EXHIBIT 10.1
AMENDMENT TO LETTER AGREEMENT
December 14, 2009

 
Digital Angel Corporation
490 Villaume Avenue
South St. Paul, MN 55075
Attention: President

Re: Amendment to Prepayment Schedule in November 5, 2009 Letter Agreement
Ladies and Gentlemen:
Reference is made to the November 5, 2009 Letter Agreement (the “Letter
Agreement”) entered into among the signatories to this Amendment to Letter
Agreement (this “Amendment”). All defined terms used herein that are not defined
shall have the meanings given to them in the Letter Agreement.
Reference is also made to the August 31, 2007 Security Agreement (and ancillary
agreements) between Destron Fearing Corporation (f/k/a/ Digital Angel
Corporation) (“DFC”) and certain of the Laurus/Kallina Related Parties (the
“Revolver”).
On November 20, 2009, the Company (and certain subsidiaries) completed the
McMurdo Sale Transaction pursuant to the terms of an Amended Sale Agreement. As
a result of the final transaction structure, trade payable balances and timing
of payments, and increases in operating requirements of Signature Industries,
the Company did not receive the expected proceeds from the transaction at
closing, which proceeds were intended for payment to the Laurus/Kallina Related
Parties under the Letter Agreement.
The parties hereto wish to amend the Letter Agreement and otherwise agree as
follows:
(a) The payment schedule set forth in paragraph (a) on page 2 of the Letter
Agreement shall be modified as follows:
(i) Upon execution of this Amendment, the Company shall pay to the
Laurus/Kallina Related Parties, and the Laurus/Kallina Related Parties will
accept from the Company, in partial satisfaction of the Existing Debt
Obligations (as determined prior to application of payment of the Deferred
Monthly Amount) the amount of $3,000,000 in cash (“Partial Prepayment”). The
Company hereby agrees that the Partial Prepayment shall be paid by the Company
and/or its designee to the Laurus/Kallina Related Parties on the date hereof as
follows: $3,000,000, less the November 2009 principal payment of $208,333
already paid, (i.e. $2,791,667) in cash by wire transfer to the account set
forth on Exhibit A to this Amendment. A portion of the required Partial
Prepayment may be satisfied by DFC on behalf of the Company as follows: DFC by
its signature below hereby requests a borrowing of $1,400,000 under the Revolver
(subject to unfunded borrowing base availability as existing on the date of this
Amendment) which borrowed amount DFC instructs the Laurus/Kallina Related
Parties to pay in cash by wire transfer to the account set forth on Exhibit A to
this Amendment on behalf of the Company and to apply such paid amount against
the Partial Payment. The Company and affiliated companies signing below (the
“Company Entities”) hereby authorize the Laurus/Kallina Related Parties to apply
all payments made pursuant to this subsection (i) against the scheduled
amortizing principal payments under the Existing Debt Obligations in inverse
order of maturity; provided that, notwithstanding the foregoing, the payments
made pursuant to this subsection (i) may also be applied against the principal
portion of the outstanding Monthly Amounts due under the Notes in December 2009
and January 2010. The Company hereby agrees to make all payments of interest and
principal under the Existing Debt Obligations (and otherwise) per the terms of
the Existing Agreements, including, without limitation unless otherwise
expressly modified herein.

 

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(ii) In addition to the payments described above in subsection (i), the Company
hereby agrees that within three (3) days after execution of this Amendment, the
Company shall pay the Deferral Payment to the Laurus/Kallina Related Parties in
the form of cash payment or common stock of the Company with an aggregate value
of $800,000, calculated and issued in accordance with the terms of the
November 26, 2008 Letter Agreement among the parties;
(iii) The Company hereby agrees that on or before February 1, 2010, the Company
shall pay to the Laurus/Kallina Related Parties, and the Laurus/Kallina Related
Parties will accept from the Company, all remaining outstanding amounts in
respect of the remaining Existing Debt Obligations (upon payment per paragraphs
(i) and (ii) above, the total remaining Existing Debt Obligations which are then
owing by the Company.
(b) Paragraph (b) on page 2 of the Letter Agreement shall have no further
effect, the Company having paid such November Monthly Amounts subsequent to
execution of the Letter Agreement.
(c) Upon execution of this Amendment, the Laurus/Kallina Related Parties agree
to immediately resume funding under the Revolver in accordance with the terms
thereof.
(d) As of the date of this Amendment and after giving full force and effect to
this Amendment, each of the Laurus/Kallina Related Parties (and their
affiliates) hereby confirms that no known default or known breach by the Company
Entities under the Existing Agreements or the Revolver has occurred prior to or
exists as of the date hereof. For the avoidance of doubt, this Amendment and the
Letter Agreement shall be deemed to be Related Agreements and Ancillary
Agreements as defined in the Existing Agreements and any failure by the Company
or its designees to make any of the payments described in Section (a) above when
due shall be deemed to be a payment event of default under and as described in
the Existing Agreements. Each of the Company Entities hereby confirms and agrees
that no default or breach by the Laurus/Kallina Related Parties under the
Existing Documents or the Revolver has occurred prior to or exists as of the
date hereof.

 

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(e) The Company Entities hereby each represents and warrants to the
Laurus/Kallina Related Parties that: (i) the Existing Agreements (and each
Related Agreement as defined therein) and the Revolver (and each Ancillary
Agreement as defined therein) shall remain in full force and effect, and are
hereby ratified and confirmed; (ii) no breach or default of any of its/their
obligations under the terms of the Existing Agreements or the Revolver or any
other agreements between any of the Laurus/Kallina Related Parties and the
Company Entities exists as of the date hereof after giving effect to the
Amendment and (iii) each of the Company Entities has the corporate power and
authority to execute and deliver this Amendment; (iv) all corporate action on
the part of each of the Company Entities (including their respective officers
and directors) necessary for the authorization of this Amendment, the
performance of all obligations of the undersigned hereunder has been taken; and
(v) this Amendment, when executed and delivered and, to the extent it is a party
thereto, will be valid and binding obligations of the Company Entities. The
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of any Laurus/Kallina Related Party, nor
constitute a waiver of any provision of any of the Letter Agreement or Existing
Agreements, except as specifically provided herein. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns and shall be governed by and construed in accordance with
the laws of the State of New York.
(f) This Amendment may be executed by the parties hereto 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 to be an original
signature hereto.
[SIGNATURE PAGES FOLLOW]

 

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              Very truly yours,
 
            LAURUS MASTER FUND, LTD. (In Liquidation)
 
       
 
  By:   Laurus Capital Management, LLC, its investment manager
 
       
 
      By: /s/ Scott Bluestein
 
      Name:Scott Bluestein
 
      Title: Authorized Signatory
 
            KALLINA CORPORATION
 
       
 
  By:   Laurus Capital Management, LLC, its investment manager
 
       
 
      By: /s/ Scott Bluestein
 
      Name: Scott Bluestein
 
      Title: Authorized Signatory
 
            VALENS U.S. SPV I, LLC
VALENS OFFSHORE SPV I, LTD.
VALENS OFFSHORE SPV II, CORP.
 
       
 
  By:   Valens Capital Management, LLC, its investment manager
 
       
 
      By: /s/ Scott Bluestein
 
      Name: Scott Bluestein
 
      Title: Authorized Signatory
 
            LV ADMINISTRATIVE SERVICES, INC., as Agent
 
            By: /s/ Scott Bluestein     Name:Scott Bluestein     Title:
Authorized Signatory

 

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              PSOURCE STRUCTURED DEBT LIMITED
 
       
 
  By:   PSource Capital Limited, its investment consultant
 
       
 
      By: /s/ Charles Lewis
 
      Name: Charles Lewis
 
      Title: Authorized Signatory

          CONSENTED AND AGREED TO:    
 
        DIGITAL ANGEL CORPORATION
(f/k/a Applied Digital Solutions, Inc.)    
 
       
By:
  /s/ Joseph J. Grillo    
 
  Name: Joseph J. Grillo
Title: President    
 
        DESTRON FEARING CORPORATION
(f/k/a Digital Angel Corporation)    
 
       
By:
  /s/ Joseph J. Grillo    
 
  Name: Joseph J. Grillo
Title: President    
 
        DIGITAL ANGEL TECHNOLOGY CORPORATION    
 
       
By:
  /s/ Joseph J. Grillo    
 
  Name: Joseph J. Grillo
Title: President    
 
        DIGITAL ANGEL INTERNATIONAL, INC.    
 
       
By:
  /s/ Joseph J. Grillo    
 
  Name: Joseph J. Grillo
Title: President    

 

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          FEARING MANUFACTURING CO. INC.    
 
       
By:
  /s/ Joseph J. Grillo    
 
  Name: Joseph J. Grillo
Title: President    
 
        FLORIDA DECISION CORPORATION
(f/k/a Pacific Decision Sciences Corporation)    
 
       
By:
  /s/ Joseph J. Grillo    
 
  Name: Joseph J. Grillo
Title: President    

 

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