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Exhibit 10.3    
    


[DIGITAL
ANGEL LETTERHEAD] 


August 15,
2003 


Midsummer
Investment, Ltd.

and the Investors under the Purchase

Agreement, dated June 30, 2003

c/o Midsummer Capital, LLC

485 Madison Avenue, 23rd Floor

New York, New York 10022 


Gentlemen:



        This
letter agreement (the "Letter Agreement") is made and entered into by and between Digital Angel Corporation, a Delaware corporation ("DOC"), the undersigned, as purchasers of that
certain Securities Purchase Agreement, dated June 30, 2003 (the "Purchase Agreement") by and between the Company and the purchasers (collectively, the "Holders"), and Applied Digital
Solutions, Inc., a Missouri corporation (the "Company"), in connection with the waiver of certain sections of the related Registration Rights
Agreement (as defined herein). Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Purchase Agreement. 


        The
parties hereby agree as follows: 


        WHEREAS,
the Company and the Holders entered into the Purchase Agreement and Registration Rights Agreement, on June 30, 2003, whereby the Holders purchased 8.5% Convertible
Exchangeable Debentures in the principal amount of $10,500,000 and received registration rights in connection therewith; and 



        WHEREAS,
Section 6(c) of the Registration Rights Agreement limits the Company's ability to file registration statements prior to the effective date of the registration statement
contemplated under the Registration Rights Agreement. 


        NOW
THEREFORE, 


        1.     Holders
have agreed to waive Section 6(c) of the Registration Rights Agreement, pursuant to that certain Waiver, dated August 15, 2003, executed by the
Holders. 


        2.     As
consideration for the waiver granted to the Company, DOC agrees to issue five-year stock purchase warrants to the Holders to purchase 500,000 shares of DOC
common stock at an exercise price of $2.64. 


        3.     DOC
also agrees to enter into a registration rights agreement with the Holders in which DOC agrees to file with the Securities and Exchange Commission a registration
statement registering the common stock underlying the warrants and use its best efforts to cause the effectiveness of such registration statement. 


        4.     DOC
agrees to pay for all of the costs and expenses in connection with the issuance of the warrants. 



        5.     The
rights and responsibilities arising under this Agreement may not be assigned or delegated by either party hereto, in whole in part, without the prior written approval
of the other parties hereto. 


        6.     Any
notice, request or other document required or permitted to be given or delivered to the Holders by DOC or the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement. 


        7.     No
amendment or modification of this Letter Agreement shall be valid unless in writing and duly executed by the parties affected by the amendment or modification. 








        8.     This
Letter Agreement shall be binding upon the parties and their respective representatives, successors and permitted assigns. 


        9.     This
Letter Agreement shall be governed by the laws of the State of Delaware without regard to its conflict of laws principles. 



        10.   This Letter Agreement and the Waiver each must be received by the Company fully executed by no later than 5:00 p.m. on August 26,
2003, and if not received by such date the offer and all provisions under the Letter Agreement and the Waiver shall be null and void.


[signature page following]





[signature page to Letter Agreement]


        AGREED
TO AND ACCEPTED by the parties hereto on the day and year first written above. 



	 	MIDSUMMER INVESTMENT, LTD.
	

 	

/s/  SCOTT KAUFMAN      

	 	By: Scott Kaufman

Its: Authorized Signatory
	

 	
ELLIOTT ASSOCIATES, L.P.
	

 	


	 	By: Paul Singer

Its: General Partner
	

 	
ELLIOTT INTERNATIONAL, L.P.
	

 	

 By: Paul Singer, President,

Elliott International Capital Advisors Inc.

Its: Attorney-in-Fact
	

 	
OMICRON MASTER TRUST
	

 	

 By: Bruce Bernstein, President

Omicron Capital L.P., as advisor

Omicron Capital Inc., its general partner









[signature page to Letter Agreement]


        AGREED
TO AND ACCEPTED by the parties hereto on the day and year first written above. 



	 	MIDSUMMER INVESTMENT, LTD.
	

 	


	 	By: Scott Kaufman

Its: Authorized Signatory
	

 	
ELLIOTT ASSOCIATES, L.P.

By: Elliott Capital Advisors, L.P., as general partner

By: Braxton Associates, Inc., as general partner
	

 	

/s/  ELLIOT GREENBERG      

	 	By: Elliot Greenberg

Its: Vice-President
	

 	
ELLIOTT INTERNATIONAL, L.P.

By: Elliott International Capital Advisors Inc., as

Attorney-in-Fact
	

 	

/s/  PAUL SINGER      

	 	By: Paul Singer, President,

Its: Vice-President
	

 	
OMICRON MASTER TRUST
	

 	

/s/  BRUCE BERNSTEIN      

	 	By: Bruce Bernstein, President

Omicron Capital L.P., as advisor

Omicron Capital Inc., its general partner









[signature page to Letter Agreement]



	 	ISLANDIA, L.P.
	

 	

/s/  EDGAR BERNER      

	 	By:	Edgar Berner, Vice President of John Lang, Inc.
	 	Its:	General Partner
	

 	
PORTSIDE GROWTH AND OPPORTUNITY FUND
	

 	

/s/  MARLAN OGILVIE      

	 	By:	Marlan Ogilvie
	 	Its:	General Counsel
	

 	
DIGITAL ANGEL CORPORATION
	

 	

/s/  RANDOLPH K. GEISSLER      

	 	By:	Randolph K. Geissler
	 	Its:	Chief Executive Officer
	

 	
APPLIED DIGITAL SOLUTIONS, INC.
	

 	

/s/  SCOTT R. SILVERMAN      

	 	By:	Scott R. Silverman
	 	Its:	CEO











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Exhibit 10.3