DIGITAL ANGEL CORPORATION 2003 FLEXIBLE STOCK PLAN

Equity Incentive Plan Agreement

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DIGITAL ANGEL CORPORATION

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Title: DIGITAL ANGEL CORPORATION 2003 FLEXIBLE STOCK PLAN
Governing Law: Delaware Date: 10/16/2009
Industry: Communications Equipment Sector: Technology

Exhibit 4.1

DIGITAL ANGEL CORPORATION

2003 FLEXIBLE STOCK PLAN

(as Amended and Restated through September 25, 2009)

DIGITAL ANGEL CORPORATION
2003 FLEXIBLE STOCK PLAN
(as Amended and Restated through September 25, 2009)

TABLE OF CONTENTS


1.	NAME AND PURPOSE	1
1.1	Name	1
1.2	Purpose	1

2.	DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION	1
2.1	General Definitions	1
2.1.1	Affiliate	1
2.1.2	Agreement	1
2.1.3	Benefit	1
2.1.4	Board	1
2.1.5	Cash Award	1
2.1.6	Change of Control	2
2.1.7	Code	3
2.1.8	Company	3
2.1.9	Committee	3
2.1.10	Common Stock	3
2.1.11	Effective Date	3
2.1.12	Employee	3
2.1.13	Employer	3
2.1.14	Exchange Act	3
2.1.15	Fair Market Value	4
2.1.16	Fiscal Year	4
2.1.17	ISO	4
2.1.18	NQSO	4
2.1.19	Option	4
2.1.20	Other Stock Based Award	4
2.1.21	Parent	4
2.1.22	Participant	4
2.1.23	Performance Based Compensation	4
2.1.24	Performance Share	4
2.1.25	Plan	5
2.1.26	Reload Option	5

iii


2.1.27	Restricted Stock	5
2.1.28	Rule 16b-3	5
2.1.29	SEC	5
2.1.30	Share	5
2.1.31	SAR	5
2.1.32	Subsidiary	5
2.2	Other Definitions	5
2.3	Conflicts	5

3.	COMMON STOCK	6
3.1	Number of Shares	6
3.2	Reusage	6
3.3	Adjustments	6

4.	ELIGIBILITY	6
4.1	Determined By Committee	6

5.	ADMINISTRATION	6
5.1	Committee	6
5.2	Authority	7
5.3	Delegation	7
5.4	Determination	7

6.	AMENDMENT	8
6.1	Power of Board	8
6.2	Limitation	8

7.	TERM AND TERMINATION	8
7.1	Term	8
7.2	Termination	8

8.	MODIFICATION OR TERMINATION OF BENEFITS	8
8.1	General	8
8.2	Committee’s Right	8
8.3	Compliance with Applicable Laws	8

9.	CHANGE OF CONTROL	9


9.1	Vesting and Payment	9
9.2	Other Action	9

10.	AGREEMENTS AND CERTAIN BENEFITS	9
10.1	Grant Evidenced by Agreement	9
10.2	Provisions of Agreement	9
10.3	Transferability	10

11.	REPLACEMENT AND TANDEM AWARDS	10
11.1	Replacement	10
11.2	Tandem Awards	10

12.	PAYMENT, DIVIDENDS AND WITHHOLDING	10
12.1	Payment	10
12.2	Dividend Equivalents	10
12.3	Withholding	11

13.	OPTIONS	11
13.1	Types of Options	11
13.2	Grant of ISOs and Option Price	11
13.3	Other Requirements for ISOs	11
13.4	NQSOs	11
13.5	Determination by Committee	11

14.	SARS	11
14.1	Grant and Payment	11
14.2	Grant of Tandem Award	11
14.3	ISO Tandem Award	12
14.4	Payment of Award	12

15.	ANNUAL LIMITATIONS	12
15.1	Limitation on Options and SARs	12
15.2	Limitation on Performance Shares	12
15.3	Computations	12

16.	RESTRICTED STOCK AND PERFORMANCE SHARES	12
16.1	Restricted Stock	12


16.2	Cost of Restricted Stock	12
16.3	Non-Transferability	13
16.4	Performance Shares	13
16.5	Grant	13

17.	CASH AWARDS	13
17.1	Grant	13
17.2	Annual Limits	13
17.3	Restrictions	13

18.	OTHER STOCK BASED AWARDS AND OTHER BENEFITS	14
18.1	Other Stock Based Awards	14
18.2	Other Benefits	14

19.	MISCELLANEOUS PROVISIONS	14
19.1	Underscored References	14
19.2	Number and Gender	14
19.3	Unfunded Status of Plan	14
19.4	Termination of Employment	14
19.5	Designation of Beneficiary	14
19.6	Governing Law	15
19.7	Purchase for Investment	15
19.8	No Employment Contract	15
19.9	No Effect on Other Benefits	15

DIGITAL ANGEL CORPORATION
2003 FLEXIBLE STOCK PLAN
(as Amended and Restated through September 25, 2009)

1. NAME AND PURPOSE

1.1 Name.

The name of this Plan is the “Digital Angel Corporation 2003 Flexible Stock Plan.”

1.2 Purpose.

The Company has established this Plan to attract, retain, motivate and reward Employees and other individuals, to encourage ownership of the Company’s common stock by Employees and other individuals, and to promote and further the best interests of the Company by granting cash and other awards. The Company also intends in appropriate circumstances to grant awards of its common stock in lieu of cash compensation pursuant to the mutual agreement of the Participant and the Company.

2. DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION

2.1 General Definitions.

The following words and phrases, when used in the Plan, unless otherwise specifically defined or unless the context clearly otherwise requires, shall have the following respective meanings:

2.1.1 Affiliate.

A Parent or Subsidiary of the Company.

2.1.2 Agreement.

The document which evidences the grant of any Benefit under the Plan and which sets forth the Benefit and the terms, conditions and provisions of, and restrictions relating to, such Benefit.

2.1.3 Benefit.

Any benefit granted to a Participant under the Plan.

2.1.4 Board.

The Board of Directors of the Company.

2.1.5 Cash Award.

A Benefit payable in the form of cash.

2.1.6 Change of Control.

The occurrence of any of the following:

	A.		An acquisition of any common stock or other voting securities of the Company entitled to vote generally for the election of directors (the “Voting Securities”) by any “Person” or “Group” (as each such term is used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person or Group, as the case may be, has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 20% of the then outstanding shares of common stock or the combined voting power of the Company’s then outstanding Voting Securities; provided, however, that in determining whether a Change of Control has occurred, shares of common stock or Voting Securities that are acquired in a Non-Control Acquisition (as defined below) shall not constitute an acquisition which would cause a Change of Control. A “Non-Control Acquisition” shall mean an acquisition by (i) the Company, (ii) any Subsidiary or (ii) any employee benefit plan maintained by the Company or any Subsidiary, including a trust forming part of any such plan (an “Employee Benefit Plan”);

	B.		When, during any 2-year period, individuals who, at the beginning of the 2-year period, constitute the Board (the “Incumbent Board”), cease for any reason to constitute at least 50% of the members of the Board; provided, however, that (i) if the election or nomination for election by the Company’s shareholders of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes hereof, be deemed to be a member of the Incumbent Board; and (ii) no individual shall be deemed to be a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person or Group other than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest;

	C.		The consummation of:

a merger, consolidation or reorganization involving the Company or any Subsidiary, unless the merger, consolidation or reorganization is a Non-Control Transaction. A “Non-Control Transaction” shall mean a merger, consolidation or reorganization of the Company or any Subsidiary where:

	(a)		the shareholders of the Company immediately prior to the merger, consolidation or reorganization own, directly or indirectly, immediately following such merger, consolidation or reorganization, at least 50% of the combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation or reorganization (the “Surviving Corporation”) in substantially the same proportion as their ownership of the common stock or Voting Securities, as the case may be, immediately prior to the merger, consolidation or reorganization,

	(b)		the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for the merger, consolidation or reorganization constitute at least two-thirds of the members of the board of directors of the Surviving Corporation, or a corporation beneficially owning, directly or indirectly, a majority of the voting securities of the Surviving Corporation, and

	(c)		no Person or Group, other than (1) the Company, (2) any Subsidiary, (3) any Employee Benefit Plan or (4) any other Person or Group who, immediately prior to the merger, consolidation or reorganization, had Beneficial Ownership of not less than 20% of the then outstanding Voting Securities or common stock, has Beneficial Ownership of 20% or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities or common stock;

	(d)		A complete liquidation or dissolution of the Company; or

(e)

The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary).

Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred solely because any Person or Group (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then outstanding Voting Securities or common stock of the Company as a result of an acquisition of Voting Securities or common stock by the Company which, by reducing the number of shares of Voting Securities or common stock then outstanding, increases the proportional number of shares beneficially owned by the Subject Person; provided, however, that if a Change of Control would have occurred (but for the operation of this sentence) as a result of the acquisition of Voting Securities or common stock by the Company, and after such acquisition by the Company, the Subject Person becomes the beneficial owner of any additional shares of Voting Securities or common stock, which increases the percentage of the then outstanding shares of Voting Securities or common stock beneficially owned by the Subject Person, then a Change of Control shall be deemed to have occurred.

2.1.7 Code.

The Internal Revenue Code of 1986, as amended. Any reference to the Code includes the regulations promulgated pursuant to the Code.

2.1.8 Company.

Digital Angel Corporation

2.1.9 Committee.

The Committee described in Section 5.1.

2.1.10 Common Stock.

The Company’s common stock, which presently has a par value of $.01 per Share.

2.1.11 Effective Date.

The date that the amended and restated Plan is approved by the shareholders of the Company which must occur within one year before or after approval by the Board. Any grants of Benefits prior to the approval by the shareholders of the Company shall be void if such approval is not obtained.

2.1.12 Employee.

Any person employed by the Employer.

2.1.13 Employer.

The Company and all Affiliates.

2.1.14 Exchange Act.

The Securities Exchange Act of 1934, as amended.

2.1.15 Fair Market Value.

The closing price of Shares on the Nasdaq National Market on a given date, or, in the absence of sales on a given date, the closing price on the Nasdaq National Market on the last day on which a sale occurred prior to such date.

2.1.16 Fiscal Year.

The taxable year of the Company which is the calendar year.

2.1.17 ISO.

An Incentive Stock Option as defined in Section 422 of the Code.

2.1.18 NQSO.

A non-qualified stock Option, which is an Option that does not qualify as an ISO.

2.1.19 Option.

An option to purchase Shares granted under the Plan.

2.1.20 Other Stock Based Award.

An award under Section 3.1 that is valued in whole or in part by reference to, or otherwise based on, common stock.

2.1.21 Parent.

Any corporation (other than the Company or a Subsidiary) in an unbroken chain of corporations ending with the Company, if, at the time of the grant of an Option or other Benefit, each of the corporations (other than the Company) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

2.1.22 Participant.

An individual who is granted a Benefit under the Plan. Benefits may be granted only to Employees, members of the Board, (including former Employees and former members of the Board if in connection with their separation from the Company), employees and owners of entities which are not Affiliates but which have a direct or indirect ownership interest in an Employer or in which an Employer has a direct or indirect ownership interest, individuals who, and employees and owners of entities which, are customers and suppliers of an Employer, individuals who, and employees and owners of entities which, render services to an Employer, and individuals who, and employees and owners of entities, which have ownership or business affiliations with any individual or entity previously described.

2.1.23 Performance Based Compensation.

Compensation which meets the requirements of Section 162(m)(4)(C) of the Code.

2.1.24 Performance Share.

A Share awarded to a Participant under Section 16.4 of the Plan.

2.1.25 Plan.

The Digital Angel Corporation 2003 Flexible Stock Plan and all amendments and supplements to it.

2.1.26 Reload Option.

An Option to purchase the number of Shares used by a Participant to exercise an Option and to satisfy any withholding requirement incident to the exercise of such Option.

2.1.27 Restricted Stock.

Shares issued under Section 16.1 of the Plan.

2.1.28 Rule 16b-3.

Rule 16b-3 promulgated by the SEC, as amended, or any successor rule in effect from time to time.

2.1.29 SEC.

The Securities and Exchange Commission.

2.1.30 Share.

A share of common stock.

2.1.31 SAR.

A stock appreciation right, which is the right to receive an amount equal to the appreciation, if any, in the Fair Market Value of a Share from the date of the grant of the right to the date of its payment.

2.1.32 Subsidiary.

Any corporation, other than the Company, in an unbroken chain of corporations beginning with the Company if, at the time of grant of an Option or other Benefit, each of the corporations, other than the last corporation in the unbroken chain, owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

2.2 Other Definitions.

In addition to the above definitions, certain words and phrases used in the Plan and any Agreement may be defined in other portions of the Plan or in such Agreement.

2.3 Conflicts.

In the case of any conflict in the terms of the Plan relating to a Benefit, the provisions in the section of the Plan which specifically grants such Benefit shall control those in a different section. In the case of any conflict between the terms of the Plan relating to a Benefit and the terms of an Agreement relating to a Benefit, the terms of the Plan shall control.

3. COMMON STOCK

3.1 Number of Shares.

The number of Shares which may be issued or sold or for which Options, SARs or Performance Shares may be granted under the Plan shall be 2,875,000 Shares. Such Shares may be authorized but unissued Shares, Shares held in the treasury, or both. The full number of Shares available may be used for any type of Option or other Benefit; provided, however, that the number of Shares that may be issued under ISOs shall not exceed 162,500.

3.2 Reusage.

If an Option or SAR expires or is terminated, surrendered, or canceled without having been fully exercised, if Restricted Shares or Performance Shares are forfeited, or if any other grant results in any Shares not being issued, the Shares covered by such Option or SAR, grant of Restricted Shares, Performance Shares or other grant, as the case may be, shall again be available for use under the Plan. Any Shares which are used as full or partial payment to the Company upon exercise of an Option or for any other Benefit that requires a payment to the Company shall be available for purposes of the Plan.

3.3 Adjustments.

If there is any change in the common stock of the Company by reason of any stock dividend, spin-off, split-up, spin-out, recapitalization, merger, consolidation, reorganization, combination or exchange of shares, or otherwise, the number of SARs and number and class of shares available for Options and grants of Restricted Stock, Performance Shares and Other Stock Based Awards and the number of Shares subject to outstanding Options, SARs, grants of Restricted Stock which are not vested, grants of Performance Shares which are not vested, and Other Stock Based Awards, and the price thereof, as applicable, may be appropriately adjusted by the Committee.

4. ELIGIBILITY

4.1 Determined By Committee.

The Participants and the Benefits they receive under the Plan shall be determined solely by the Committee. In making its determinations, the Committee shall consider past, present and expected future contributions of Participants and potential Participants to the Employer, including, without limitation, the performance of, or the refraining from the performance of, services. Unless specifically provided otherwise herein, all determinations of the Committee in connection with the Plan or an Agreement shall be made in its sole discretion.

5. ADMINISTRATION

5.1 Committee.

The Plan shall be administered by the Committee. The Committee shall consist of

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