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Exhibit 10.4
 
 
STOCK PLEDGE AGREEMENT
 
This Stock Pledge Agreement (this “Agreement”), dated as of August 24, 2006,
among Laurus Master Fund, Ltd. (the “Pledgee”), Applied Digital Solutions, Inc.,
a Missouri corporation ("ADSX") and Computer Equity Corporation, a Delaware
corporation (each a "Pledgor" and collectively, the “Pledgors”). 
 
BACKGROUND
 
ADSX and the Pledgee have entered into a Securities Purchase Agreement, dated as
of August 24, 2006 (as amended, modified, restated or supplemented from time to
time, the “Securities Purchase Agreement”), pursuant to which the Pledgee
provides or will provide certain financial accommodations to the Pledgors.
 
In order to induce the Pledgee to provide or continue to provide the financial
accommodations described in the Securities Purchase Agreement, the Pledgors have
agreed to pledge and grant a security interest in the collateral described
herein to the Pledgee on the terms and conditions set forth herein.
 
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
 
1. Defined Terms. All capitalized terms used herein which are not defined shall
have the meanings given to them in the Securities Purchase Agreement.
 
2. Pledge and Grant of Security Interest. To secure the full and punctual
payment and performance of (the following clauses (a) and (b), collectively, the
“Obligations”) (a) the obligations under the Securities Purchase Agreement and
the Related Agreements (the Securities Purchase Agreement and the Related
Agreements , as each may be amended, restated, modified and/or supplemented from
time to time, excluding the Common Stock Purchase Warrant and the Warrant Shares
as defined in the Securities Purchase Agreement, collectively, the “Documents”)
and (b) all other obligations and liabilities of the Pledgors to the Pledgee
whether now existing or hereafter arising, direct or indirect, liquidated or
unliquidated, absolute or contingent, due or not due and whether under, pursuant
to or evidenced by a note, agreement, guaranty, instrument or otherwise, (in
each case, irrespective of the genuineness, validity, regularity or
enforceability of such Obligations, or of any instrument evidencing any of the
Obligations or of any collateral therefor or of the existence or extent of such
collateral, and irrespective of the allowability, allowance or disallowance of
any or all of such in any case commenced by or against the Pledgors under Title
11, United States Code, including, without limitation, obligations of the
Pledgors for post-petition interest, fees, costs and charges that would have
accrued or been added to the Obligations but for the commencement of such case),
the Pledgors hereby pledge, assign, hypothecate, transfer and grant a security
interest to Pledgee in all of the following (the “Collateral”):
 
 

   

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(a) the shares of stock or other equity interests set forth on Schedule A
annexed hereto and expressly made a part hereof (together with any additional
shares of stock or other equity interests acquired by the Pledgors, the “Pledged
Stock”), the certificates representing the Pledged Stock and all dividends,
cash, instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Stock;
 
(b) all additional shares of stock or other equity interests of any issuer
(each, an “Issuer”) of the Pledged Stock from time to time acquired by the
Pledgors in any manner, including, without limitation, stock dividends or a
distribution in connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets, combination of shares,
stock split, spin-off or split-off (which shares shall be deemed to be part of
the Collateral), and the certificates representing such additional shares, and
all dividends, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares; and
 
(c) all options and rights, whether as an addition to, in substitution of or in
exchange for any shares of any Pledged Stock and all dividends, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
such options and rights.
 
The term “Collateral” shall exclude the shares of stock or other equity
interests and participations set forth on Schedule B to this Agreement,
including, without limitation, stock dividends or a distribution in connection
with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock split, spin-off or
split-off relating to such shares (the “Excluded Collateral”). Without limiting
the generality of the foregoing, it is hereby specifically understood and agreed
that the Pledgors may from time to time hereafter pledge and deliver additional
shares of stock or other equity interests to the Pledgee as collateral security
for the Obligations. Upon the pledge and delivery to the Pledgee, such
additional shares of stock or other equity interests shall be deemed to be part
of the Collateral and shall be subject to the terms of this Agreement whether or
not Schedule A is amended to refer to such additional shares or interests.
Notwithstanding anything to the contrary contained herein, upon payment of the
Obligations under the Note in immediately available funds, this Agreement shall
automatically terminate and be without further force or effect.
 
3. Delivery of Collateral. (a) All certificates representing or evidencing the
Pledged Stock shall be delivered to and held by or on behalf of Pledgee pursuant
hereto and shall be accompanied by duly executed instruments of transfer or
assignments in blank, all in form and substance satisfactory to Pledgee. The
Pledgors hereby authorize the Issuer upon demand by the Pledgee to deliver any
certificates, instruments or other distributions issued in connection with the
Collateral directly to the Pledgee, in each case to be held by the Pledgee,
subject to the terms hereof. Upon the occurrence and during the continuance of
an Event of Default (as defined below), the Pledgee shall have the right, during
such time in its discretion and without notice to the Pledgors, to transfer to
or to register in the name of the Pledgee or any of its nominees any or all of
the Pledged Stock. In addition, the Pledgee shall have the right at such time to
exchange certificates or instruments representing or evidencing Pledged Stock
for certificates or instruments of smaller or larger denominations.
 

 
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(b) ADSX hereby represents, warrants and covenants that the shares of Digital
Angel Corporation owned by ADSX but held as the trust estate (the “Trust
Estate”) in the Digital Angel Share Trust (the “Trust”) is and shall remain
Trust Estate, except as such Trust Estate may be issued upon the exercise of the
warrants held by Elliot Associates, L.P., Elliot International, L.P., Omicron
Master Trust, Portside Growth and Opportunity Fund and Islandia, L.P.
(collectively, the “Existing Warrant Holders”) as set forth on Schedule 4.3 of
the Securities Purchase Agreement. In the event that the Trust is dissolved or
liquidated, ADSX shall, in accordance with the terms of the pledge set forth
herein immediately deliver the remaining Trust Estate to the Pledgee in
accordance with this Agreement. ADSX shall not, and shall ensure that Wilmington
Trust Company, as trustee of the Trust (the “Trustee”), shall not, deliver any
portion of the Trust Estate to any person other than the Assignee; except in
respect of the Excluded Collateral which may be delivered to the Existing
Warrant Holders.
 
4. Representations and Warranties of the Pledgors. Each Pledgor represents and
warrants to the Pledgee (which representations and warranties shall be deemed to
continue to be made until all of the Obligations have been paid in full and each
Document and each agreement and instrument entered into in connection therewith
(other than the Warrant) has been irrevocably terminated) that:
 
(a) the execution, delivery and performance by such Pledgor of this Agreement
and the pledge of the Collateral hereunder do not and will not result in any
violation of any agreement, indenture, instrument, license, judgment, decree,
order, law, statute, ordinance or other governmental rule or regulation
applicable to such Pledgor;
 
(b) this Agreement constitutes the legal, valid, and binding obligation of each
Pledgor enforceable against such Pledgor in accordance with its terms;
 
(c) (i) all Pledged Stock owned by each Pledgor is set forth on Schedule A
hereto and (ii) each Pledgor is the legal and beneficial owner of the Pledged
Stock as set forth on Schedule A; except for the Trust Estate in respect of
which, while held in the Trust, the Trustee is the legal owner and ADSX is the
beneficial owner;
 
(d) all of the shares of the Pledged Stock have been duly authorized, validly
issued and are fully paid and nonassessable;
 
(e) no consent or approval of any person, corporation, governmental body,
regulatory authority or other entity, is or will be necessary for (i) the
execution, delivery and performance of this Agreement, or (ii) the exercise by
the Pledgee of any rights with respect to the Collateral (other than Laurus’
internal policies and procedures and in respect of the Trust Estate while held
in the Trust (ii) the pledge and assignment of, and the grant of a security
interest in, the Collateral hereunder other than in respect of the Trust Estate
while held in the Trust;
 
(f) there are no pending or, to the best of each Pledgor’s knowledge, threatened
actions or proceedings before any court, judicial body, administrative agency or
arbitrator which may materially adversely affect the Collateral;
 
 

 
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(g) each Pledgor has the requisite power and authority to enter into this
Agreement and to pledge and assign the Collateral to the Pledgee in accordance
with the terms of this Agreement;
 
(h) each Pledgor owns each item of the Collateral and, except for the pledge and
security interest granted to Pledgee hereunder and the security interest granted
by ADSX to InfoTech USA, Inc. in respect of 750,000 shares of Digital Angel
Corporation owned by ADSX, the Collateral shall be, immediately following the
closing of the transactions contemplated by the Documents, free and clear of any
other security interest, mortgage, pledge, claim, lien, charge, hypothecation,
assignment, offset or encumbrance whatsoever (collectively, “Liens”);
 
(i) there are no restrictions on transfer of the Pledged Stock contained in the
articles of incorporation or by-laws (or equivalent organizational documents) of
the Issuer or otherwise which have not otherwise been enforceably and legally
waived by the necessary parties;
 
(j) none of the Pledged Stock has been issued or transferred in violation of the
securities registration, securities disclosure or similar laws of any
jurisdiction to which such issuance or transfer may be subject; and
 
(k) the pledge and assignment of the Collateral and the grant of a security
interest under this Agreement vest in the Pledgee all rights of each Pledgor in
the Collateral as contemplated by this Agreement.
 
(l) (a) ADSX has delivered to the Trustee an irrevocable instruction in respect
of the Trust Estate which such notice requires the Trustee, upon release of any
of the Trust Estate (other than the Excluded Collateral) for any reason, to
deliver such released Trust Estate (other than the Excluded Collateral) to
Assignee and no other person and (b) the Trustee has acknowledged and accepted
the irrevocable instruction referenced in clause (a) above.
 
5. Covenants. Each Pledgor covenants that, until the Obligations shall be
indefeasibly satisfied in full and each Document and each agreement and
instrument entered into in connection therewith (other than the Warrant) is
irrevocably terminated:
 
(a) Such Pledgor will not sell, assign, transfer, convey, or otherwise dispose
of its rights in or to the Collateral or any interest therein; nor will such
Pledgor create, incur or permit to exist any Lien whatsoever with respect to any
of the Collateral or the proceeds thereof other than that created hereby.
 
(b) Such Pledgor will, at its expense, defend Pledgee’s right, title and
security interest in and to the Collateral against the claims of any other
party.
 
(c) Such Pledgor shall at any time, and from time to time, upon the written
request of Pledgee, execute and deliver such further documents and do such
further acts and things as Pledgee may reasonably request in order to effectuate
the purposes of this Agreement including, but without limitation, delivering to
Pledgee, upon the occurrence of an Event of Default, irrevocable proxies in
respect of the Collateral in form satisfactory to Pledgee. Until
 
 

 
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receipt thereof, upon an Event of Default that has occurred and is continuing
beyond any applicable grace period, this Agreement shall constitute such
Pledgor’s proxy to Pledgee or its nominee to vote all shares of Collateral then
registered in such Pledgor’s name.
 
(d) Notwithstanding anything to the contrary in this Agreement, each Pledgor
expressly acknowledges and agrees that all dividends and distributions declared
by Issuer in respect of the Collateral and otherwise payable to such Pledgor
shall be applied toward prepayment of the Note, and such Pledgor shall not
receive any such dividends or distributions, except to the extent necessary to
satisfy such Pledgor’s income tax obligations with respect thereto. The Pledgor
will not consent to or approve the issuance of (i) any additional shares of any
class of capital stock or other equity interests of the Issuer; or (ii) any
securities convertible either voluntarily by the holder thereof or automatically
upon the occurrence or nonoccurrence of any event or condition into, or any
securities exchangeable for, any such shares, unless, in either case such
capital stock issued or issuable to the Pledgor as a result of such transaction
are pledged and delivered to Laurus as Collateral pursuant to this Agreement in
such proportion as shall be determined by multiplying the amount of Pledged
Stock of such issuer by a fraction, the numerator of which shall be the number
of shares of capital stock of such issuer pledged to Laurus hereunder
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock of such issuer issued or issuable to Pledgor
immediately after such event. The product so obtained shall thereafter be the
number of additional shares of such Issuer’s capital stock that shall
immediately be pledged and delivered to Laurus as additional Pledged Stock and
Collateral pursuant to this Agreement.
 
6. Voting Rights and Dividends. 
 
(a) So long as no Event of Default occurs and remains continuing:
 
(i) Each Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Collateral, or any part thereof, for any
purpose not inconsistent with the terms of this Agreement; provided, however,
that such Pledgor shall not exercise, or shall refrain from exercising, any such
right if it would result in an Event of Default.
 
(ii) Any and all dividends or distributions declared in respect of the
Collateral shall be applied toward payment of the Note in accordance with
Section 5(d) hereof.
 
(b) In addition to the Pledgee’s rights and remedies set forth in Section 8
hereof, in case an Event of Default shall have occurred and be continuing,
beyond any applicable cure period, the Pledgee shall (i) be entitled to vote the
Collateral, (ii) be entitled to give consents, waivers and ratifications in
respect of the Collateral (each Pledgor hereby irrevocably constituting and
appointing the Pledgee, with full power of substitution, the proxy and
attorney-in-fact of such Pledgor for such purposes) and (iii) be entitled to
collect and receive for its own use cash dividends paid on the Collateral. Each
Pledgor shall not be permitted to exercise or refrain from exercising any voting
rights or other powers if, in the reasonable judgment of the Pledgee, such
action would have a material adverse effect on the value of the Collateral or
any part thereof; and, provided, further, that such Pledgor shall give at least
five (5) days’ written notice of the manner in which such Pledgor intends to
exercise, or the reasons for refraining from exercising, any voting rights or
other powers other than with respect to any election of directors
 
 

 
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and voting with respect to any incidental matters. Following the occurrence of
an Event of Default, all dividends and all other distributions in respect of any
of the Collateral, shall be delivered to the Pledgee to hold as Collateral and
shall, if received by the Pledgor, be received in trust for the benefit of the
Pledgee, be segregated from the other property or funds of any other pledgor,
and be forthwith delivered to the Pledgee as Collateral in the same form as so
received (with any necessary endorsement).
 
7. Event of Default. An “Event of Default” under this Agreement shall occur upon
the happening of any of the following events:
 
(a) An “Event of Default” under the Documents shall have occurred and be
continuing beyond any applicable cure period;
 
(b) Any representation or warranty of the Pledgors made herein, in the
Securities Purchase Agreement or the Note shall be false or misleading in any
material respect;
 
(c) Any portion of the Collateral is subjected to a material post-judgment levy
of execution, attachment, distraint or other judicial process or any portion of
the Collateral is the subject of a claim (other than by the Pledgee) of a Lien
or other right or interest in or to the Collateral and such levy or claim shall
not be cured, disputed or stayed within a period of thirty (30) business days
after the occurrence thereof; or
 
(d) Each Pledgor shall (i) apply for, consent to, or suffer 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) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (vii) take any action for the purpose of effecting any of the
foregoing.
 
8. Remedies. In case an Event of Default shall have occurred and is continuing,
the Pledgee may:
 
(a) Transfer any or all of the Collateral into its name, or into the name of its
nominee or nominees;
 
(b) Exercise all corporate rights with respect to the Collateral including,
without limitation, all rights of conversion, exchange, subscription or any
other rights, privileges or options pertaining to any shares of the Collateral
as if it were the absolute owner thereof, including, but without limitation, the
right to exchange, at its discretion, any or all of the Collateral upon the
merger, consolidation, reorganization, recapitalization or other readjustment of
the Issuer thereof, or upon the exercise by the Issuer of any right, privilege
or option pertaining to any of the Collateral, and, in connection therewith, to
deposit and deliver any and all of the Collateral with any committee,
depository, transfer agent, registrar or other designated
 
 

 
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agent upon such terms and conditions as it may determine, all without liability
except to account for property actually received by it; and
 
(c) Subject to any requirement of applicable law, sell, assign and deliver the
whole or, from time to time, any part of the Collateral at the time held by the
Pledgee, at any private sale or at public auction, with or without demand,
advertisement or notice of the time or place of sale or adjournment thereof or
otherwise (all of which are hereby waived, except such notice as is required by
applicable law and cannot be waived), for cash or credit or for other property
for immediate or future delivery, and for such price or prices and on such terms
as the Pledgee in its sole discretion may determine, or as may be required by
applicable law.
 
Each Pledgor hereby waives and releases any and all right or equity of
redemption whether after sale hereunder. At any such sale, unless prohibited by
applicable law, the Pledgee may bid for and purchase the whole or any part of
the Collateral so sold free from any such right or equity of redemption. All
moneys received by the Pledgee hereunder, whether upon sale of the Collateral or
any part thereof or otherwise, shall be held by the Pledgee and applied by it as
provided in Section 10 hereof. No failure or delay on the part of the Pledgee in
exercising any rights hereunder shall operate as a waiver of any such rights nor
shall any single or partial exercise of any such rights preclude any other or
future exercise thereof or the exercise of any other rights hereunder. The
Pledgee shall have no duty as to the collection or protection of the Collateral
or any income thereon nor any duty as to preservation of any rights pertaining
thereto, except to apply the funds in accordance with the requirements of
Section 10 hereof. The Pledgee may exercise its rights with respect to property
held hereunder without resort to other security for or sources of reimbursement
for the Obligations. In addition to the foregoing, Pledgee shall have all of the
rights, remedies and privileges of a secured party under the Uniform Commercial
Code of New York (the “UCC”) regardless of the jurisdiction in which enforcement
hereof is sought.
 
9. Private Sale. Each Pledgor recognizes that the Pledgee may be unable to
effect (or to do so only after delay which would adversely affect the value that
might be realized from the Collateral) a public sale of all or part of the
Collateral by reason of certain prohibitions contained in the Securities Act,
and may be compelled to resort to one or more private sales to a restricted
group of purchasers who will be obliged to agree, among other things, to acquire
such Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Each Pledgor agrees that any such private sale
may be at prices and on terms less favorable to the seller than if sold at
public sales and that such private sales shall be deemed to have been made in a
commercially reasonable manner. Each Pledgor agrees that the Pledgee has no
obligation to delay sale of any Collateral for the period of time necessary to
permit the Issuer to register the Collateral for public sale under the
Securities Act.
 
10. Proceeds of Sale. The proceeds of any collection, recovery, receipt,
appropriation, realization or sale of the Collateral shall be applied by the
Pledgee as follows:
 
(a) First, to the payment of all costs, reasonable expenses and charges of the
Pledgee and to the reimbursement of the Pledgee for the prior payment of such
costs, reasonable expenses and charges incurred in connection with the care and
safekeeping of the Collateral (including, without limitation, the reasonable
expenses of any sale or any other disposition of any
 
 

 
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of the Collateral), attorneys’ fees and reasonable expenses, court costs, any
other fees or expenses incurred or expenditures or advances made by Pledgee in
the protection, enforcement or exercise of its rights, powers or remedies
hereunder;
 
(b) Second, to the payment of the Obligations, in whole or in part, in such
order as the Pledgee may elect, whether or not such Obligations is then due;
 
(c) Third, to such persons, firms, corporations or other entities as required by
applicable law including, without limitation, Section 9-615(a)(3) of the UCC;
and
 
(d) Fourth, to the extent of any surplus, to the Pledgors or as a court of
competent jurisdiction may direct.
 
In the event that the proceeds of any collection, recovery, receipt,
appropriation, realization or sale are insufficient to satisfy the Obligations,
the Pledgors shall be liable for the deficiency plus the costs and fees of any
attorneys employed by Pledgee to collect such deficiency.
 
11. Waiver of Marshaling. Each Pledgor hereby waives any right to compel any
marshaling of any of the Collateral.
 
12. No Waiver. Any and all of the Pledgee’s rights with respect to the Liens
granted under this Agreement shall continue unimpaired, and each Pledgor shall
be and remain obligated in accordance with the terms hereof, notwithstanding (a)
the bankruptcy, insolvency or reorganization of such Pledgor, (b) the release or
substitution of any item of the Collateral at any time, or of any rights or
interests therein, or (c) any delay, extension of time, renewal, compromise or
other indulgence granted by the Pledgee in reference to any of the Obligations.
Each Pledgor hereby waives all notice of any such delay, extension, release,
substitution, renewal, compromise or other indulgence, and hereby consents to be
bound hereby as fully and effectively as if such Pledgor had expressly agreed
thereto in advance. No delay or extension of time by the Pledgee in exercising
any power of sale, option or other right or remedy hereunder, and no failure by
the Pledgee to give notice or make demand, shall constitute a waiver thereof, or
limit, impair or prejudice the Pledgee’s right to take any action against such
Pledgor or to exercise any other power of sale, option or any other right or
remedy.
 
13. Expenses. The Collateral shall secure, and the Pledgors shall pay to Pledgee
on demand, from time to time, all reasonable costs and expenses, (including but
not limited to, reasonable attorneys’ fees and costs, taxes, and all transfer,
recording, filing and other charges) of, or incidental to, the custody, care,
transfer, administration of the Collateral or any other collateral, or in any
way relating to the enforcement, protection or preservation of the rights or
remedies of the Pledgee under this Agreement or with respect to any of the
Obligations.
 
14. The Pledgee Appointed Attorney-In-Fact and Performance by the Pledgee. Upon
the occurrence of an Event of Default, each Pledgor hereby irrevocably
constitutes and appoints the Pledgee as such Pledgor’s true and lawful
attorney-in-fact, with full power of substitution, to execute, acknowledge and
deliver any instruments and to do in such Pledgor’s name, place and stead, all
such acts, things and deeds for and on behalf of and in the name of such
Pledgor, which
 
 

 
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such Pledgor could or might do or which the Pledgee may deem necessary,
desirable or convenient to accomplish the purposes of this Agreement, including,
without limitation, to execute such instruments of assignment or transfer or
orders and to register, convey or otherwise transfer title to the Collateral
into the Pledgee’s name. Each Pledgor hereby ratifies and confirms all that said
attorney-in-fact may so do and hereby declares this power of attorney to be
coupled with an interest and irrevocable. If any Pledgor fails to perform any
agreement herein contained, upon the occurrence and during the continuance of an
Event of Default, the Pledgee may itself perform or cause performance thereof,
and any costs and expenses of the Pledgee incurred in connection therewith shall
be paid by the Pledgors as provided in Section 10 hereof.
 
15. Recapture. Notwithstanding anything to the contrary in this Agreement, if
the Pledgee receives any payment or payments on account of the Obligations,
which payment or payments or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver, or any other party under the United States
Bankruptcy Code, as amended, or any other federal or state bankruptcy,
reorganization, moratorium or insolvency law relating to or affecting the
enforcement of creditors’ rights generally, common law or equitable doctrine,
then to the extent of any sum not finally retained by the Pledgee, the Pledgors'
obligations to the Pledgee shall be reinstated and this Agreement shall remain
in full force and effect (or be reinstated) until payment shall have been made
to Pledgee, which payment shall be due on demand.
 
16. Waivers. THE PARTIES HERETO DESIRES THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
LAURUS, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED BETWEEN THEN IN CONNECTION WITH THIS AGREEMENT,
ANY OTHER DOCUMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.
 
17. Captions. All captions in this Agreement are included herein for convenience
of reference only and shall not constitute part of this Agreement for any other
purpose.
 
18. Miscellaneous.
 
(a) This Agreement constitutes the entire and final agreement among the parties
with respect to the subject matter hereof and may not be changed, terminated or
otherwise varied except by a writing duly executed by the parties hereto.
 
(b) No waiver of any term or condition of this Agreement, whether by delay,
omission or otherwise, shall be effective unless in writing and signed by the
party sought to be charged, and then such waiver shall be effective only in the
specific instance and for the purpose for which given.
 
 

 
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(c) In the event that any provision of this Agreement or the application thereof
to any Pledgor or any circumstance in any jurisdiction governing this Agreement
shall, to any extent, be invalid or unenforceable under any applicable statute,
regulation, or rule of law, such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform to
such statute, regulation or rule of law, and the remainder of this Agreement and
the application of any such invalid or unenforceable provision to parties,
jurisdictions, or circumstances other than to whom or to which it is held
invalid or unenforceable shall not be affected thereby, nor shall same affect
the validity or enforceability of any other provision of this Agreement.
 
(d) This Agreement shall be binding upon each Pledgor, and the Pledgors'
successors and assigns, and shall inure to the benefit of the Pledgee and its
successors and assigns.
 
(e) Any notice or other communication required or permitted pursuant to this
Agreement shall be given in accordance with the Securities Purchase Agreement.
 
(f) THIS AGREEMENT AND THE OTHER DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
 
(g) EACH PLEDGOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN SUCH PLEDGOR,
ON THE ONE HAND, AND THE PLEDGEE, ON THE OTHER HAND, PERTAINING TO THIS
AGREEMENT OR ANY OF THE OTHER DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS, PROVIDED, THAT EACH
PLEDGOR ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY
A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND
FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE THE PLEDGEE FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION TO COLLECT THE INDEBTEDNESS, TO REALIZE ON THE COLLATERAL OR
ANY OTHER SECURITY FOR THE INDEBTEDNESS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE PLEDGEE. EACH PLEDGOR EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND EACH PLEDGOR HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH PLEDGOR
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO SUCH PLEDGOR AT THE ADDRESS SET FORTH IN THE SECURITIES PURCHASE
 
 

 
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AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON SUCH PLEDGOR'S
ACTUAL RECEIPT THEREOF.
 
(h) It is understood and agreed that any person or entity that desires to become
a Pledgor hereunder, or is required to execute a counterpart of this Agreement
after the date hereof pursuant to the requirements of any Document, shall become
a Pledgor hereunder by (x) executing a Joinder Agreement in form and substance
satisfactory to the Pledgee, (y) delivering supplements to such exhibits and
annexes to such Documents as the Pledgee shall reasonably request and/or set
forth in such joinder agreement and (z) taking all actions as specified in this
Agreement as would have been taken by such Pledgor had it been an original party
to this Agreement, in each case with all documents required above to be
delivered to the Pledgee and with all documents and actions required above to be
taken to the reasonable satisfaction of the Pledgee.
 
(i) This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which when taken together shall
constitute one and the same agreement. Any signature delivered by a party by
facsimile transmission shall be deemed an original signature hereto.
 
[Remainder of Page Intentionally Left Blank]

 

 
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first written above.
 
APPLIED DIGITAL SOLUTIONS, INC.
 
By: /s/ Evan C. McKeown                        
Name: Evan C. McKeown
Title:   SVP & CFO
 
COMPUTER EQUITY CORPORATION
 
By: /s/ Evan C. McKeown                        
Name: Evan C. McKeown
Title:   SVP & CFO
 
LAURUS MASTER FUND, LTD.
 
By: /s/ David Grin                                    
Name: David Grin
Title:   Director
 

 
 

 
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SCHEDULE A to the Stock Pledge Agreement
 
Pledged Stock

             
Pledgor
Issuer
Class of
Stock
Stock
Certificate
Number
Par
Value
Number of
Shares
% of
outstanding
Shares(1)
 
Applied Digital Solutions, Inc.
 
VeriChip Corporation
 
Common
 
3
 
$.001
 
10,833,333
 
65%
 
Applied Digital Solutions, Inc.
 
InfoTech USA, Inc.
 
Common
 
SIC 0203
SIC 0217
 
$.01
 
2,570,000
 
52.0%
 
Applied Digital Solutions, Inc.
 
Digital Angel Corporation
 
Common
 
3470
3510
3536
3538
3585
3587
3605
3681
3700
 
$.005
 
9,120,282
 
20.5%
 
Applied Digital Solutions, Inc.
 
Digital Angel Corporation
 
Common
 
 
$.005
 
13,703,506
 
30.8%
 
Applied Digital Solutions, Inc.
 
Pacific Decision Sciences Corporation
 
Common
 
1
 
$.001
 
1,000
 
100%
 
Applied Digital Solutions, Inc.
 
Computer Equity Corporation
 
Common
 
1
 
$.001
 
100
 
100%
 
Applied Digital Solutions, Inc.
 
Thermo Life Energy Corp.
 
Common
 
1
 
$.001
 
20,000,000
 
100%
 
Applied Digital Solutions, Inc.
 
Perimeter Acquisition Corp.
 
Common
 
1
 
$.001
 
100
 
100%
 
Computer Equity Corporation
 
Government Telecommunications, Inc.
 
Common
 
4
 
$.02
 
100
 
100%

 

 
(1) As of August 8, 2006

 

 
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SCHEDULE B to the Stock Pledge Agreement

Excluded Collateral

1,000,000 shares of Digital Angel Corporation held as part of the Trust Estate
in the Digital Angel Share Trust to the extent such shares are required to be
reserved in respect of warrants held by the Existing Warrant Holders as of the
date hereof.

5,833,334 shares of VeriChip Corporation

 

 
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EXHIBIT A

FORM OF CONTROL ACKNOWLEDGMENT

ISSUER     MEMBERSHIP INTEREST OWNERS:

[Issuer]     [Pledgor]
________________________

Reference is hereby made to that certain Stock Pledge Agreement, dated as of
__________ __, 2006 (the “Pledge Agreement”), between the above-referenced
members ( “Pledgors”) of ____________, a ___________ [limited liability
company][limited partnership], (a “[Issuer]”) and Laurus Master Fund, Ltd., a
Cayman Islands company (“Laurus”). Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed thereto in the Pledge Agreement.

[Issuer] is hereby instructed by Pledgors that all of Pledgors' right, title and
interest in and to all of Pledgors’ rights in connection with any
[membership][partnership] interests in [Issuer] now and hereafter owned by
Pledgors are subject to a pledge and security interest in favor of Laurus.

[Issuer], by its written acknowledgment and acceptance hereof, hereby
acknowledges receipt of a copy of the aforementioned Pledge Agreement and agrees
promptly to note on its books the security interest granted under such Pledge
Agreement. [Issuer] also waives any rights or requirements at any time hereafter
to receive a copy of such Pledge Agreement in connection with the registration
of any Collateral in the name of the Laurus or its nominee or the exercise of
voting rights by the Laurus or its nominee.

[Remainder of this page intentionally left blank]

 

 
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IN WITNESS WHEREOF, Pledgors have caused this Control Acknowledgment to be duly
signed and delivered by its officer duly authorized as of this _____ day of
___________ 2006.

PLEDGOR.

 
By:                                                                   
Name:                                                              
Title:                                                                

Acknowledged and accepted this
______ day of __________ 2006.

[ISSUER]

By:                                                                   
Name:                                                              
Title:                                                                

 

 

 
 
 

 
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