Exhibit 10.3
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this “Agreement”), dated as of August 31, 2010, is by and
between DESTRON FEARING CORPORATION, a Delaware corporation (“Pledgor”) and TCI
BUSINESS CAPITAL, INC., a Minnesota corporation (“Lender”).
RECITALS:
Pledgor and Lender acknowledge the following:
A. Pledgor and Lender are parties to a certain Credit and Security Agreement
dated on or about the date hereof (as the same maybe amended, restated, renewed,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
pursuant to which Lender has made, or will make, certain loans and other
financial accommodations available to Pledgor.
B. It is a condition precedent to the agreement of Lender to extend such loans
and provide such other financial accommodations that Pledgor shall have executed
and delivered this Agreement in favor of Lender.
AGREEMENTS:
In consideration of the Recitals and in order to induce Lender to extend credit
under the Credit Agreement, Pledgor hereby agrees with Lender as follows:
1. Definitions. All terms defined in the Minnesota Uniform Commercial Code (the
“UCC”) and used herein shall have the meanings assigned to such terms in the UCC
and capitalized terms not defined herein shall have the meanings assigned to
such terms in the Credit Agreement.
2. Pledge and Collateral. To secure the payment and performance of all of
Pledgor’s indebtedness, liabilities and obligations to Lender, whether now
existing or hereafter arising, whether otherwise secured or unsecured and
howsoever evidenced, arising or created, including but not limited to all of
Pledgor’s obligations arising under (a) the Credit Agreement, including any
extensions, modifications, substitutions, amendments and renewals thereof,
whether for principal, interest, fees, expenses, indemnification or otherwise,
and (b) this Agreement and any and all other agreements, documents and
instruments evidencing, securing or relating to the Credit Agreement, including
any extensions, modifications, substitutions, amendments and renewals thereof,
whether for fees, expenses, indemnification or otherwise (collectively, the
“Secured Obligations”), Pledgor hereby pledges to Lender and grants to Lender a
first priority security interest in all its right, title and interest in and to
the following described collateral (collectively, the “Pledged Collateral”):
(a) all right, title and interest of the Pledgor, now existing or hereafter
acquired, in all shares of stock, options, certificates, instruments or other
documents evidencing or representing an ownership interest in DIGITAL ANGEL
TECHNOLOGY CORPORATION, a Minnesota corporation, TIMELY TECHNOLOGY CORPORATION,
a California corporation, DIGITAL ANGEL INTERNATIONAL, INC., a Minnesota
corporation, and GT ACQUISITION SUB, INC., a Minnesota corporation (each, an
“Issuer” and collectively, the “Issuers”), including without limitation all of
Pledgor’s financial and governance rights and its right to share in all profits,
dividends and distributions; and

 

 

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(b) all right, title and interest of Pledgor in and to all present and future
payments, proceeds, dividends, distributions, splits, warrants, subscriptions,
instruments, compensation, property, assets, interests and rights, and all
monies, due or to become due and payable to Pledgor in connection with the
Pledged Collateral or otherwise paid, issued or distributed from time to time in
respect of or in substitution or exchange therefor or on account of the Pledged
Collateral, and any certificate, instrument or other document evidencing or
representing the same (including all proceeds of dissolution or liquidation).
The shares of stock, options, certificates, instruments or other documents
evidencing or representing the foregoing shall be collectively referred to
herein as the “Pledged Securities”.
3. Delivery of Pledged Securities; Control.
(a) Pledgor shall deliver to Lender:
(i) The Pledged Securities described on Schedule I attached hereto on or before
the date hereof;
(ii) Any other original shares of stock, options, certificates, instruments or
other documents constituting Pledged Securities within five (5) days after the
Pledgor’s receipt thereof;
(iii) Blank stock powers, duly executed by Pledgor with respect to any Pledged
Securities delivered in connection with (i) and (ii) above, which such blank
stock powers shall be in substantially the form provided on Exhibit A attached
hereto; and
(iv) Acknowledgments of Issuer, duly executed by each Issuer with respect to any
Pledged Securities delivered in connection with (i) and (ii) above, which such
Acknowledgment shall be in substantially the form provided on Exhibit B attached
hereto.
(b) If any Issuer is organized in a jurisdiction which does not permit the use
of certificates to evidence equity ownership, or if any of the Pledged
Collateral is at any time not evidenced by certificates of ownership, then
Pledgor shall (i) cause such Issuer to record on the equity holder register, or
in the books of such Issuer, the pledge of the Pledged Collateral hereunder,
(ii) cause such Issuer to execute and deliver to Lender a control agreement by
and among such Issuer, Lender and Pledgor in form and substance acceptable to
Lender, and (iii) execute any customary pledge forms or other documents
reasonably necessary or appropriate to complete the pledge and give Lender the
right and power to transfer such Pledged Collateral in accordance with the terms
hereof.
4. Representations, Warranties and Covenants of the Pledgor. Pledgor hereby
represents, warrants and covenants that:
(a) Pledged Collateral. Set forth on Schedule I is a complete and accurate list
and description of all Pledged Securities as of the date of this Agreement,
together with the names of all shareholders of each Issuer, and their respective
percentage interests.
(b) Percentage of Outstanding Equity. The Pledged Securities constitute, and
until payment in full of the Secured Obligations will continue to constitute,
all of the outstanding (i) shares of capital stock of Issuers, (ii) securities
or obligations convertible or exchangeable into any such shares or interests,
and (iii) warrants, rights or options to subscribe for or purchase any such
shares or interests, or any such convertible or exchangeable securities or
obligations.

 

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(c) Title. Pledgor has title to and is the sole legal and beneficial owner of
the Pledged Collateral free of any liens, security interests, claims or other
encumbrances of any kind limiting the transferability of the Pledged Collateral,
except as granted herein.
(d) Due Authorization, Etc., of Stock. The Pledged Securities have been duly
authorized and validly issued and are fully paid and nonassessable and are not
subject to the preemptive rights of any person. All of the Pledged Securities
were issued pursuant to a valid exemption from the registration requirements of
the Securities Act of 1933, as amended, and fully comply with any and all
applicable state securities laws.
(e) Sale or Other Disposition of Pledged Collateral. The Pledgor will not assign
(by operation of law or otherwise), sell, lease, transfer, pledge or grant a
security interest in or otherwise dispose of or abandon any Pledged Collateral,
and the inclusion of “proceeds” of the Pledged Collateral under the security
interest granted herein shall not be deemed a consent by the Lender to any sale
or other disposition of any Pledged Collateral except as expressly permitted
herein.
(f) Required Consents. Except for any consents as may be required in connection
with any disposition of any portion of the Pledged Securities by laws affecting
the offering and sale of securities generally, no consent of any other person or
entity (including members and creditors of the Pledgor) is required in
connection with (i) the execution, delivery, performance, validity or
enforceability of this Agreement; (ii) the perfection or maintenance of the
security interest created hereby (including the first priority nature of such
security interest); or (iii) the exercise by the Lender of the voting or other
rights provided for in this Agreement. Without limiting the generality of the
foregoing, the Pledgor specifically represents and warrants that the security
interest granted hereby is authorized under the terms of, and fully satisfies
the requirements of, any restriction on the assignment of financial or
governance rights in any Issuer arising under the laws of Minnesota (including
without limitation the Minnesota Business Corporations Act), the articles of
incorporation or bylaws of any Issuer, any resolution adopted by the
shareholders or board of directors of any Issuer, any written action by the
shareholders or board of directors of any Issuer, or among them and any Issuer
or otherwise.
(g) Nature of Security Interest. When the Pledged Securities are delivered to
the Lender (or, in the case of uncertificated Pledged Securities, when the
Issuer of such Pledged Securities has marked its books and records to reflect
the security interest of the Lender in such Pledged Securities and executed and
delivered to the Lender an acknowledgment in the form attached hereto as
Exhibit B), the Lender will obtain a valid and perfected first security interest
in such Pledged Securities as security for the repayment of the Secured
Obligations, prior to all other liens and encumbrances thereon and security
interests therein.
(h) Action Impairing Value of Pledged Collateral. The Pledgor will not, without
the prior written consent of the Lender, execute any document or instrument or
take any other action in connection with any of the Pledged Collateral which
would impair the value of the interest or rights of the Pledgor or the Lender
therein. None of the Pledged Collateral is subject to an option to purchase or
similar right of any person or entity.
(i) Taxes. Pledgor will pay, when due, all taxes and other governmental charges
levied or assessed upon or against any Pledged Collateral. Lender at its option
may pay and discharge any taxes, governmental charges, liens, or encumbrances on
the Pledged Collateral which sums so advanced or paid by Lender shall be paid by
Pledgor on demand with interest at the highest rate permitted by applicable law
and shall become part of the Secured Obligations.

 

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(j) Turnover. If Pledgor receives any payment or property from the Pledged
Collateral in violation of the terms of this Agreement, Pledgor will hold such
payment or property in trust for Lender and forthwith pay over or deliver the
same to Lender in the form received with appropriate endorsement or assignment
in-blank to be applied in accordance with the terms hereof.
(k) Further Assurances. At any time or times hereafter, Pledgor authorizes
Lender to file such financing statements and the Pledgor agrees it will, at its
sole cost and expense, perform all acts and execute all documents requested by
the Lender from time to time to evidence, perfect, maintain or enforce the
Lender’s first priority security interest in the Pledged Collateral or otherwise
in furtherance of the provisions of this Agreement.
5. Registration.
(a) At any time before or after the occurrence of an Event of Default the Lender
may cause all or any of the Pledged Securities to be transferred to or
registered in its name or the name of its nominee or nominees.
(b) If the Lender shall determine to exercise its right to sell all or any of
the Pledged Collateral pursuant to Section 10 hereof, the Pledgor will, at its
expense do or cause to be done all such other acts and things as may be
necessary to make such sale of the Pledged Collateral or any part thereof valid
and binding and in compliance with applicable law.
(c) The Pledgor will not permit any Issuer to issue, deliver or register for
transfer (i) any shares of its capital stock, (ii) any securities or obligations
convertible or exchangeable into any such shares or (iii) any warrants, rights
or options to subscribe for or purchase any such shares or any such convertible
or exchangeable securities or obligations.
6. Voting Rights and Certain Payments Prior to Default. So long as no Event of
Default exists, the Pledgor shall be entitled:
(a) to exercise, as the Pledgor shall deem appropriate:
(i) the voting power with respect to the Pledged Collateral in respect of the
election of directors; and
(ii) the voting power with respect to the Pledged Collateral in respect of all
other matters but in a manner not inconsistent with the terms hereof or of the
Secured Obligations; provided, however, that the Pledgor shall not exercise or
refrain from exercising any such voting power if such action would have a
material adverse effect on the value of the Pledged Collateral or any part
thereof.
For the above purposes, the Lender shall (if any Pledged Securities shall be
registered in the name of the Lender or its nominee) execute or cause to be
executed from time to time, at the expense of the Pledgor, such proxies or other
instruments in favor of the Pledgor, in such form and for such purposes as shall
be reasonably required by the Pledgor as specified in a written request
therefor, to enable the Pledgor to exercise such voting power with respect to
the Pledged Securities;

 

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(b) except as otherwise provided in Sections 7 and 8 hereof, to receive and
retain for its own account any and all payments, proceeds, dividends,
distributions, monies, compensation, property, assets, instruments or rights,
other than:
(i) stock or liquidating dividends or distributions with respect to any of the
Pledged Securities; or
(ii) extraordinary dividends and dividends or other amounts payable under or in
connection with any recapitalization, restructuring or other nonordinary course
event, paid, issued or distributed from time to time in respect of the Pledged
Collateral (the dividends and amounts in this clause (ii) being collectively
referred to herein as the “Extraordinary Payments”).
7. Extraordinary Payments and Distributions.
(a) In case, upon the dissolution or liquidation (in whole or in part) of any
Issuer, any sum shall be paid or payable as a liquidating dividend or otherwise
upon or with respect to any of the Pledged Securities or in the event any other
Extraordinary Payment is paid or payable, then and in any such event such sum
shall be paid over to the Lender promptly, and in any event within five days
after receipt thereof, to be held by the Lender as additional collateral
hereunder or, in the discretion of the Lender, applied against the
then-outstanding Secured Obligations in such amounts and in such a manner as the
Lender may determine.
(b) In case any stock dividend shall be declared with respect to any of the
Pledged Securities, or any shares of stock or fractions thereof shall be issued
pursuant to any stock split or reclassification involving any of the Pledged
Securities, or any distribution of capital shall be made on any of the Pledged
Securities, or any shares, obligations or other property shall be distributed
upon or with respect to the Pledged Securities pursuant to a recapitalization or
reclassification of the capital of the Pledgor, or pursuant to the dissolution,
liquidation (in whole or in part), bankruptcy or reorganization of any Issuer,
or to the merger or consolidation of any Issuer with or into another entity, the
shares, obligations or other property so distributed shall be delivered to the
Lender promptly, and in any event within five days after receipt thereof, to be
held by the Lender as additional collateral hereunder, and all the same (other
than cash) shall constitute Pledged Collateral for all purposes hereof.
8. Voting Rights and Certain Payments After Default.
(a) Upon the occurrence and during the continuance of any Event of Default, all
rights of the Pledgor to exercise or refrain from exercising the voting and
other consensual rights which the Pledgor would otherwise be entitled to
exercise pursuant to Section 6(a) hereof and to receive the dividends and
interest payments which it would otherwise be authorized to receive and retain
pursuant to Section 6(b) shall upon written notice by the Lender to the Pledgor
cease, and thereupon the Lender shall be entitled to exercise all voting power
with respect to the Pledged Securities and to receive any and all dividends,
distributions and interest at any time and from time to time declared or paid
upon any of the Pledged Securities (which shall be applied against the
then-outstanding Secured Obligations) in such amounts and in such a manner as
the Lender may determine.
(b) All dividends, distributions and interest payments which are received by the
Pledgor contrary to the provisions of subsection (a) above shall be received in
trust for the benefit of the Lender, shall be segregated from other funds of the
Pledgor and shall be forthwith paid over to the Lender as Pledged Collateral in
the same form as so received (with any necessary endorsement).

 

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9. Events of Default. The occurrence of any of the following events shall
constitute an Event of Default under this Agreement:
(a) The occurrence of an Event of Default under the terms of, and as defined in,
the Credit Agreement or any other Loan Documents (as defined in the Credit
Agreement);
(b) Pledgor shall fail to perform any of its agreements contained herein; or
(c) Any statement, representation or warranty of Pledgor made herein or any time
furnished to Lender shall be untrue in any material respect as of the date made.
10. Remedies.
(a) If any Event of Default exists, the Lender may exercise in respect of the
Pledged Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not applicable to the affected Pledged
Collateral) and may also, without obligation to resort to other security, at any
time and from time to time sell, resell, assign and deliver, in its discretion,
all or any of the Pledged Collateral, in one or more parcels at the same or
different times, and all right, title and interest, claim and demand therein and
right of redemption thereof, on any securities exchange on which any Pledged
Securities or any of them may be listed, or at public or private sale, for cash,
upon credit or for future delivery, and in connection therewith the Lender may
grant options, the Pledgor hereby waiving and releasing any and all equity or
right of redemption.
(b) If any of the Pledged Collateral is sold by the Lender upon credit or for
future delivery, the Lender shall not be liable for the failure of the purchaser
to purchase or pay for the same and, in the event of any such failure, the
Lender may resell such Pledged Collateral. In no event shall any part of the
proceeds of sale of any Pledged Collateral be credited against the Secured
Obligations until the payment therefor has actually been received by the Lender.
(c) The Lender may apply the cash proceeds actually received from any sale or
other disposition of the Pledged Collateral to the Secured Obligations in any
order or manner which the Lender may determine, and the Pledgor shall remain
liable and will pay the Lender on demand any deficiency remaining.
(d) The Pledgor recognizes that the Lender may be unable to effect a public sale
of the Pledged Collateral consisting of securities by reason of certain
prohibitions contained in the Securities Act, or in applicable Blue Sky or other
state securities laws, as now or hereafter in effect, but 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 securities for their
own account, for investment and not with a view to the distribution or resale
thereof. The Pledgor agrees that any such Collateral sold at any such private
sale may be sold at a price and upon other terms less favorable to the seller
than if sold at public sale and that each such private sale shall be deemed to
have been made in a commercially reasonable manner. The Lender shall have no
obligation to delay sale of any such securities for the period of time necessary
to permit the Pledgor, even if the Pledgor would agree, to register such
securities for public sale under the Securities Act. The Pledgor agrees that
private sales made under the foregoing circumstances shall be deemed to have
been made in a commercially reasonable manner.
(e) The Lender shall give the Pledgor ten days’ prior notice of the time and
place of any public sale and of the time after which any private sale or other
disposition is to be made, which notice the Pledgor agrees is reasonable, all
other demands, advertisements and notices being hereby waived.

 

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(f) The Lender shall not be obligated to make any sale of Pledged Collateral if
it shall determine not to do so, regardless of the fact that notice of sale may
have been given. The Lender may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned.
(g) The remedies provided herein in favor of the Lender shall not be exclusive,
but shall be cumulative and in addition to all other remedies in favor of the
Lender existing under the Loan Documents or at law or in equity.
11. Lender Appointed Attorney-in-Fact.
(a) To effectuate the terms and provisions hereof, the Pledgor hereby appoints
the Lender as the Pledgor’s attorney-in-fact for the purpose, after the
occurrence and during the continuance of an Event of Default, of carrying out
the provisions of this Agreement and taking any action and executing any
instrument which the Lender may deem necessary or advisable to accomplish the
purposes hereof (subject to the rights of the Pledgor under Section 6). Without
limiting the generality of the foregoing, the Lender shall, after the occurrence
and during the continuance of an Event of Default, have the right and power to:
(i) receive, endorse and collect all checks and other orders for the payment of
money made payable to the Pledgor representing any interest or dividend or other
distribution or amount payable in respect of the Pledged Collateral or any part
thereof and to give full discharge for the same; and
(ii) execute endorsements, assignments or other instruments of conveyance or
transfer with respect to all or any of the Pledged Collateral.
(b) Other than any action which constitutes gross negligence or willful
misconduct, all acts done under the foregoing authorization are hereby ratified
and approved and neither the Lender nor any designee or agent thereof shall be
liable for any act or omission, for any error of judgment or for any mistake of
fact or law.
(c) This power of attorney, being coupled with an interest, is irrevocable while
any Secured Obligations remain unpaid or unperformed.
12. Lender’s Duties; Reasonable Care.
(a) The Lender shall have the duty to exercise reasonable care in the custody
and preservation of any Pledged Collateral in its possession, which duty shall
be fully satisfied if the Lender maintains safe custody of such Pledged
Collateral.
(b) Except as specifically set forth above, the Lender shall have no further
obligation to ascertain the occurrence of, or to notify the Pledgor with respect
to, any events and shall not be deemed to assume any such further obligation as
a result of the establishment by the Lender of any internal procedures with
respect to any securities in its possession, nor shall the Lender shall not be
deemed to assume any other responsibility for, or obligation or duty with
respect to, any Pledged Collateral, or its use, of any nature or kind, or any
matter or proceedings arising out of or relating thereto, including any
obligation or duty to take any action to collect, preserve or protect its or the
Pledgor’s rights in the Pledged Collateral or against any prior parties thereto,
but the same shall be at the Pledgor’s sole risk and responsibility at all
times.

 

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(c) The Pledgor hereby releases the Lender, and its officers, directors,
employees and agents, from any claims, causes of action and demands at any time
arising out of or with respect to this Agreement, the Pledged Collateral and/or
any actions taken or omitted to be taken by the Lender with respect thereto
(except, in the case of the Lender, such claims, causes of action and demands
arising from the gross negligence or willful misconduct of the Lender), and the
Pledgor hereby agrees to hold the Lender and its officers, directors, employees
and agents harmless from and with respect to any and all such claims, causes of
action and demands (except such claims, causes of action and demands arising
from the gross negligence or willful misconduct of the Lender).
13. Rights and Remedies Not Waived. The Lender’s prior recourse to any Pledged
Collateral shall not constitute a condition of any demand, suit or proceeding
for payment or collection of the Secured Obligations. No act, omission or delay
by the Lender shall constitute a waiver of its rights and remedies hereunder or
otherwise. No single or partial waiver by the Lender of any default hereunder or
right or remedy which it may have shall operate as a waiver of any other
default, right or remedy or of the same default, right or remedy on a future
occasion.
14. Obligations Not Affected by Acts of Lender. Pledgor’s obligations hereunder
shall not be affected or impaired by any of the following acts or things which
Lender is expressly authorized to do, omit or suffer from time to time, without
notice or approval by Lender: (i) any extension, renewal, modification or
amendment of the Credit Agreement or any of the documents, instruments or
agreements creating, evidencing or securing the Secured Obligations or delivered
therewith; (ii) any delay or lack of diligence in the enforcement of any of the
Secured Obligations; (iii) any failure to institute proceedings, file a claim or
give any required notices; (iv) any full or partial release of, settlement with
or agreement not to sue any guarantor, indemnitor or any other person or entity
obligated under the Secured Obligations; (v) any waiver or indulgence granted to
any guarantor or any person or entity obligated under the Secured Obligations;
(vi) any failure to obtain or realize upon any other Pledged Collateral obtained
from any other party or to see to the proper perfection thereof or to establish
the priority of the lien thereon or (vii) acquire a security interest in any
property in addition to the Pledged Collateral or release any such interests so
acquired or permit any substitution or exchange for such property or any portion
thereof.
15. Lender May Perform. If the Pledgor fails to perform any agreement contained
herein, the Lender may itself perform, or cause performance of, such agreement,
and the expenses of the Lender incurred in connection therewith shall be payable
by the Pledgor on demand.
16. Governing Law. This Agreement is being delivered in and shall be deemed to
be a contract governed by the laws of the State of Minnesota and shall be
interpreted and enforced in accordance with the laws of that state without
regard to the principles of conflicts of laws.

 

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17. Submission to Jurisdiction; Service of Process. As a material inducement to
the Lender to enter into the Credit Agreement, the parties agree that:
ALL JUDICIAL PROCEEDINGS IN ANY MANNER RELATING TO OR ARISING OUT OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR ANY OBLIGATIONS THEREUNDER, MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
MINNESOTA LOCATED IN HENNEPIN COUNTY. BY EXECUTING AND DELIVERING THIS
AGREEMENT, THE PLEDGOR IRREVOCABLY:
(a) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND
VENUE OF SUCH COURTS;
(b) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(c) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT
MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE
PLEDGOR AT ITS ADDRESS SPECIFIED IN SECTION 21;
(d) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS SUFFICIENT TO CONFER
PERSONAL JURISDICTION OVER THE PLEDGOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT,
AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND
(e) AGREES THAT THE LENDER RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST THE PLEDGOR IN THE
COURTS OF ANY OTHER JURISDICTION.
18. Waiver of Trial by Jury. THE PLEDGOR AND THE LENDER HEREBY AGREE TO WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to
be all encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. The Pledgor and the Lender each acknowledge that this waiver
is a material inducement for the Borrower and the Lender to enter into a
business relationship, that the Borrower and the Lender have already relied on
this waiver in entering into this Agreement and that each will continue to rely
on this waiver in their related future dealings. The Pledgor and the Lender
further warrant and represent that each has reviewed this waiver with its legal
counsel, and that each knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL
WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 18 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
19. Limitation of Liability. THE PLEDGOR AND THE LENDER HEREBY WAIVE ANY RIGHT
EITHER OF THEM MAY HAVE TO CLAIM OR RECOVER FROM THE OTHER PARTY ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES, OF WHATEVER NATURE,
OTHER THAN ACTUAL DAMAGES.
20. Admissibility of Pledge Agreement. The Pledgor agrees that a copy of this
Agreement signed by the Pledgor and transmitted by telecopier for delivery to
the Lender shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence.

 

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21. Notices. All notices shall be sent in the manner, to such addresses and
shall be effective at such times as are set forth in Section 8.3 of the Credit
Agreement.
22. Entire Agreement; Amendments and Modification. This Agreement is the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior understandings and agreements. No provision of this
Agreement shall be amended or modified except by a written instrument executed
by the Pledgor and the Lender.
23. Continuing Pledge Agreement.
(a) This Agreement shall create a continuing security interest in the Pledged
Collateral and shall be binding upon the Pledgor and its successors and assigns
and inure to the benefit of, and be enforceable by, the Lender and its
successors, transferees and assigns.
(b) Upon the payment in full of the Secured Obligations and all other amounts
payable under this Agreement and the expiration of the Lender’s obligation (if
any) to extend additional credit under the Credit Agreement, the security
interest granted hereby shall terminate and all rights to the Pledged Collateral
shall revert to the Pledgor. Upon any such termination, the Lender will, at the
Pledgor’s expense and without representation or warranty of any nature
whatsoever and wholly without recourse, return to the Pledgor such of the
Pledged Collateral as shall not have been sold or otherwise applied pursuant to
the terms hereof and execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence such termination.
24. Expenses. The Pledgor agrees to pay on demand: (i) all costs and expenses of
the Lender (including the reasonable fees and expenses of counsel and paralegals
for the Lender) incurred in connection with the preparation, execution and
delivery of this Agreement and the preparation, negotiation and execution of any
and all amendments to this Agreement, and (ii) all costs and expenses of the
Lender incurred in connection with the enforcement of its rights hereunder. The
obligations of the Pledgor under this Section shall survive any termination of
this Agreement.
25. Captions; Separability. The captions of the sections and subsections of this
Agreement have been inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this Agreement. If any
term of this Agreement shall be held to be invalid, illegal or unenforceable,
the validity of all other terms hereof shall in no way be affected thereby.
[Remainder of page intentionally left blank; signature page follows]

 

10

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above.

                          PLEDGOR:

DESTRON FEARING CORPORATION,
a Delaware corporation
      By:           Name:   Jason Prescott        Title:   Chief Financial
Officer   

                            LENDER:

TCI BUSINESS CAPITAL, INC.,
a Minnesota corporation
      By:           Name:   Catherine Sedacca        Title:   Chief Risk
Officer     

 

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SCHEDULE I
Pledged Securities

          Owner   Description   Certificate Number(s)          

 

 

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EXHIBIT A
IRREVOCABLE ASSIGNMENT IN BLANK
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
                                                             the following
shares of capital stock of                                         , a
                     corporation:
No. of Shares                                                          
                       Certificate No.
and irrevocably appoints
                                                             its agent and
attorney-in-fact to transfer all or any part of such capital stock and to take
all necessary and appropriate action to effect any such transfer. The agent and
attorney-in-fact may substitute and appoint one or more persons to act for
him/her/it. The effectiveness of a transfer pursuant to this assignment shall be
subject to any and all transfer restrictions referenced on the face of the
certificates evidencing such interest or in the articles of incorporation,
articles of organization, bylaws or operating agreement, as applicable, of the
subject company, to the extent they may from time to time exist.

            DESTRON FEARING CORPORATION,

a Delaware corporation
      By:           Name:           Title:      

 

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EXHIBIT B
Acknowledgment of Issuer
The undersigned hereby (a) acknowledges receipt of a copy of that certain Pledge
Agreement executed by DESTRON FEARING CORPORATION, a Delaware corporation
(“Pledgor”) and TCI BUSINESS CAPITAL, INC., a Minnesota corporation (“Lender”)
dated as of                     , 2010 (as amended, restated, supplemented or
otherwise modified from time to time, the “Agreement”; capitalized terms used
but not otherwise defined herein shall have the meanings assigned to such terms
in the Agreement), (b) agrees promptly to note on its books the security
interests granted to Lender under the Agreement, (c) agrees that it will comply
with the instructions of Lender with respect to the applicable Pledged
Collateral without further consent by Pledgor, (d) agrees to notify Lender upon
obtaining knowledge of any interest in favor of any person or entity in the
applicable Pledged Collateral that is adverse to the interest of Lender therein
and (e) waives any right or requirement at any time hereafter to received a copy
of the Agreement in connection with the registration of any Pledged Collateral
thereunder in the name of Lender or its nominee or the exercise of voting rights
by Lender or its nominee.

            [DIGITAL ANGEL TECHNOLOGY CORPORATION, a Minnesota corporation]
[TIMELY TECHNOLOGY CORPORATION, a California corporation]
[DIGITAL ANGEL INTERNATIONAL, INC., a Minnesota corporation]
[GT ACQUISITION SUB, INC.,
a Minnesota corporation]
      By:           Name:           Title: