Exhibit 10.7

 

GUARANTY

 

This GUARANTY, dated as of November 13, 2013 (this “Guaranty”), is made by each
of the undersigned (each a “Guarantor”, and collectively, the “Guarantors”), in
favor of Hudson Bay Master Fund Ltd. in its capacity as collateral agent (in
such capacity, the “Collateral Agent”) for the “Buyers” (as defined below) party
to the Securities Purchase Agreement (as defined below).

 

W I T N E S S E T H :

 

WHEREAS, Digital Angel Corporation, a Delaware corporation with offices located
at 220 Congress Park Drive, Suite 200, Delray Beach, Florida 33445 (the
“Company”) and each party listed as a “Buyer” on the Schedule of Buyers attached
thereto (collectively, the “Buyers”) are parties to the Securities Purchase
Agreement dated as of the date hereof (as amended, restated, replaced or
otherwise modified from time to time, the “Securities Purchase Agreement”),
pursuant to which the Company shall be required to sell, and the Buyers shall
purchase or have the right to purchase, the “Notes” (as defined therein) issued
pursuant to the Securities Purchase Agreement (as defined therein);

 

WHEREAS, the Securities Purchase Agreement requires that the Guarantors execute
and deliver to the Collateral Agent, (i) a guaranty guaranteeing all of the
obligations of the Company under the Securities Purchase Agreement, the Notes
and the “Transaction Documents” (as defined in the Securities Purchase
Agreement, the “Transaction Documents”); and (ii) a Security and Pledge
Agreement dated the date hereof granting the Collateral Agent a lien in all of
their property (the “Security Agreement”); and

 

WHEREAS, each Guarantor has determined that the execution, delivery and
performance of this Guaranty directly benefits, and is in the best interest of,
such Guarantor;

 

NOW, THEREFORE, in consideration of the premises and the agreements herein and
in order to induce the Buyers to perform under the Securities Purchase
Agreement, each Guarantor hereby agrees with each Buyer as follows:

 

SECTION 1.     Definitions. Reference is hereby made to the Securities Purchase
Agreement and the Notes for a statement of the terms thereof. All terms used in
this Guaranty which are defined in the Securities Purchase Agreement or the
Notes and not otherwise defined herein shall have the same meanings herein as
set forth therein.

 

“Collateral” shall mean all property and assets of the Company and each
Guarantor, wherever located and whether now or hereafter existing and whether
now owned or hereafter acquired, of every kind and description, tangible or
intangible, including, without limitation, the collateral described in Section 2
of the Security Agreement.

 

“Maturity Date” shall mean November 13, 2014; provided, however, the Maturity
Date may be extended at the option of the Holder pursuant to the Notes.

 

SECTION 2.     Guaranty. The Guarantors, jointly and severally, hereby
unconditionally and irrevocably, guaranty to Collateral Agent, for the benefit
of the Buyers, the punctual payment, as and when due and payable, by stated
maturity or otherwise, of all Obligations (as defined in the Security Agreement)
of the Company from time to time owing by it in respect of the Securities
Purchase Agreement, the Notes and the other Transaction Documents, including,
without limitation, all interest that accrues after the commencement of any
Insolvency Proceeding (as defined in the Security Agreement) of the Company or
any Guarantor, whether or not the payment of such interest is unenforceable or
is not allowable due to the existence of such Insolvency Proceeding, and all
fees, interest, premiums, penalties, contract causes of actions, costs,
commissions, expense reimbursements, indemnifications and all other amounts due
or to become due under any of the Transaction Documents (such obligations being
the “Guaranteed Obligations”), and agrees to pay any and all expenses (including
reasonable counsel fees and expenses) reasonably incurred by the Collateral
Agent in enforcing any rights under this Guaranty. Without limiting the
generality of the foregoing, each Guarantor’s liability hereunder shall extend
to all amounts that constitute part of the Guaranteed Obligations and would be
owed by the Company to the Collateral Agent or any Buyer under the Securities
Purchase Agreement and the Notes but for the fact that they are unenforceable or
not allowable due to the existence of an Insolvency Proceeding involving any
Guarantor or the Company (each, a “Transaction Party”).

 

 
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Each Guarantor, and by its acceptance of this Guaranty, the Collateral Agent and
each Buyer, hereby confirms that it is the intention of all such Persons that
this Guaranty and the Guaranteed Obligations of each Guarantor hereunder not
constitute a fraudulent transfer or conveyance for purposes of Section 548 of
Chapter 11 of Title 11 of the United States Code, 11 U.S.C §§ 101 et seq. (or
other applicable bankruptcy, insolvency or similar laws) (collectively the
“Bankruptcy Code”), the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar foreign, federal, provincial or state law
to the extent applicable to this Guaranty and the Guaranteed Obligations of each
Guarantor hereunder. To effectuate the foregoing intention, the Collateral
Agent, the Buyers and the Guarantors hereby irrevocably agree that the
Guaranteed Obligations of each Guarantor under this Guaranty at any time shall
be limited to the maximum amount as will result in the Guaranteed Obligations of
such Guarantor under this Guaranty not constituting a fraudulent transfer or
conveyance.

 

SECTION 3.     Guaranty Absolute; Continuing Guaranty; Assignments.

 

(a)     The Guarantors, jointly and severally, guaranty that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the
Transaction Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Collateral Agent or any Buyer with respect thereto. The
obligations of each Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may be brought and
prosecuted against any Guarantor to enforce such obligations, irrespective of
whether any action is brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The liability of any
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and each Guarantor hereby irrevocably waives, to the extent
permitted by law, any defenses it may now or hereafter have in any way relating
to, any or all of the following:

 

(i)     any lack of validity or enforceability of any Transaction Document or
any agreement or instrument relating thereto;

 

(ii)     any change in the time, manner or place of payment of, or in any other
term of, all or any of the Guaranteed Obligations, or any other amendment or
waiver of or any consent to departure from any Transaction Document, including,
without limitation, any increase in the Guaranteed Obligations resulting from
the extension of additional credit to any Transaction Party or otherwise;

 

(iii)     any taking, exchange, release or non-perfection of any Collateral;

 

(iv)      any taking, release or amendment or waiver of or consent to departure
from any other guaranty, for all or any of the Guaranteed Obligations;

 

(v)     any change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any Transaction
Party;

 

(vi)     any manner of application of Collateral or any other collateral, or
proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any Collateral or any other collateral for all or
any of the Guaranteed Obligations or any other Obligations of any Transaction
Party under the Transaction Documents or any other assets of any Transaction
Party or any of its Subsidiaries;

 

 
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(vii)     any failure of the Collateral Agent or any Buyer to disclose to any
Transaction Party any information relating to the business, condition (financial
or otherwise), operations, performance, properties or prospects of any other
Transaction Party now or hereafter known to the Collateral Agent or any Buyer
(each Guarantor waiving any duty on the part of the Collateral Agent or any
Buyer to disclose such information); or

 

(viii)     any other circumstance (including any statute of limitations) or any
existence of or reliance on any representation by the Collateral Agent or any
Buyer that might otherwise constitute a defense available to, or a discharge of,
any Transaction Party or any other guarantor or surety.

 

This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Collateral Agent, any Buyer, or any other
Person upon the insolvency, bankruptcy or reorganization of any Transaction
Party or otherwise, all as though such payment had not been made.

 

(b)     This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until the indefeasible cash payment in full of the Guaranteed
Obligations (other than inchoate indemnity obligations) and/or complete
conversion of all of the Company’s obligations under the Notes to equity
securities of the Company and payment of all other amounts payable under this
Guaranty (other than inchoate indemnity obligations) and shall not terminate for
any reason prior to the respective Maturity Date of each Note (other than
payment in full of the Notes and/or complete conversion of all of the Company’s
obligations under the Notes to equity securities of the Company) and (ii) be
binding upon each Guarantor and its respective successors and assigns. This
Guaranty shall inure to the benefit of and be enforceable by the Collateral
Agent, the Buyers, and their respective successors, and permitted pledgees,
transferees and assigns. Without limiting the generality of the foregoing
sentence, the Collateral Agent or any Buyer may pledge, assign or otherwise
transfer all or any portion of its rights and obligations under and subject to
the terms of any Transaction Document to any other Person, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to the Collateral Agent or such Buyer (as applicable) herein or otherwise, in
each case as provided in the Securities Purchase Agreement or such Transaction
Document. Notwithstanding the foregoing and for the avoidance of doubt, this
Guaranty will expire and each Guarantor will be released from its obligation
hereunder upon the indefeasible and final payment in full in cash of the
Guaranteed Obligations and/or complete conversion of all of the Company’s
obligations under the Notes to equity securities of the Company in accordance
with the terms of the Notes.

 

SECTION 4.     Waivers. To the extent permitted by applicable law, each
Guarantor hereby waives promptness, diligence, notice of acceptance and any
other notice with respect to any of the Guaranteed Obligations and this Guaranty
and any requirement that the Collateral Agent exhaust any right or take any
action against any Transaction Party or any other Person or any Collateral. Each
Guarantor acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated herein and that the waiver set forth in
this Section 4 is knowingly made in contemplation of such benefits. The
Guarantors hereby waive any right to revoke this Guaranty, and acknowledge that
this Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future. To the extent permitted by applicable
law, each Guarantor hereby unconditionally and irrevocably waives (a) any
defense arising by reason of any claim or defense based upon an election of
remedies by the Collateral Agent or any Buyer that in any manner impairs,
reduces, releases or otherwise adversely affects the subrogation, reimbursement,
exoneration, contribution or indemnification rights of such Guarantor or other
rights of such Guarantor to proceed against any of the other Transaction
Parties, any other guarantor or any other Person or any Collateral, and (b) any
defense based on any right of set-off or counterclaim against or in respect of
the Guaranteed Obligations of such Guarantor hereunder. Each Guarantor hereby
unconditionally and irrevocably waives any duty on the part of the Collateral
Agent or any Buyer to disclose to such Guarantor any matter, fact or thing
relating to the business, condition (financial or otherwise), operations,
performance, properties or prospects of any other Transaction Party or any of
its Subsidiaries now or hereafter known by the Collateral Agent or a Buyer.

 

 
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SECTION 5.     Subrogation. No Guarantor may exercise any rights that it may now
or hereafter acquire against any Transaction Party or any other guarantor that
arise from the existence, payment, performance or enforcement of any Guarantor’s
obligations under this Guaranty, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution or indemnification and any
right to participate in any claim or remedy of the Collateral Agent or any Buyer
against any Transaction Party or any other guarantor or any Collateral, whether
or not such claim, remedy or right arises in equity or under contract, statute
or common law, including, without limitation, the right to take or receive from
any Transaction Party or any other guarantor, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security solely
on account of such claim, remedy or right, unless and until all of the
Guaranteed Obligations (other than inchoate indemnity obligations) and all other
amounts payable under this Guaranty (other than inchoate indemnity obligations)
shall have indefeasibly been paid in full in cash or converted in full. If any
amount shall be paid to a Guarantor in violation of the immediately preceding
sentence at any time prior to the later of the indefeasible and final payment in
full in cash of the Guaranteed Obligations and all other amounts payable under
this Guaranty or converted in full, such amount shall be held in trust for the
benefit of the Collateral Agent and shall forthwith be paid to the Collateral
Agent to be credited and applied to the Guaranteed Obligations and all other
amounts payable under this Guaranty, whether matured or unmatured, in accordance
with the terms of the Transaction Document, or to be held as Collateral for any
Guaranteed Obligations or other amounts payable under this Guaranty thereafter
arising. If (a) any Guarantor shall make payment to the Collateral Agent of all
or any part of the Guaranteed Obligations, and (b) all of the Guaranteed
Obligations (other than inchoate indemnity obligations) and all other amounts
payable under this Guaranty (other than inchoate indemnity obligations) shall
indefeasibly be paid in full in cash or converted in full, the Collateral Agent
will, at such Guarantor’s request and expense, execute and deliver to such
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to such Guarantor of
an interest in the Guaranteed Obligations resulting from such payment by such
Guarantor.

 

SECTION 6.     Representations, Warranties and Covenants.

 

(a)     Each Guarantor hereby represents and warrants as of the date first
written above as follows:

 

(i)     The Guarantor (A) is a corporation, limited liability company or limited
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization as set forth on the signature pages
hereto, (B) has all requisite corporate, limited liability company or limited
partnership power and authority to conduct its business as now conducted and as
presently contemplated and to execute and deliver this Guaranty and each other
Transaction Document to which the Guarantor is a party, and to consummate the
transactions contemplated hereby and thereby and (C) is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its business
makes such qualification necessary except where the failure to be so qualified
would not result in a Material Adverse Effect.

 

(ii)     The execution, delivery and performance by the Guarantor of this
Guaranty and each other Transaction Document to which the Guarantor is a party
(A) have been duly authorized by all necessary corporate, limited liability
company or limited partnership action, (B) do not and will not contravene its
charter, articles or by-laws, its limited liability company or operating
agreement or its certificate of partnership or partnership agreement, as
applicable, or any applicable law or any contractual restriction binding on the
Guarantor or its properties do not and will not result in or require the
creation of any lien (other than pursuant to any Transaction Document) upon or
with respect to any of its properties, and (C) do not and will not result in any
default, noncompliance, suspension, revocation, impairment, forfeiture or
nonrenewal of any material permit, license, authorization or approval applicable
to it or its operations or any of its properties.

 

 
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(iii)     No authorization or approval or other action by, and no notice to or
filing with, any governmental authority is required in connection with the due
execution, delivery and performance by the Guarantor of this Guaranty or any of
the other Transaction Documents to which the Guarantor is a party (other than
expressly provided for in any of the Transaction Documents).

 

(iv)     Each of this Guaranty and the other Transaction Documents to which the
Guarantor is or will be a party, when delivered, will be, a legal, valid and
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except as may be limited by the Bankruptcy Code or
other applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, suretyship or similar laws and equitable principles (regardless of
whether enforcement is sought in equity or at law).

 

(v)     There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding against the Guarantor or to which any of
the properties of the Guarantor is subject, before any court or other
governmental authority or any arbitrator that (A) if adversely determined, could
reasonably be expected to have a Material Adverse Effect or (B) relates to this
Guaranty or any of the other Transaction Documents to which the Guarantor is a
party or any transaction contemplated hereby or thereby.

 

(vi)     The Guarantor (A) has read and understands the terms and conditions of
the Securities Purchase Agreement and the other Transaction Documents, and
(B) now has and will continue to have independent means of obtaining information
concerning the affairs, financial condition and business of the Company and the
other Transaction Parties, and has no need of, or right to obtain from any
Buyer, any credit or other information concerning the affairs, financial
condition or business of the Company or the other Transaction Parties that may
come under the control of any Buyer.

 

(vii)     There are no conditions precedent to the effectiveness of this
Guaranty that have not been satisfied or waived.

 

SECTION 7.     Right of Set-off. Upon the occurrence and during the continuance
of any Event of Default, any Buyer may, and is hereby authorized to, at any time
and from time to time, without notice to the Guarantors (any such notice being
expressly waived by each Guarantor) and to the fullest extent permitted by law,
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by any Buyer to or for the credit or the account of any Guarantor against any
and all obligations of the Guarantors now or hereafter existing under this
Guaranty or any other Transaction Document, irrespective of whether or not any
Buyer shall have made any demand under this Guaranty or any other Transaction
Document and although such obligations may be contingent or unmatured. Each
Buyer agrees to notify the relevant Guarantor promptly after any such set-off
and application made by such Buyer, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of any Buyer under this Section 7 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which such Buyer may
have under this Guaranty or any other Transaction Document in law or otherwise.

 

 
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SECTION 8.     Limitation on Guaranteed Obligations. Notwithstanding any
provision herein contained to the contrary, each Guarantor's liability hereunder
shall be limited to an amount not to exceed as of any date of determination the
greater of:

 

(a)     the net amount of all Guaranteed Obligations, plus Interest thereon at
the applicable Interest Rate as specified in the Note.

 

(b)     the amount which could be claimed by the Collateral Agent from any
Guarantor under this Guaranty without rendering such claim voidable or avoidable
under the Bankruptcy Code or under any applicable state Uniform Fraudulent
Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law
after taking into account, among other things, Guarantor’s right of contribution
and indemnification.

 

(c)     Each Guarantor agrees that the Guaranteed Obligations may at any time
and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guaranty hereunder or affecting the rights and
remedies of any Collateral Agent hereunder.

 

(d)     No payment made by the Company, any Guarantor, any other guarantor or
any other Person or received or collected by the Collateral Agent or any other
Buyer from the Company, any of the Guarantors, any other guarantor or any other
Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Guaranteed Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of any Guarantor hereunder which shall,
notwithstanding any such payment (other than any payment made by such Guarantor
in respect of the Guaranteed Obligations or any payment received or collected
from such Guarantor in respect of the Guaranteed Obligations), remain liable for
the Guaranteed Obligations up to the maximum liability of such Guarantor
hereunder until after all of the Guaranteed Obligations and all other amounts
payable under this Guaranty shall have indefeasibly been paid in full in cash.

 

SECTION 9.     Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to any Guarantor, to the Company’s address, or if to the Collateral Agent or any
Buyer, to it at its respective address, each as set forth in Section 9(f) of the
Securities Purchase Agreement; or as to any Person at such other address as
shall be designated by such Person in a written notice to such other Person
complying as to delivery with the terms of this Section 9. All such notices and
other communications shall be effective (i) if mailed (by certified mail,
postage prepaid and return receipt requested), when received or three (3)
Business Days after deposited in the mails, whichever occurs first; (ii) if
telecopied, when transmitted and confirmation is received, provided same is on a
Business Day and, if not, on the next Business Day; (iii) if e-mailed, when
transmitted if the sending party does not receive an automatically generated
message from the recipient’s e-mail server that such e-mail could not be
delivered to such recipient, provided same is on a Business Day and, if not, on
the next Business Day; or (iv) if delivered by hand, upon delivery, provided
same is on a Business Day and, if not, on the next Business Day.

 

SECTION 10.     CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER DOCUMENT RELATED
HERETO SHALL BE BROUGHT EXCLUSIVELY IN THE OF THE STATE OR FEDERAL COURTS
SITTING IN CHICAGO, ILLINOIS, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE FOREGOING
COURTS. EACH GUARANTOR HEREBY IRREVOCABLY APPOINTS THE SECRETARY OF STATE OF THE
STATE OF ILLINOIS AS ITS AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING AND FURTHER IRREVOCABLY CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS DEEMED APPROPRIATE BY ANY OF THE FOREGOING COURTS.
EACH GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
FOREGOING COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT ITS ADDRESS FOR
NOTICES AS SET FORTH ON THE SIGNATURE PAGE HERETO AND TO THE SECRETARY OF STATE
OF THE STATE OF ILLINOIS, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER
SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT TO
SERVE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST EACH GUARANTOR IN ANY OTHER
JURISDICTION. ANY GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY OF THE FOREGOING COURTS AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY GUARANTOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, EACH GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF
ITS OBLIGATIONS UNDER THIS GUARANTY AND THE OTHER TRANSACTION DOCUMENTS.

 

 
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SECTION 11.     WAIVER OF JURY TRIAL, ETC. EACH GUARANTOR HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING
ANY RIGHTS UNDER THIS GUARANTY OR THE OTHER TRANSACTION DOCUMENTS, OR UNDER ANY
AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR
WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR
ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS
GUARANTY OR THE OTHER TRANSACTION DOCUMENTS, AND AGREES THAT ANY SUCH ACTION,
PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
EACH GUARANTOR CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF
THE COLLATERAL AGENT OR ANY BUYER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
COLLATERAL AGENT OR ANY BUYER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING
OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH GUARANTOR HEREBY
ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COLLATERAL
AGENT ENTERING INTO THIS AGREEMENT.

 

SECTION 12.     Taxes.

 

(a)     All payments made by any Guarantor hereunder or under any other
Transaction Document shall be made in accordance with the terms of the
respective Transaction Document and shall be made without set-off, counterclaim,
deduction or other defense. All such payments shall be made free and clear of
and without deduction for any present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on the net income of any Buyer by the jurisdiction in
which such Buyer is organized or where it has its principal lending office (all
such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities, collectively or individually, “Taxes”). If any Guarantor shall be
required to deduct or to withhold any Taxes from or in respect of any amount
payable hereunder or under any other Transaction Document:

 

(i)     the amount so payable shall be increased to the extent necessary so that
after making all required deductions and withholdings (including Taxes on
amounts payable to any Buyer pursuant to this sentence) each Buyer receives an
amount equal to the sum it would have received had no such deduction or
withholding been made,

 

(ii)     such Guarantor shall make such deduction or withholding,

 

 
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(iii)     such Guarantor shall pay the full amount deducted or withheld to the
relevant taxation authority in accordance with applicable law, and

 

(iv)     as promptly as possible thereafter, such Guarantor shall send the
Buyers an official receipt (or, if an official receipt is not available, such
other documentation as shall be satisfactory to the Collateral Agent, as the
case may be) showing payment.  In addition, each Guarantor agrees to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made hereunder or
from the execution, delivery, registration or enforcement of, or otherwise with
respect to, this Guaranty or any other Transaction Document (collectively,
“Other Taxes”).

 

(b)     Each Guarantor hereby indemnifies and agrees to hold the Collateral
Agent and each Buyer (each an “Indemnified Party”) harmless from and against
Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 12) paid by
any Indemnified Party  as a result of any payment made hereunder or from the
execution, delivery, registration or enforcement of, or otherwise with respect
to, this Guaranty or any other Transaction Document, and any liability
(including penalties, interest and expenses for nonpayment, late payment or
otherwise) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted.  This indemnification shall
be paid within thirty (30) days from the date on which the Collateral Agent or
such Buyer makes written demand therefor, which demand shall identify the nature
and amount of such Taxes or Other Taxes.

 

(c)     If any Guarantor fails to perform any of its obligations under this
Section 12, such Guarantor shall indemnify the Collateral Agent and each Buyer
for any taxes, interest or penalties that may become payable as a result of any
such failure. The obligations of the Guarantors under this Section 12 shall
survive the termination of this Guaranty and the payment of the Obligations and
all other amounts payable hereunder.

 

SECTION 13.      Indemnification.

 

(a)     Without limitation on any other Obligations of any Guarantor or remedies
of the Collateral Agent and the Buyers under this Guaranty, except to the extent
resulting from such Indemnified Party’s gross negligence or willful misconduct,
as determined by a final judgment of a court of competent jurisdiction, each
Guarantor shall, to the fullest extent permitted by law, indemnify, defend and
save and hold harmless the Collateral Agent and each Buyer and each of their
affiliates and their respective officers, directors, employees, agents and
advisors (each, an “Indemnified Party”) from and against, and shall pay on
demand, any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party in
connection with or as a result of any failure of any Guaranteed Obligations to
be the legal, valid and binding obligations of any Transaction Party enforceable
against such Transaction Party in accordance with their terms.

 

(b)     Each Guarantor hereby also agrees that none of the Indemnified Parties
shall have any liability (whether direct or indirect, in contract, tort or
otherwise) to any of the Guarantors or any of their respective affiliates or any
of their respective officers, directors, employees, agents and advisors, and
each Guarantor hereby agrees not to assert any claim against any Indemnified
Party on any theory of liability, for special, indirect, consequential or
punitive damages arising out of or otherwise relating to the facilities, the
actual or proposed use of the proceeds of the advances, the Transaction
Documents or any of the transactions contemplated by the Transaction Documents.

 

 
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SECTION 14.     Miscellaneous.

 

(a)     Each Guarantor will make each payment hereunder in lawful money of the
United States of America and in immediately available funds to each Buyer, at
such address specified by such Buyer from time to time by notice to the
Guarantors.

 

(b)     No amendment or waiver of any provision of this Guaranty and no consent
to any departure by any Guarantor therefrom shall in any event be effective
unless the same shall be in writing and signed by each Guarantor and each Buyer,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.

 

(c)     No failure on the part of any Buyer to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any Transaction Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Collateral Agent and the Buyers provided herein and in the other Transaction
Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Collateral Agent and the
Buyers under any Transaction Document against any party thereto are not
conditional or contingent on any attempt by the Collateral Agent or any Buyer to
exercise any of their respective rights under any other Transaction Document
against such party or against any other Person.

 

(d)     Any provision of this Guaranty that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.

 

(e)     This Guaranty shall (i) be binding on each Guarantor and its respective
successors and assigns, and (ii) inure, together with all rights and remedies of
the Collateral Agent hereunder, to the benefit of the Collateral Agent, the
Buyers and their respective successors, transferees and assigns. Without
limiting the generality of clause (ii) of the immediately preceding sentence,
the Collateral Agent and any Buyer may assign or otherwise transfer its rights
and obligations under the Securities Purchase Agreement or any other Transaction
Document to any other Person in accordance with the terms thereof, and such
other Person shall thereupon become vested with all of the benefits in respect
thereof granted to the Collateral Agent or such Buyer, as the case may be,
herein or otherwise. None of the rights or obligations of any Guarantor
hereunder may be assigned or otherwise transferred without the prior written
consent of each Buyer.

 

(f)     This Guaranty reflects the entire understanding of the transaction
contemplated hereby and shall not be contradicted or qualified by any other
agreement, oral or written, entered into before the date hereof.

 

(g)     Section headings herein are included for convenience of reference only
and shall not constitute a part of this Guaranty for any other purpose.

 

(h)     This Guaranty shall be governed by and construed in accordance with the
law of the State of Illinois applicable to contracts made and to be performed
therein without regard to conflict of law principles. Further, the law of the
state of Illinois shall apply to all disputes or controversies arising out of or
connected to or with this guaranty without regard to conflict of law principles.

 

 
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SECTION 15.     Currency Indemnity.

 

If, for the purpose of obtaining or enforcing judgment against Guarantor in any
court in any jurisdiction, it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 15 referred to
as the “Judgment Currency”) an amount due under this Guaranty in any currency
(the “Obligation Currency”) other than the Judgment Currency, the conversion
shall be made at the rate of exchange prevailing on the Business Day immediately
preceding (a) the date of actual payment of the amount due, in the case of any
proceeding in the courts of courts of the jurisdiction that will give effect to
such conversion being made on such date, or (b) the date on which the judgment
is given, in the case of any proceeding in the courts of any other jurisdiction
(the applicable date as of which such conversion is made pursuant to this
Section 15 being hereinafter in this Section 15 referred to as the “Judgment
Conversion Date”).

 

If, in the case of any proceeding in the court of any jurisdiction referred to
in the preceding paragraph, there is a change in the rate of exchange prevailing
between the Judgment Conversion Date and the date of actual receipt of the
amount due in immediately available funds, the Guarantor shall pay such
additional amount (if any, but in any event not a lesser amount) as may be
necessary to ensure that the amount actually received in the Judgment Currency,
when converted at the rate of exchange prevailing on the date of payment, will
produce the amount of the Obligation Currency which could have been purchased
with the amount of’ the Judgment Currency stipulated in the judgment or judicial
order at the rate of exchange prevailing on the Judgment Conversion Date. Any
amount due from the Guarantor under this Section 15 shall be due as a separate
debt and shall not be affected by judgment being obtained for any other amounts
due under or in respect of this Guaranty.

 

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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed by
its respective duly authorized officer, as of the date first above written.

 

GUARANTORS:

Veriteq acquisition corporation

 

 

 

By:     /s/ Scott R. Silverman                                        

           Name: Scott R. Silverman
           Title: Chief Executive Officer
     

 

 

positiveid animal health corporation

 

 

 

By:     /s/ Scott R. Silverman                                        

           Name: Scott R. Silverman
           Title: Chief Executive Officer

 

 

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ACCEPTED BY:

HUDSON BAY MASTER FUND LTD.,
as Collateral Agent

 

 

 

By:     /s/Yoav Roth                                                

           Name: Yoav Roth
           Title: Authorized Signatory