,
that Purchaser shall not be entitled to settle, either administratively or after
the commencement of litigation, any claim regarding Taxes that would create an
obligation of Seller to such Tax authority or as indemnity obligation on the
part of Seller hereunder, without the prior consent of Seller, which consent
shall not be unreasonably conditioned, withheld or delayed; provided,
however, that such consent shall not be required to the extent that
Purchaser directly pays such additional amounts owed by the Seller, if any, and
agrees in writing with Seller not to seek indemnity from the Seller against the
effects of such settlement. Where consent to a settlement is withheld by Seller
pursuant to this section, Seller may continue or initiate any further
proceedings at its own expense.

(j) Carrybacks. Seller shall, within 15 days, pay to Purchaser any Tax
refund (or reduction in Tax liability) resulting from a carryback of a
post-acquisition Tax attribute of any of the Company and its Subsidiaries into
the Seller153s consolidated Tax Return, when such refund (or reduction) is
realized by the Seller or a member of the Seller153s Affiliated Group. At
Purchaser153s request, Seller will cooperate with the Company and its Subsidiaries
at Purchaser153s expense in obtaining such refund (or reduction), including
through the filing of amended Tax Returns or refund claims. Purchaser agrees to
indemnify Seller for any Taxes resulting from the disallowance of such
post-acquisition Tax attribute on audit or otherwise.

(k) Indemnification Provisions. The provisions of Article VIII
apply to any indemnification pursuant to this Section 5.8. All indemnity
payments under this Agreement and any adjustment to any payment of the Purchase
Price as described in Section 2.2 shall be treated as an adjustment to
the Purchase Price paid for the Shares for tax purposes.

(l) Section 338(h)(10). At Purchaser153s option and sole discretion,
Purchaser and Seller shall join in making an election under Code §338(h)(10)
(and any corresponding elections under state, local, or non-U.S. tax law)
(collectively, a “ §338(h)(10) Election“) with respect to the purchase and
sale of the stock of the Company and any of its Subsidiaries hereunder. If the
Purchaser elects to have the Seller and Purchaser to join in making a
§338(h)(10) Election, Purchaser will timely pay to the Seller (to be forwarded
by Seller to the appropriate Governmental Entity) the amount of any increase in
Taxes actually payable by Seller (after reducing the amount of such Taxes
payable by the amount of any losses, net operating loss carryovers, capital loss
carryovers and tax credits available to the Seller) at least 5 Business Days
prior to the due date (including any applicable extensions) for filing the
Seller’s Tax Returns that include the deemed asset sale resulting from the
§338(h)(10) Election and Purchaser agrees to indemnify and hold Seller harmless
against any Losses resulting from the Purchaser’s failure to pay to Seller such
Taxes. The Purchaser and Seller agree that if a §338(h)(10) Election is made,
the Purchase Price and the liabilities of the Company and its Subsidiaries will
be allocated to the assets of the Company and its Subsidiaries for all purposes
(including Tax and financial accounting purposes) as reasonably determined by
Purchaser, but in any event in a manner consistent with Code §338 and the
Treasury Regulations thereunder. If a §338(h)(10) Election is made, Purchaser,
Seller and the Company and its Subsidiaries shall file all Tax Returns
(including amended returns and claims for refund) and information reports in a
manner consistent with such allocation.

Section 5.9. Publicity. The Seller and Purchaser shall consult with
each other before issuing any press release or otherwise making any public
statements (including scheduling a press conference or conference call with
investors or analysts) with respect to this Agreement or any of the transactions
contemplated by this Agreement and shall not issue any such press release or
make any such public statement without the prior consent of the other party,
which consent shall not be unreasonably withheld or delayed; provided,
however, that a party may, without the prior consent of the other party,
issue such press release or make such public statement as may be required by Law
or Order including as required by the Securities Exchange Act of 1934, as
amended, or the applicable rules of the SEC.

Section 5.10. Transition Services. Except as provided in the
Transition Services Agreement, all data processing, cash management, accounting,
insurance, banking, personnel, legal, communications and other products and
services between the Company and its Subsidiaries on the one hand, and Seller or
any Affiliates (other than the Company and its Subsidiaries) on the other hand,
including any agreements or understandings (written or oral) with respect
thereto, shall terminate simultaneously with the Closing without any further
action or liability on the part of the parties thereto.

Section 5.11. Intercompany Arrangements. Seller shall arrange, in a
manner that has no adverse Tax effects upon the Company or any Subsidiary of the
Company, for Intercompany Accounts to be entirely settled effective as of the
Closing, without any further liability of any kind on the part of the Company or
any Subsidiary of the Company. In addition, except as otherwise expressly
contemplated by this Agreement, all agreements and commitments, whether written,
oral or otherwise, which are solely between the Company or a Subsidiary of the
Company, on the one hand, and Seller and its Affiliates (excluding the Company
or a Subsidiary of the Company), on the other hand, shall be terminated and of
no further effect, simultaneously with the Closing without any further action or
liability of any kind on the part of the Company or any Subsidiary of the
Company.

Section 5.12. Books and Records. After the Closing Date, upon any
reasonable request from a party hereto or its representatives, the party holding
applicable records shall (a) provide to the requesting party or its
representatives reasonable access to such records during normal business hours
and (b) permit the requesting party or its representatives to make copies of
such records, in each case at no cost to the requesting party or its
representatives (other than for reasonable out-of-pocket expenses);
provided, however, that nothing herein shall require either party to
disclose any information to the other if such disclosure would jeopardize any
attorney-client or other legal privilege or contravene any applicable Law. Such
records may be sought under this Section for any reasonable purpose, including
to the extent reasonably required in connection with the audit, accounting, Tax,
litigation, federal securities disclosure or other similar needs of the party
seeking such records. Notwithstanding the foregoing, any and all such records
may be destroyed by a party if such destroying party sends to the other party
hereto written notice of its intent to destroy such records, specifying in
reasonable detail the contents of the records to be destroyed; such records may
then be destroyed after the 60th day following such notice unless the other
party hereto notifies the destroying party that such other party desires to
obtain possession of such records, in which event the destroying party shall
transfer the records to such requesting party and such requesting party shall
pay all reasonable expenses of the destroying party in connection therewith. On
or before the Closing Date, Seller shall be permitted to make and retain a copy
of the e-mails and any attachments residing on the Company153s existing server or
the digitalangel.com website. On and after Closing, Seller shall be permitted to
utilize such copy of the e-mails and attachments, provided that its use is
necessary for (1) concluding Seller’s involvement in the Business, (2) complying
with Seller’s obligations under applicable Law or Seller153s contractual
obligations, or (3) continued operation of the Emergency Locator Business or the
on-going activities of Seller not related to the Business; provided, further,
that such use shall only be permitted to the extent it does not violate the
restrictive covenants set forth in Section 5.19 and to the extent Seller
complies with the confidentiality provisions of Section 5.17 with respect
to such information.

Section 5.13. Insurance Policies.

(a) If (i) the Company would be entitled to the proceeds of a claim made
after Closing under an occurrence-based insurance policy held by Seller or any
of its Subsidiaries (other than the Company and its Subsidiaries) before Closing
and (ii) Purchaser informs Seller in a timely manner of such claim, Seller shall
report and pursue such claim.

(b) Notwithstanding anything herein to the contrary, all proceeds paid out
under insurance policies of Seller and its Subsidiaries from and after the
Closing shall be for the benefit of Purchaser to the extent such proceeds are in
respect of the Company or the Business, and Seller shall cause such proceeds to
be transferred to Purchaser within thirty (30) Business Days after receipt.

Section 5.14. Bank Accounts. Seller shall provide Purchaser with a
complete list of each of the bank accounts of the Company and the authorized
signatories for each such account as soon as practicable before the Closing
Date. The Seller represents that such bank accounts are the only bank accounts
used in the Business. The parties shall cooperate in connection with the
replacement or supplementation of such signatories effective as of the Closing.

Section 5.15. Notices of Certain Events. From and after the date of
this Agreement until the earlier of the Closing or the termination of this
Agreement, Seller shall promptly notify Purchaser of: (a) any change or event
that would cause any of the conditions in Article VI of this Agreement
not to be satisfied; (b) any event that would constitute a breach or default by
Seller of any representation, warranty, agreement or covenant of such Party
contained in this Agreement; (including inaccuracies in representations and
warranties as if made and restated on and as of a date between the date hereof
and Closing); (c) any written notice or other written communication from any
Person alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement; and (d) any
Proceeding or investigation commenced or, to the Knowledge of Seller, threatened
against, relating to or involving this Agreement or any transaction contemplated
hereby or thereby; provided, however, that, (x) no such notice will be
deemed to cure any breach or inaccuracy of any representation or warranty made
pursuant to this Agreement or limit any rights or remedies and (y) no such
notice will relieve any party of any obligation or liability under this
Agreement.

Section 5.16. Further Assurances.

(a) From and after the Closing, each of Seller and Purchaser shall furnish or
cause to be furnished to the other party and its employees, counsel, auditors
and other representatives such information and assistance relating to the
Company (to the extent within the control of such other party) as is reasonably
necessary for financial reporting and accounting matters of the other party,
including the furnishing of such documentation and information relating to the
Company as may be reasonably requested in connection with the preparation of
reports, accounts and other documents and materials to be filed with or
submitted to the SEC or any stock exchange. In order to facilitate the
resolution of any claims made against or incurred by Seller, for a period of six
years following the Closing, Purchaser shall provide Seller and its
Representatives reasonable access (for the purposes of examining and copying at
the sole cost and expense of Seller), during normal business hours and on at
least two (2) Business Days153 prior written notice, to those portions of the
books and records of the Business kept by Purchaser solely with respect to
periods prior to the Closing Date. Subject to Seller153s discretion to destroy
pre-Closing records as set forth in Section 5.12, for a period of six
years following the Closing, Seller shall provide Purchaser and its
Representatives reasonable access (for the purposes of examining and copying at
the sole cost and expense of Purchaser), during normal business hours and on at
least two (2) Business Days153 prior written notice, to those portions of the
books and records related to the Company in Seller153s possession solely with
respect to periods prior to the Closing Date. Any information obtained by either
party pursuant to this Section 5.16(a) shall be subject to the terms and
conditions of the Confidentiality Agreement.

(b) At any time and from time to time, each party to this Agreement agrees,
subject to the terms and conditions of this Agreement, to take such actions and
to execute and deliver such documents as may be necessary to effectuate the
purposes of this Agreement at the earliest practicable time.

Section 5.17. Confidentiality. Seller shall, and shall cause its
Affiliates and its and their respective agents, representatives, employees,
officers and directors to, from and after the Closing Date: (a) treat and hold
as confidential all (and not disclose or provide any third party access to any)
information relating to Trade Secrets and all other confidential or proprietary
information of the Company and the Business (collectively, “Confidential
Information“), (b) in the event that Seller, any of its Affiliates or any of
its or their respective agents, representatives, employees, officers or
directors becomes legally compelled to disclose any such information, provide
Purchaser with prompt written notice of such requirement (to the extent legally
permissible) so that Purchaser may seek (at Purchaser153s cost) a protective order
or other remedy or waive compliance with this Section 5.17, and (c) in
the event that such protective order or other remedy is not obtained, or
Purchaser waives compliance with this Section 5.17, furnish only that
portion of such Confidential Information that is legally required to be provided
and cooperate with Purchaser (at Purchaser153s cost) to obtain assurances that
confidential treatment will be accorded such Confidential Information;
provided, however, that this Section 5.17 shall not apply to any
information that, at the time of disclosure, (i) is available publicly or
otherwise known to the public other than as a result of disclosure in breach of
this Agreement or (ii) is required to be disclosed by applicable Law (subject to
compliance with clauses (b) and (c) of this Section 5.17).

Section 5.18. Non-Competition; Non-Solicitation. Seller acknowledges
that prior to Closing, the Seller had access to confidential and proprietary
information of the Business and the agreements and covenants contained in this
Section 5.18 are essential to protect the Business. Accordingly, Seller
covenants and agrees as follows:

(a) During the Restricted Period (as defined below), neither Seller nor any
of its Affiliates shall, within any Territory (as defined below), directly or
indirectly:

(i) (A) engage or invest in, or own, control, manage or participate in the
ownership, control or management of any Person that engages in the Restricted
Business (a “Competitor“); (B) render any services related to the
Restricted Business to, any Person, entity or enterprise, which Person, entity
or enterprise is that a Competitor; or (C) become associated with any Competitor
in any capacity, including, without limitation, as a shareholder, manager,
consultant, lessor or developer; or

(ii) (A) solicit, divert or take away, or accept any business relating to the
Restricted Business (or help any other Person, entity or enterprise to solicit,
divert, take-away or accept any such business) from any Person, entity or
enterprise who, during the two year period ending on the Closing Date, is or was
a customer or supplier of any of the Business, or who, to the Knowledge of the
Seller, during the Restricted Period becomes a customer or supplier of the
Company or any Material Company Subsidiary or (B) actively cause any customer,
referral source, supplier or other business relation to curtail doing business
with the Company or any Material Company Subsidiary.

(b) During the Restricted Period, neither Seller nor any of its Affiliates
shall, directly or indirectly or by assisting others, (i) solicit for hire or
otherwise attempt to hire any individual who within a twelve (12) month period
of such hiring or solicitation served as an officer, employee, consultant or
advisor of the Business and to whom the Seller, the Company or any Material
Company Subsidiary paid aggregate compensation during the most recently
completed fiscal year of the Seller in excess of $50,000 or (ii) encourage or
attempt to induce any such officer, employee, consultant or advisor to terminate
such Person153s or entity153s relationship with the Business or to work for any
business other than the Business, whether or not a Competitor of the Business
and whether or not under contract with the Company or any Material Company
Subsidiary, or at will. Notwithstanding the foregoing portion of this
Section 5.18(b), Seller and its Affiliates may employ, contract with,
engage and use the services of Joseph J. Grillo, Parke Hess, Patricia Petersen
and Jason Prescott unless such individual remained employed by Company through
and after the Closing. Additionally, Seller and its Affiliates may employ,
contract with, engage and use the services of all members of Seller153s Board of
Directors and Seller153s legal, accounting and professional advisors after
Closing.

(c) As used herein, the term “Restricted Period” shall mean in the
period commencing on the Closing Date and ending on the expiration of three
years following the Closing Date. If Seller breaches any agreement or covenant
contained in Section 5.18 hereof, the Restricted Period for purposes of
Section 5.18 shall be extended for an additional period equal to the
period during which such breach occurred and continued. The Seller acknowledges
that the Company and the Material Company Subsidiaries have operations in, sell
their products, and/or otherwise conduct the Business throughout the United
States of America, Canada, South America, Asia, Australia, New Zealand and
Europe. As used herein, the term “Territory” shall mean the United States
of America, Canada, South America, Asia, Australia, New Zealand and Europe. As
used herein, the term “Restricted Business” shall mean the business of
developing, manufacturing, distributing and selling RFID and visual
identification tags, readers and related software for animals, including cattle,
livestock, swine, horses, sheep, goats, deer, llamas, companion animals and
fish.

(d) The Seller agrees and acknowledges that the duration, scope and
geographic area of the covenants described in this Section 5.18 are fair,
reasonable and necessary in order to protect the goodwill and other legitimate
interests of the Purchaser. If, however, for any reason any court of competent
jurisdiction determines that the restrictions in this Section 5.18 are
not reasonable, such restrictions shall be interpreted, modified or rewritten to
include as much of the duration, scope and geographic area identified in this
Section 5.18 as will render such restrictions valid and enforceable.

Section 5.19. Non-Compete Agreement. On the date hereof, Joseph J.
Grillo shall execute and deliver the Non-Compete Agreement, which Non-Compete
Agreement, by and subject to its terms, shall come into full force and effect on
the Closing.

Section 5.20. Qualified Employee Plans. The Seller, the Company or its
ERISA Affiliates, as appropriate, shall amend the Seller153s Qualified Employee
Plans and any underlying loan agreements on or before the Closing Date:

(a) to the extent necessary to avoid a default of any loans under the
Qualified Employee Plans as a result of the termination of participation of the
Company under the Qualified Employee Plans as of the Closing;

(b) to terminate the participation of the Company in the Qualified Employee
Plans as of the Closing and to fully vest all Company employees as of the
Closing;

(c) to rollover the loan notes and other property in the Qualified Employee
Plans to a tax qualified plan of Purchaser (“Buyer Plan“); and

(d) make such other amendments to the Qualified Employee Plans as may be
reasonably requested by Purchaser related to or concerning this Agreement and
the employees of the Company (collectively the “Amendments“).

Any Amendments shall be subject to review and approval of Purchaser, and the
Seller shall provide to Purchaser an executed duplicate original of any such
Amendments on the Closing Date and evidence on or before Closing satisfactory to
the Seller that any such Amendments have been duly adopted by the Seller through
proper corporate action.

In the event that a rollover of assets to a Buyer Plan from the trust of the
Seller153s Qualified Employee Plans is reasonably anticipated to trigger
liquidation charges, surrender charges, or other material fees to be imposed
upon the account of any participant or beneficiary under such Qualified Employee
Plan as a result of the transactions contemplated by this Agreement, then the
Seller shall reimburse Purchaser or participants, as applicable, for any and all
charges and fees that are paid or incurred attributable to accounts of Company
employees who receive a rollover distribution from such Qualified Employee Plan.

Section 5.21. Use of Digital Angel Name. At Closing, the Company shall
grant Seller: (i) a non-exclusive, personal, limited, revocable, royalty-free
right and license to use the mark DIGITAL ANGEL in the corporate name of Seller
through December 31, 2012; and (ii) an exclusive, personal, limited, revocable,
royalty-free right and license to use the domain name DIGITALANGEL.COM through
December 31, 2012. The license will contain customary restrictions on use and
quality control reasonably satisfactory to the parties. Additionally, the
license shall prohibit Seller from using the DIGITAL ANGEL mark in connection
with marketing products.

ARTICLE VI.

CONDITIONS

Section 6.1. Conditions to Each Party153s Obligation to Effect the
Closing. The obligation of each party to consummate the Closing shall be
subject to the satisfaction or waiver on or prior to the Closing Date of each of
the following conditions:

(a) Stockholder Approval. The Stockholder Approval shall have been
obtained.

(b) Statutes; Court Orders. No Law shall have been enacted or
promulgated by any Governmental Entity which prohibits or makes illegal the
consummation of the Closing; and there shall be no Order of a court of competent
jurisdiction in effect precluding consummation of the Closing.

Section 6.2. Conditions to Obligations of Purchaser to Effect the
Closing. The obligation of Purchaser to consummate the Closing shall be
subject to the satisfaction or waiver on or prior to the Closing Date of each of
the following conditions:

(a) The representations and warranties of Seller set forth in Article
III shall be true and correct in all material respects (provided that any
materiality qualifications already included in such representations and
warranties shall be read out for purposes of this Section 6.2(a)) as of the
Closing Date as if made on the Closing Date (except that representations and
warranties that refer specifically to an earlier date must be true and correct
as of such earlier date). Notwithstanding the above, the Fundamental
Representations shall be true and correct (without giving effect to materiality
qualifications already included in such representations and warranties) as of
the Closing Date as if made on the Closing Date (except that representations and
warranties that refer specifically to an earlier date must be true and correct
as of such earlier date)

(b) Seller shall have performed and complied with, in all material respects,
all covenants and obligations required by this Agreement to be performed or
complied with by it prior to or at the Closing.

(c) Purchaser shall have received a certificate signed by a senior officer of
Seller to the effect that the conditions set forth in clauses (a) and (b) above
have been satisfied.

(d) Seller shall have delivered to Purchaser all of the items specified to be
delivered by Seller in Section 2.1(c).

(e) Seller shall not have (i) applied for, consented to, or suffered to exist
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or other fiduciary of itself or of all or a substantial part
of its property, (ii) made a general assignment for the benefit of creditors,
(iii) commenced a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (iv) been adjudicated a bankrupt or insolvent, (v)
filed a petition seeking to take advantage of any other law providing for the
relief of debtors, (vi) acquiesced to, or failed to have dismissed, within
thirty (30) days, any petition filed against it in any involuntary case under
such bankruptcy laws, or (vii) taken any action for the purpose of effecting any
of the foregoing.

(f) No Material Adverse Effect shall have occurred since the date this
Agreement was signed.

(g) Seller and Company shall have (i) transferred all of the Excluded Assets
and Excluded Liabilities to a Person that is not the Company or a Subsidiary of
the Company, and (ii) transferred all assets of the Business owned by the Seller
or its Affiliates (other than the Company and its Subsidiaries) to the Company
or a Material Company Subsidiary.

(h) All guaranties made by the Company and its Subsidiaries with respect to
Seller153s (or its Subsidiaries153) Indebtedness, and all Intercompany Accounts
shall have been terminated and released.

(i) All consents or approvals listed in Schedule 3.4 shall have been
obtained by the Seller in form reasonably satisfactory to the Purchaser and
Seller.

(j) No Regulatory Restrictions exist as of the Closing Date.

Section 6.3. Conditions to Obligations of Seller to Effect the
Closing. The obligations of Seller to consummate the Closing shall be
subject to the satisfaction or waiver on or prior to the Closing Date of each of
the following conditions:

(a) The representations and warranties of Purchaser set forth in Article
IV shall be true and correct in all material respects (provided that any
materiality qualifications already included in such representations and
warranties shall be read out for purposes of this Section 6.3(a)) as of the
Closing Date as though made on and as of the Closing Date (except that
representations and warranties that by their terms speak specifically as of the
date of this Agreement or another date shall be true and correct as of such
date).

(b) Purchaser shall have performed and complied with, in all material
respects, all covenants and obligations required by this Agreement to be
performed or complied with by it prior to or at the Closing.

(c) Seller shall have received a certificate signed by an officer of
Purchaser to the effect that the conditions set forth in clauses (a) and (b)
above have been satisfied.

(d) Purchaser shall have delivered to Seller all of the items specified to be
delivered by Purchaser in Section 2.1(b).

ARTICLE VII.

TERMINATION

Section 7.1. Termination. This Agreement may be terminated at any time
prior to the Closing, whether before or after receipt of the Stockholder
Approval:

(a) by the mutual written consent of Seller and Purchaser; or

(b) by either of Seller or Purchaser, upon written prior notice to the other:

(i) if the Closing shall not have occurred on or before August 4, 2011, (the
“Walk-Away Date“); provided, however, that the right to
terminate this Agreement under this Section 7.1(b)(i) shall not be
available to a party if the failure of the Closing to have occurred on or before
the Walk-Away Date was primarily due to the failure of such party to perform any
of its obligations under this Agreement; further provided, that in the
event of Regulatory Restrictions the Purchaser may request, and Seller shall
grant, a one time 30 day extension of the Walk-Away Date;

(ii) if any Law or Order having the effect set forth in Section 6.1(b)
shall be in effect and shall have become final and nonappealable; or

(iii) if Stockholder Approval shall not have been obtained at the
Stockholders Meeting duly convened therefor or at any adjournment or
postponement thereof.

(i) if Seller shall have materially breached or failed to perform in all
material respects any of its representations, warranties, covenants or
agreements set forth in this Agreement, which breach or failure to perform (x)
would give rise to the failure of a condition set forth in Section 6.2(a)
or (b) and (y) cannot be cured by Seller or, if curable, is not cured by
the Walk-Away Date, provided that Purchaser shall not have the right to
terminate this Agreement pursuant to this Section 7.1(c)(i) if Purchaser
is then in material breach of any of its covenants or agreements contained in
this Agreement;

(ii) if Seller153s Board of Directors has adopted an Adverse Recommendation
Change;

(iii) if any of the conditions set forth in Section 6.1 or 6.2
shall have become incapable of satisfaction before the Walk-Away Date;
provided that a breach by Purchaser is not the cause thereof; or

(iv) if a Material Adverse Effect shall have occurred.

(d) by Seller, upon prior written notice to Purchaser:

(i) if Purchaser shall have materially breached or failed to perform in all
material respects any of its representations, warranties, covenants or
agreements set forth in this Agreement, which breach or failure to perform (x)
would give rise to the failure of a condition set forth in Sections
6.3(a) or (b) and (y) cannot be cured by Purchaser or, if curable, is
not cured by the Walk-Away Date, provided that Seller shall not have
the right to terminate this Agreement pursuant to this Section 7.1(d)(i)
if Seller is then in material breach of any of its covenants or agreements
contained in this Agreement;

(ii) if Seller (A) has complied with its obligations under Sections
5.3 and 5.4, and (B) is in compliance with Section 5.4,
concurrently enters into a definitive written Acquisition Agreement providing
for a Superior Proposal; provided, however, Seller may not terminate
this Agreement pursuant to this Section 7.1(d)(ii) until at least five
Business Days have passed since the date of the most recent Adverse
Recommendation Notice;

(iii) if any of the conditions set forth in Sections 6.1 or 6.3
shall have become incapable of satisfaction before the Walk-Away Date;
provided that a breach by Seller is not the cause thereof; or

(iv) if Regulatory Restrictions affirmatively enjoining or otherwise
prohibiting the Closing have been imposed.

Section 7.2. Effect of Termination. In the event of the termination of
this Agreement as provided in Section 7.1, written notice thereof shall
be given to the other party, specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall forthwith become null and
void (other than Sections 5.17, 7.2 and 7.3, and Article
X, all of which shall survive termination of this Agreement), and there
shall be no liability on the part of Purchaser or Seller except (i) as provided
in Section 7.3, (ii) as set forth in Section 5.17, and (iii)
nothing shall relieve any party from liability for fraud or any willful or
intentional breach of this Agreement.

Section 7.3. Termination Fees.

(a) Paid by Seller.

(i) In the event that this Agreement is properly terminated by Purchaser
pursuant to Section 7.1(c)(i), (ii) or (iv) Seller shall
promptly pay to Purchaser $500,000.

(ii) In the event that this Agreement is terminated by Seller pursuant to
Section 7.1(d)(ii), Seller shall promptly pay to Purchaser $1,000,000.

(b) Paid by Purchaser.

(i) In the event that this Agreement is properly terminated by Seller
pursuant to Section 7.1(d)(i) or (iv) Purchaser shall promptly pay
to Seller $750,000, provided Seller is not in material breach of any of its
covenants or agreements contained in this Agreement.

(ii) In the event that this Agreement is terminated by either party pursuant
to

Section 7.1(b)(i) due to the existence of Regulatory Restrictions,
then Purchaser shall promptly pay to Seller $750,000; provided,
however, Purchaser shall not have to pay such fee unless (A) the Walk-Away
Date has occurred (and, for avoidance of doubt, Seller shall have extended the
Walk-Away Date by 30 days as per Section 7.1(b)(i)), (B) the Stockholder
Approval has been received, and (C) Seller is not in material breach of any of
its covenants or agreements contained in this Agreement.

(d) Each of Seller and Purchaser acknowledges that the agreements contained
in this Section 7.3 are an integral part of the Agreement. Following
termination of this Agreement, amounts paid pursuant to this Section 7.3
shall constitute, for the party receiving the fee, such party153s sole and
exclusive remedy following such termination (other than as provided in
Section 7.2 above).

ARTICLE VIII.

INDEMNIFICATION

Section 8.1. Indemnification; Remedies.

(a) Seller153s Indemnification Obligations. Seller shall indemnify,
defend and hold harmless Purchaser, the Company (after Closing), the respective
Affiliates of each of the foregoing, and the respective officers, directors,
employees and agents of each of the foregoing (“Purchaser Indemnified
Persons“) from and against any and all Losses arising out of or relating to:

(i) any breach or inaccuracy of any of the representations and warranties of
Seller contained in this Agreement by virtue of such breach or inaccuracy on and
as of the Closing Date with the same effect as though made on such date or, in
the case of any representation or warranty that speaks as of a specific date or
time, on and as of such specific date or time;

(ii) any breach by Seller of its covenants or obligations contained in this
Agreement;

(iii) (A) any Excluded Liabilities, or (B) any claims or threatened claims of
any kind against Purchaser or the Company by any holders or purported holders of
any securities or rights to acquire securities of Seller or the Company in
connection with the transactions contemplated by this Agreement, including
without limitation claims alleging violation of fiduciary duties or securities
laws or related to appraisal or dissenters153 rights;

(iv) any Taxes that are payable by Seller pursuant to Section 5.8
(except to the extent that the amount of such Taxes is, or already has been,
reflected in the Financial Statements and in the calculation of the Closing Date
Net Working Capital;

(b) Limitations on Seller153s Indemnification. Seller153s indemnification
obligation under Section 8.1(a)(i) shall be subject to each of the
following limitations:

(i) with respect to indemnification under Section 8.1(a)(i), such
obligation to indemnify shall terminate on the 18-month anniversary of the
Closing Date (the “Cut-Off Date“) unless before such date Purchaser has
provided Seller with an applicable Claim Notice, provided that (x) the
representations and warranties in Sections 3.2 (Authorization),
3.3 (Execution; Validity of Agreement), 3.5 (Ownership of Shares),
3.6 (Capitalization), 3.7 (but excluding 3.7(b))
(Subsidiaries), 3.10(b) (Title to Assets), 3.21(f) (WARN Act),
3.30 (Brokers or Finders) and 3.31 (No Retained Assets) (the
foregoing, collectively, the “Fundamental Representations“) shall survive
the Closing indefinitely and (y) the representations and warranties in
Section 3.19 (Tax Matters) and Section 3.16 (Environmental
Matters) shall survive until 30 days after the expiration of the relevant
statute of limitations;

(ii) there shall be no obligation to indemnify under Section 8.1(a)(i)
for any Losses for which Seller, but for this Section 8.1(b)(ii), would
be liable in excess of $4,000,000 in the aggregate, provided, however,
that that the limitation on indemnification set forth in this Section
8.1(b)(ii) shall not apply to any Losses arising out of or relating to
breaches or inaccuracies of the Fundamental Representations or the
representations and warranties in Sections 3.16 (Environmental Matters)
or 3.19 (Tax Matters); and

(iii) there shall be no obligation to indemnify under Section
8.1(a)(i) until the aggregate amount of all Losses exceeds $250,000, in
which event only the first $125,000 of such aggregate amount of all Losses shall
not be recoverable and amounts in excess of the first $125,000 shall be
recoverable; provided, however, that the limitation on indemnification
set forth in this Section 8.1(b)(iv) shall not apply to any Losses
arising out of or relating to breaches or inaccuracies of the Fundamental
Representations or the representations and warranties in Section 3.16
(Environmental Matters) or 3.19 (Tax Matters).

(c) Purchaser153s Indemnification. From and after the Closing, Purchaser
shall indemnify, defend and hold harmless Seller and its Affiliates of each of
the foregoing and the respective officers, directors, employees and agents of
each of the foregoing from and against any and all Losses arising out of or
relating to (i) any breach or inaccuracy of any of the representations and
warranties of Purchaser contained in this Agreement by virtue of such breach or
inaccuracy on and as of the Closing Date with the same effect as though made on
such date or, in the case of any representation or warranty that speaks as of a
specific date or time, on and as of such specific date or time, or (ii) any
breach by Purchaser of its covenants or obligations contained in this Agreement.

(d) Nothing in this Agreement shall prejudice any action by Seller or
Purchaser for fraud.

Section 8.2. Notice of Claim; Defense.

(a) If (i) any third-party institutes or asserts any claim, demand,
investigation, action or proceeding (each of the foregoing, a
“Proceeding“) that may give rise to Losses for which a party (an
“Indemnifying Party“) may be liable for indemnification under this
Article VIII (a “Third-Party Claim“) or (ii) any Person entitled
to indemnification under this Agreement (an “Indemnified Party“) shall
have a claim to be indemnified by an Indemnifying Party that does not involve a
Third-party Claim (a “Direct Claim“), then, in case of clause (i) or
(ii), the Indemnified Party shall promptly send to the Indemnifying Party a
written notice specifying the nature of such claim and the amount of all related
Losses (a “Claim Notice“). The Indemnifying Party shall be relieved of
its indemnification obligations under this Article VIII only to the
extent that it is materially prejudiced by the failure of the Indemnified
Parties to provide a timely and adequate Claim Notice. No Person shall be liable
for any claim for indemnification under Article VIII unless such claim
arises prior to the applicable survival period and the applicable Claim Notice
is delivered by the Indemnified Party to the Indemnifying Party prior to the
expiration of the applicable survival period.

(b) In the event of a Third-Party Claim, the Indemnifying Party may elect to
retain counsel of its choice, reasonably acceptable to the relevant Indemnified
Parties, to represent such Indemnified Parties in connection with such
Proceeding and shall pay the reasonable fees and expenses of such counsel. The
Indemnified Parties may participate, at their own expense and through legal
counsel of their choice, in any such Proceeding, provided that (i) the
Indemnifying Party may elect to control the defense of the Indemnified Parties
in connection with such Proceeding and (ii) the Indemnified Parties and their
counsel shall cooperate with the Indemnifying Party and its counsel in
connection with such Proceeding. The Indemnifying Party shall not settle any
such Proceeding without the Indemnified Party153s prior written consent (which
shall not be unreasonably withheld), unless the terms of such settlement provide
for no relief other than the payment of monetary damages that are fully
indemnified pursuant to this Article VIII. Notwithstanding the foregoing,
if (x) the Indemnifying Party elects not to retain counsel and assume control of
such defense, (y) both the Indemnifying Party and any Indemnified Party are or
may be parties to or subjects of such Proceeding or conflicts of interests exist
between the Indemnifying Party and such Indemnified Party or (z) the Proceeding
is reasonably likely to establish a precedential custom or practice that is
detrimental to the continuing business interests of the Indemnified Party, then
the Indemnified Parties shall retain counsel reasonably acceptable to the
Indemnifying Party in connection with such Proceeding and assume control of the
defense in connection with such Proceeding, and the reasonable fees and expenses
of no more than one such counsel per jurisdiction selected by the Indemnified
Parties shall be reimbursed by the Indemnifying Party. Under no circumstances
will the Indemnifying Party have any liability in connection with any settlement
of any Proceeding that is entered into without its prior written consent (which
shall not be unreasonably withheld or delayed).

(c) From and after the delivery of a Claim Notice, at the reasonable request
of the Indemnifying Party, each Indemnified Party shall grant the Indemnifying
Party and its counsel, experts and representatives full access, during normal
business hours, to the books, records, personnel and properties of the
Indemnified Party to the extent reasonably related to the Claim Notice at no
cost to the Indemnifying Party (other than for reasonable out-of-pocket expenses
of the Indemnified Parties).

Section 8.3. Reductions for Insurance Proceeds and Other Recoveries.
The amount of any Loss subject to indemnification hereunder or of any claim
therefor shall be calculated net of any insurance proceeds (net of direct
collection expenses) actually received by the Indemnified Party on account of
such Loss. Each Indemnified Party shall use commercially reasonable efforts to
seek full recovery under all insurance policies that such Person reasonably
believes cover any Loss to the same extent as they would if such Loss were not
subject to indemnification hereunder. Any Losses shall be reduced (retroactively
or prospectively) by any insurance proceeds, proceeds of subrogation and any
indemnity, contribution or other similar payment from third parties actually
recovered (net of direct collection expenses). The existence of a claim for
monies by an Indemnified Party against an insurer or other third party in
respect of any Losses shall not, however, delay any payment otherwise due and
owing under this Article VIII. In such event, the Indemnifying Party
shall make payment in full to the applicable Indemnified Party of the amount due
and owing under this Article VIII against an assignment by the
Indemnified Party to the Indemnifying Party of the entire claim for insurance
proceeds or against such third party. Notwithstanding any other provisions of
this Agreement, the parties intend that no insurer or any other third party
shall be (i) entitled to a benefit it would not be entitled to receive in the
absence of the provisions of this Article VIII or (ii) relieved of the
responsibility to pay any claims for which it is obligated. If an Indemnified
Party has received the payments required by this Article VIII from an
Indemnifying Party in respect of any Losses and later receives insurance
proceeds or other amounts in respect of such Losses, then the Indemnified Party
shall as promptly as practicable pay to the Indemnifying Party a sum equal to
the amount of insurance proceeds or other amounts received, net of any costs
incurred in connection with such insurance or other third-party recoveries, up
to the aggregate amount of any payments received from the Indemnifying Party
pursuant to this Article VIII in respect of such Losses (or if there is
more than one Indemnifying Party, the Indemnified Party shall pay each
Indemnifying Party its proportionate share, based on the payments received from
the Indemnifying Party, of such insurance or other proceeds).

Section 8.4. Rights Under Escrow Agreement. In the event Seller has
any liability to any Purchaser Indemnified Person pursuant to Section
8.1(a)(i) for any Losses, the Purchaser Indemnified Person shall receive
payment thereof against and to the extent of the balance of the Escrow Amount
under the Escrow Agreement and, thereafter, from Seller, subject to the
limitations set forth in Section 8.1(b). In the event Seller has any
liability to any Purchaser Indemnified Person pursuant to Sections
8.1(a)(ii), 8.1(a)(iii), 8.1(a)(iv) or for fraud, the
Purchaser Indemnified Person shall receive payment thereof, first, against and
to the extent of the balance of the Escrow Amount under the Escrow Agreement,
and, thereafter, from any other Person from whom Purchaser may be entitled to
recover.

Section 8.5. Tax Treatment of Payments. Seller, Purchaser, the Company
and their respective Affiliates shall treat any and all payments under this
Article VIII as an adjustment to the Purchase Price for Tax purposes.

Section 8.6. Change in Control Payments. Notwithstanding anything in
this Agreement to the contrary, Seller shall retain all liability with respect
to, and shall indemnify and hold harmless Purchaser, the Company, and their
respective Affiliates, for any change in control payment, transaction bonus,
retention bonus or similar payment to which any director, employee or former
employee of the Company may be entitled in connection with the transactions
contemplated by this Agreement, whether contingent or otherwise (collectively,
“Change in Control Payments“).

Section 8.7. Payment of Direct Claims. A claim for indemnification for
any matter not involving a Third-Party Claim may be asserted by notice to the
party from whom indemnification is sought and shall be paid within fifteen (15)
days after such notice.

ARTICLE IX.

DEFINITIONS AND INTERPRETATION

Section 9.1. Definitions. For all purposes of this Agreement, except
as otherwise expressly provided or unless the context clearly requires
otherwise:

“Accounting Arbitrator” has the meaning set forth in Section
2.2(c).

“Accounts Receivable” has the meaning set forth in Section
3.25.

“Acquisition Agreement” shall have the meaning set forth in
Section 5.4(c).

“Adverse Recommendation Change” shall have the meaning set forth in
Section 5.4(c).

“Adverse Recommendation Notice” shall have the meaning set forth in
Section 5.4(c).

“Affiliate” shall have the meaning set forth in Rule 12b-2 of the
Exchange Act.

“Affiliated Group” means any affiliated group within the meaning of
Code §1504(a) or any similar group defined under a similar provision of state,
local or non-U.S. law.

“Agreement” means this Stock Purchase Agreement, together with the
Exhibits and Schedules hereto and the Disclosure Schedule.

“Assumed Debt” means any Indebtedness of the Company or its
Subsidiaries set forth on Schedule 3.8(b) other than Indebtedness
included in the Payoff Amount. In no event will the aggregate amount of such
Indebtedness exceed $5,000,000.

“Audits” shall have the meaning set forth in Section 3.19(d).

“Balance Sheet Date” means the date of the most recent audited balance
sheet included in the Financial Statements.

“Board Recommendation” shall have the meaning set forth in Section
5.4(c).

“Business” shall have the meaning set forth in the recitals.

“Business Day” means a day other than Saturday, Sunday or any day on
which the principal commercial banks located in the State of Minnesota are
authorized or obligated to close under the laws of such state.

“Carve-Out Statements” means the unaudited balance sheet of the
Business on a standalone basis as at March 31, 2011 together with the unaudited
statements of income and cash flows of the Business on a standalone basis for
the three month period ended March 31, 2011, being the equivalent financial
statements of the Company adjusted to eliminate the effects of, among other
things, the Emergency Locator Business and to include any assets or liabilities
of the Business currently held by the Seller.

“Change in Control Payments” shall have the meaning set forth in
Section 8.7.

“Claim Notice” shall have the meaning set forth in Section
8.2(a).

“Closing” shall have the meaning set forth in Section 2.1(a).

“Closing Certificate” shall have the meaning set forth in Section
2.2(a).

“Closing Date” means the date on which the Closing occurs.

“Closing Date Balance Sheet” shall have the meaning set forth in
Section 2.2(a).

“Closing Date Net Working Capital” means Current Assets less
Current Liabilities as of the Closing Date.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” shall have the meaning set forth in the recitals.

“Company Predecessor” means any predecessors of the Company as a
result of one or more amalgamations or wind-up.

“Company Product” has the meaning set forth in Section 3.28.

“Competition Authority” means any Governmental Entity responsible for
enforcement of antitrust or competition law (including the U.S. Federal Trade
Commission, Antitrust Division of the U.S. Department of Justice, European
Commission, or Office of Fair Trade).

“Competitor” has the meaning set forth in Section 5.18(a)(i).

“Confidential Information” shall have the meaning set forth in
Section 5.17.

“Confidentiality Agreement” means the agreement between Company and
Purchaser dated June 3, 2009.

“Contract” shall have the meaning set forth in Section 3.4.

“Copyrights” means U.S. and foreign registered and unregistered
copyrights (including those in computer software and databases), rights of
publicity and, if applicable, all registrations and applications to register the
same.

“Current Assets” means cash and cash equivalents, Accounts Receivable,
prepaid expenses and inventory of the Business.

“Current Liabilities” means the current liabilities of the Business,
including accounts payable, customer deposits, deferred revenue, deferred rent,
sales taxes payable, accrued withholding taxes, payroll taxes payable and
salaries, bonuses payable and any other accrued expenses, but excluding any
portion of the Company153s Indebtedness deemed current.

“Cut-Off Date” shall have the meaning set forth in Section
8.1(b)(i).

“Direct Claim” shall have the meaning set forth in Section
8.2(a).

“Disclosure Schedule” means the disclosure schedule of even date
herewith delivered by Seller to Purchaser simultaneously with the execution
hereof.

“Emergency Locator Business” means the products developed,
manufactured, assembled sold and marketed by Signature Industries, Limited,
Seller153s majority-owned Subsidiary.

“Employee Plan” means any agreement, contract, plan, fund, program,
agreement or arrangement involving direct or indirect compensation (other than
ordinary salary and wage payments) or any other employee benefit of any kind,
including, but not limited to, each deferred compensation, incentive
compensation, bonus, stock purchase, stock option, other equity compensation,
employee benefit, supplemental unemployment benefit, severance or termination
pay, salary continuation, medical, dental, surgical, disability,
hospitalization, life insurance, welfare, profit-sharing, stock bonus, pension,
savings, retirement, supplementary retirement, employment, termination, change
in control, severance, dependent care, Code Section 125 or other pre-tax
benefits, in each case, that has been sponsored, maintained or contributed to or
required to be contributed to by the Company, or by any ERISA Affiliate, or to
which the Company, or an ERISA Affiliate has been a party or has any liability
with respect to, whether written or oral, for the benefit of any director,
employee or former employee of the Company or any ERISA Affiliate (or their
respective beneficiaries, dependents or spouses).

“Encumbrances” means any and all liens, charges, security interests,
options, claims, mortgages, pledges, proxies, voting trusts or agreements,
obligations, understandings or arrangements or other restrictions on title or
transfer of any nature whatsoever.

“Environmental Laws” means all Laws relating to: (i) protection,
preservation or cleanup of the environment or natural resources; (ii) any
Release or threatened Release, including, without limitation, control,
investigation, study, assessment, testing, monitoring, containment, removal,
remediation, cleanup or abatement of such Release or threatened Release; (iii)
the management, manufacture, generation, formulation, processing, labeling,
distribution, introduction into commerce, registration, use, treatment,
handling, storage, disposal, transportation, re-use, recycling or reclamation of
any Hazardous Substance, or (iv) health and safety.

“ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.

“ERISA Affiliate” means any trade or business, whether or not
incorporated, that together with the Company or Seller has been treated as a
“single employer” within the meaning of Section 4001(b) of ERISA or Section
414(b), (c), (m) or (o) of the Code.

“Escrow Account” shall have the meaning set forth in Section
2.1(b)(ii).

“Escrow Agent” shall have the meaning set forth in Section
2.1(b)(ii).

“Escrow Agreement” shall have the meaning set forth in Section
2.1(b)(ii).

“Escrow Amount” shall have the meaning set forth in Section
2.1(b)(ii).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Assets” means: (i) the shares of capital stock of Signature
Industries Limited owned by the Company; (ii) assets related solely to the
Emergency Locator Business owned by the Company, if any; and (iii) the shares of
capital stock of Timely Technology Corporation, a California corporation, owned
by the Company; unless and to the extent any such assets are used in the
operation of the Business.

“Excluded Liabilities” means any and all liabilities, whether primary
or secondary, known or unknown, accrued or contingent, of any kind or nature,
other than liabilities related to the Business. Without limiting the generality
of the foregoing, “Excluded Liabilities” shall include any and all liabilities:
(i) incurred as a result of the operation of or in connection with the Emergency
Locator Business, (ii) of Signature Industries Limited; (iii) of Timely
Technology Corporation; and (iv) liabilities and Indebtedness Seller owes to
Hillair Capital, LLC (and related purchasers) and the guaranties thereof made by
the Company and its Subsidiaries.

“Financial Statements” means (a) the audited consolidated balance
sheets of Seller as at December 31, 2010 and December 31, 2009, together with
the audited consolidated statements of income and cash flows of Seller for the
years ended December 31, 2010 and 2009, (b) the unaudited consolidated balance
sheet of Seller as at March 31, 2011 together with the unaudited consolidated
statements of income and cash flows of Seller for the three month period ended
March 31, 2011, and (c) the Carve-Out Statements.

“Fundamental Representations” shall have the meaning set forth in
Section 8.1(b)(i).

“GAAP” means U.S. generally accepted accounting principles,
consistently applied throughout the periods presented in accordance with
Seller153s accounting policies and practices.

“Governmental Entity” means a foreign or domestic court, arbitral
tribunal, administrative agency, commission, governmental or department,
regulatory authority, agency, any stock exchange or self-regulatory authority.

“Hazardous Substances” means any substances, materials, wastes or
agents that are designated as hazardous or toxic or subject to regulation or
liability under Environmental Laws, including without limitation petroleum or
any fraction thereof, asbestos, polychlorinated biphenyls, and mold.

“Indebtedness” of any Person means, as of any date, the amount equal
to the sum (without any double-counting) of the following obligations (whether
or not then due and payable), to the extent they are of such Person: (i) all
outstanding indebtedness for borrowed money owed to third parties, (ii) accrued
interest payable with respect to Indebtedness referred to in clause (i), (iii)
all obligations evidenced by notes, bonds, debentures or other similar
instruments (whether or not convertible) or arising under indentures, (iv) all
obligations arising out of any financial hedging, swap or similar arrangements,
(v) all obligations as lessee that would be required to be capitalized in
accordance with GAAP, and (vi) all obligations in connection with any letter of
credit, banker153s acceptance, guarantee, surety, performance or appeal bond, or
similar credit transaction.

“Indemnified Party” shall have the meaning set forth in Section
8.2(a).

“Indemnifying Party” shall have the meaning set forth in Section
8.2(a).

“Intellectual Property” means all of the following: Trademarks,
Patents, Copyrights, Trade Secrets, Internet domain names and Licenses.

“Intercompany Accounts” means all balances related to indebtedness,
including any intercompany indebtedness, loan, guaranty, receivable, payable or
other account between Seller and the Company or any Subsidiary of the Company.

“IRS” means the U.S. Internal Revenue Service.

“Knowledge of Seller” means the actual knowledge of Joseph J. Grillo,
Seller153s Chief Executive Officer, Jason Prescott, Seller153s Chief Financial
Officer or Parke Hess, Seller153s Chief Operating Officer, and such knowledge that
any such person would be deemed to have acquired upon reasonable inquiry of
those in the Company and its Subsidiaries with relevant subject matter
responsibility.

“Law” shall have the meaning set forth in Section 3.4.

“Leased Real Property” shall have the meaning set forth in Section
3.10(c).

“Licenses” means all licenses and agreements pursuant to which the
Company has acquired rights in or to any Intellectual Property, or licenses and
agreements pursuant to which the Company has licensed or transferred the right
to use any Intellectual Property.

“Losses” means any and all damages, losses, actions, Proceedings,
causes of action, obligations, liabilities, claims, encumbrances, penalties,
demands, assessments, settlements, judgments, costs and expenses, including
court costs and reasonable attorneys153 and disbursements and costs of litigation;
provided, however, that Losses shall not include punitive damages,
treble damages or exemplary damages (except to the extent such damages are
awarded in connection with a Third Party Claim for which indemnification is
available to an Indemnified Party).

“Material Adverse Effect” means any event, change, effect,
development, condition or occurrence that has had or would reasonably be
expected to have, individually or in the aggregate, a material adverse effect on
the business, financial or other condition, or results of operations of the
Company or the Business; provided, however, none of the following shall
be deemed to constitute, and none of the following shall be taken into account
in determining whether there has been, a Material Adverse Effect: (a) any event,
change, effect, development, condition or occurrence arising from or relating to
(i) general business or economic conditions not specific or peculiar to the
Company or the Business, (ii) national or international political or social
conditions, including the engagement by the U.S. in hostilities, whether or not
pursuant to the declaration of a national emergency or war, or the occurrence of
any military or terrorist attack upon the U.S., or any of its territories,
possessions, or diplomatic or consular offices or upon any military
installation, equipment or personnel of the U.S., (iii) disruption to financial,
banking, or securities markets in general (including any disruption thereof and
any decline in the price of any security or any market index), (iv) changes in
GAAP, that, except to the extent such event, change, effect, development,
condition or occurrence described in clauses (i) through (iv) has a
disproportionate effect on the Company or the Business when compared to other
companies in the industry in which the Company or the Business operates; (b) the
taking of any action required by this Agreement or the Related Documents, (c)
the announcement or disclosure of the transactions contemplated herein, or (d)
the presence of Regulatory Restrictions.

“Material Company Subsidiaries” shall have the meaning set forth in
Section 3.7.

“Material Contract” shall have the meaning set forth in Section
3.11(a).

“Material Intellectual Property” shall have the meaning set forth in
Section 3.20(a).

“Non-Compete Agreement” means a non-compete agreement entered into
between the Purchaser and Joseph J. Grillo on the date hereof in the form
attached hereto as Exhibit C.

“Notice of Dispute” shall have the meaning set forth in Section
2.2(b).

“Order” shall have the meaning set forth in Section 3.15.

“Owned Intellectual Property” means Intellectual Property owned by the
Company that is material to the Business, excluding Intellectual Property
associated with the Emergency Locator Business.

“Owned Real Property” shall have the meaning set forth in Section
3.10(c).

“Patents” means issued U.S. and foreign patents and pending patent
applications, patent disclosures, and any and all divisions, continuations,
continuations-in-part, reissues, reexaminations, and extensions thereof, any
counterparts claiming priority therefrom, utility models, patents of
importation/confirmation, certificates of invention and similar statutory
rights.

“Payoff Amount” means the aggregate of the amounts of Indebtedness
owed to certain Persons by the Company or its Subsidiaries as indicated on the
payoff letters delivered by the Seller to the Purchaser in accordance with
Section 5.6.

“PBGC” means the Pension Benefit Guaranty Corporation.

“Permits” shall have the meaning set forth in Section 3.17.

“Permitted Encumbrances” shall have the meaning set forth in
Section 3.10(b).

“Person” means a natural person, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity or organization.

“Pre-Closing Tax Period” shall have the meaning set forth in
Section 5.8(a).

“Proceeding” shall have the meaning set forth in Section
8.2(a).

“Proxy Statement” shall have the meaning set forth in Section
3.4.

“Purchase Price” shall have the meaning set forth in Section
1.2(a).

“Purchaser” shall have the meaning set forth in the opening paragraph.

“Purchaser Indemnified Persons” shall have meaning set forth in
Section 8.1(a).

“Real Property Lease” has the meaning set forth in Section
3.10(e).

“Related Documents” means the Escrow Agreement and the Transition
Services Agreement.

“Related Party” shall have the meaning set forth in Section
3.22.

“Release” means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing, of any
Hazardous Substances at, in, on, into or onto the environment, including,
without limitation, the migration of any Hazardous Substances through or in the
environment.

“Regulatory Restrictions” means any one or more of the following: (i)
the seeking by a Competition Authority of an Order temporarily or permanently
enjoining the Closing, (ii) the imposition of an Order sought in clause (i),
(iii) the filing of a complaint (or similar) by any Competition Authority
challenging the transactions contemplated in this Agreement as violating
competition Laws (including or similar to Section 1 of the Sherman Antitrust
Act, Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission
Act), (iv) the initiation of a formal or informal investigation by any
Competition Authority in connection with the transactions contemplated herein,
or (v) any indication (written or oral) from a Competition Authority that it is
likely to challenge the transactions contemplated by this Agreement or impose
material sanctions on any party upon consummation of the transactions
contemplated by this Agreement or, to the extent no such indication has been
received from a Competition Authority (after inquiry) and the Stockholder
Approval has been obtained, Purchaser has received written advice from its
counsel that a significant risk exists that consummation of the transactions
contemplated by this Agreement will result in a Competition Authority
challenging the transactions or imposing material sanctions on the Purchaser or
the Company after Closing.

“Representatives” shall have the meaning set forth in Section
5.4(a).

“Restricted Business” has the meaning set forth in Section
5.18(c).

“Restricted Period” has the meaning set forth in Section
5.18(c).

“Schedule” means an individual section of the Disclosure Schedule.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Seller” shall have the meaning set forth in the opening paragraph.

“Seller SEC Documents” has the meaning set forth in Section
3.12.

“Shares” shall have the meaning set forth in Section 3.6.

“Stockholder Approval” shall have the meaning set forth in Section
3.2(d).

“Stockholders Meeting” shall have the meaning set forth in Section
5.3(b).

“Straddle Period” shall have the meaning set forth in Section
5.8(b).

“Subsidiary” means, with respect to any Person, any corporation or
other organization, whether incorporated or unincorporated, of which (a) at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries or (b) such Person or any other Subsidiary of such Person is a
general partner (excluding any such partnership where such Person or any
Subsidiary of such Person does not have a majority of the voting interest in
such partnership).

“Superior Proposal” shall have the meaning set forth in Section
5.4(d)(ii).

“Takeover Proposal” shall have the meaning set forth in Section
5.4(d)(i).

“Tax” or “Taxes” means any federal, state, local, or foreign
income, gross receipts, net worth, capital, license, payroll, estimated,
employment, excise, severance, stamp, business and occupation, premium, windfall
profits, environmental, capital stock, franchise, profits, margin, gross margin,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, ad valorem,
customs duties, value added, alternative or add-on minimum tax, estimated or any
other taxes of any kind imposed by a Governmental Entity, including any
interest, penalty, or addition thereto, whether disputed or not, and including
any obligations to indemnity or otherwise assume or succeed to the Tax liability
of any other Person (other than pursuant to this Agreement).

“Tax Return” means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

“Territory” has the meaning set forth in Section 5.18(c).

“Third-Party Claim” shall have the meaning set forth in Section
8.2(a).

“Third-Party Consents” shall have the meaning set forth in Section
5.7(d).

“Title IV Employee Plan” means an Employee Plan that has been subject
to Section 302, Section 303 or Title IV of ERISA or Section 412 or Section 430
of the Code.

“Trademarks” means U.S. and foreign registered and unregistered
trademarks, trade dress, service marks, logos, trade names, corporate names and
all registrations and applications to register the same.

“Trade Secrets” means all categories of trade secrets as defined in
the Uniform Trade Secrets Act, including business information and industrial
designs, discoveries, improvements, ideas, designs, models, formulae, patterns,
compilations, data collections, drawings, blueprints, mask works, devices,
methods, techniques, processes, know-how, proprietary information, customer
lists, technical information and trade secrets.

“Transition Services Agreement” means the agreement for transition
services to be provided by the Company to Seller after Closing substantially in
the form attached hereto as Exhibit D.

“U.S.” means the United States of America.

“U.S. Dollar” or “$” means the lawful currency of the United
States of America.

“Walk-Away Date” shall have the meaning set forth in Section
7.1(b)(i).

“WARN Act” means the Worker Adjustment and Retraining Notification
Act.

Section 9.2. Interpretation.

(a) The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.

(b) Whenever the words “include”, “includes” or “including” are used in this
Agreement they shall be deemed to be followed by the words “without limitation.”

(c) The words “hereof”, “herein” and “herewith” and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the articles,
sections, paragraphs, exhibits and schedules of this Agreement unless otherwise
specified.

(d) The meaning assigned to each term defined herein shall be equally
applicable to both the singular and the plural forms of such term, and words
denoting any gender shall include all genders. Where a word or phrase is defined
herein, each of its other grammatical forms shall have a corresponding meaning.

(e) A reference to any party to this Agreement or any other agreement or
document shall include such party153s successors and permitted assigns.

(f) A reference to any legislation or to any provision of any legislation
shall include any amendment to, and any modification or re-enactment thereof,
any legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto.

(g) A reference herein to any other agreement or document shall be to such
agreement or document as it may have been or may hereafter be amended, modified,
supplemented, waived or restated from time to time in accordance with its terms
and, to the extent applicable, the terms of this Agreement, and shall include
all annexes, exhibits, schedules and other documents or agreements attached
thereto.

(h) The parties have participated jointly in the negotiation and drafting of
this Agreement. In the event 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 favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

(i) All payments and adjustments under this Agreement shall be made in U.S.
Dollars.

ARTICLE X.

MISCELLANEOUS

Section 10.1. Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the Closing shall be paid
by the party incurring such expenses, except as specifically provided to the
contrary in this Agreement.

Section 10.2. Amendment and Modification. This Agreement may be
amended, modified and supplemented in any and all respects, but only by a
written instrument signed by all of the parties hereto expressly stating that
such instrument is intended to amend, modify or supplement this Agreement.

Section 10.3. Notices. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given: (1) on the
date of delivery, if personally delivered, (2) on the day of receipt, if
delivered by a nationally recognized next-day courier service, or (3) on the
third Business Day following the date of mailing, if mailed by registered or
certified mail (return receipt requested), in each case to such party at its
address set forth below or such other address as such party may specify by
notice to the parties hereto.

If to Purchaser, to:

Allflex USA, Inc.

P.O. Box 612266

DFW Airport, TX 75261

Attention: Harold B. Kernodle

Telecopy: (972) 456-3882

with a copy which shall not constitute notice to:

Hunton & Williams LLP

1445 Ross Avenue

Suite 3700

Dallas, TX 75202

Attention: T. Allen McConnell, Esq.

Telecopy: (214) 740-7147

and if to Seller, to:

Digital Angel Corporation

490 Villaume Avenue

South St. Paul, MN 55075

Facsimile No.: (651) 455-0217

Telephone No.: (651) 455-1621

Attention: Chief Executive Officer

with a copy which shall not constitute to:

Winthrop & Weinstine, P.A.

Capella Tower, Suite 3500

225 South Sixth Street

Minneapolis, MN 55402

Facsimile No.: (612) 604-6929

Telephone No.: (621) 604-6400

Attention: Philip T. Colton, Esq.

Email: pcolton@winthrop.com

Section 10.4. Counterparts; Facsimile. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties. Any signature
page of any such counterpart, or any electronic facsimile thereof, may be
attached or appended to any other counterpart to complete a fully executed
counterpart of this Agreement, and any telecopy or other facsimile transmission
of any signature shall be deemed an original and shall bind such party.

Section 10.5. Entire Agreement; No Third Party Beneficiaries. This
Agreement, together with and the Related Documents (a) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof and
thereof and (b) are not intended to confer upon any Person other than the
parties hereto and thereto any rights or remedies hereunder (except that the
Purchaser Indemnified Persons are intended to be third party beneficiaries of
Article VIII hereof); provided that this Agreement shall not
supersede or in any way modify the terms of the Confidentiality Agreement.

Section 10.6. Severability. Any term or provision of this Agreement
that is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction or other authority declares that any term or
provision hereof is invalid, void or unenforceable, the parties agree that the
court making such determination shall have the power to reduce the scope,
duration, area or applicability of the term or provision, to delete specific
words or phrases, or to replace any invalid, void or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision.

Section 10.7. Governing Law. This Agreement and the transactions
contemplated herein, and all disputes, claims, or controversies between the
parties under or, except to the extent governing law is expressly set forth in a
Related Document, related to this Agreement or the facts and circumstances
leading to its execution or performance, whether in contract, tort or otherwise,
shall be governed by and construed in accordance with the Laws of the State of
Delaware, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the Laws of any jurisdiction other than the
State of Delaware.

Section 10.8. Jurisdiction. Each of the parties irrevocably submits
itself to the non-exclusive personal jurisdiction of all state and federal
courts sitting in the State of Delaware, including to the jurisdiction of all
courts to which an appeal may be taken from such courts, in any action, suit or
proceeding arising out of or relating to this Agreement, any of the transactions
contemplated by this Agreement or any facts and circumstances leading to its or
their execution or performance.

Section 10.9. Waiver of Trial by Jury. EACH OF THE PARTIES HEREBY
ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, THE FACTS OR CIRCUMSTANCES LEADING TO ITS OR THEIR
EXECUTION OR PERFORMANCE OR ANY ACTIONS OF ANY OF ANY OTHER PARTY153S AFFILIATES
AND REPRESENTATIVES. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (1) NO
REPRESENTATIVE OR AFFILIATE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER, (2) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVER, (3) IT MAKES SUCH WAIVER KNOWINGLY AND VOLUNTARILY
AND (4) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 10.9.

Section 10.10. Time of Essence. Each of the parties hereto hereby
agrees that, with regard to all dates and time periods set forth or referred to
in this Agreement, time is of the essence.

Section 10.11. Extension; Waiver. At any time prior to the Closing
Date, either party hereto may extend the time for the performance of any of the
obligations or other acts of the other party. Any agreement on the part of a
party to any such extension shall be valid only if set forth in an instrument in
writing signed by or on behalf of such party. The failure of either party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.

Section 10.12. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be transferred by either party
(whether by operation of law or otherwise) without the prior written consent of
the other party, provided, however, that Purchaser may transfer any of
its rights and obligations to any Affiliate of Purchaser, but no such assignment
shall relieve Purchaser of its obligations hereunder. Any transfer of any
rights, interests or obligations hereunder in violation of this Section shall be
null and void.

Section 10.13. Specific Performance. Each party shall be entitled to
equitable relief, including specific performance, in the event of any breach or
threatened breach of this Agreement.

[Signature Page Follows]

5966987v10

IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement or
caused this Agreement to be executed by their respective officers thereunto duly
authorized as of the date first written above.

SELLER:

DIGITAL ANGEL CORPORATION

By: /s/ Joseph J. Grillo

Its: Chief Executive Officer

PURCHASER:

ALLFLEX USA, INC.

By: /s/ Harold B. Kernodle

Its: Chief Financial Officer

[Signature Page to Stock Purchase Agreement]

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