**Exhibit10.5**

 

**REGISTRATION RIGHTS AGREEMENT**

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This Registration RightsAgreement (this “Agreement”) is made and entered into as of July 31, 2003,by and between Digital Angel Corporation, a Delaware corporation (the“Company”), and Laurus Master Fund, Ltd., a Cayman Islands company (the“Purchaser”).

 

This Agreement is beingentered into in connection with a Securities Purchase Agreement dated as of thedate hereof between the Purchase and the Company (the “Purchase Agreement”) andpursuant to the Note and Warrant.

 

The Company and thePurchaser hereby agree as follows:

 

# 1.                                       **Definitions**.  Capitalized terms used and not otherwisedefined herein that are defined in the Purchase Agreement shall have themeanings given such terms in the Purchase Agreement.  As used in this Agreement, the following terms shall have thefollowing meanings:

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*“Commission”* means the U.S. Securities andExchange Commission.

 

“*Effectiveness Date*” meansthe 90th day following the Closing Date.

 

“*Effectiveness Period*” shallhave the meaning set forth in Section 2(a).

 

*“Exchange Act”* means the SecuritiesExchange Act of 1934, as amended.

 

“*Filing Date*” means, withrespect to the Registration Statement required to be filed hereunder, the 30thday following the Closing Date.

 

“*Holder*” or “*Holders*”means the Purchaser or any of its affiliates or transferees to the extent anyof them hold Registrable Securities.

 

“*Indemnified Party*” shallhave the meaning set forth in Section 5(c).

 

“*Indemnifying Party*” shallhave the meaning set forth in Section 5(c).

 

“*Losses*” shall have themeaning set forth in Section 5(a).

 

“*Note*” means the convertiblepromissory note issued by the Company to the Purchaser on the date hereof.

 

“*Proceeding*” means an action,claim, suit, investigation or proceeding (including, without limitation, aninvestigation or partial proceeding, such as a deposition), whether commencedor threatened.

 

“*Prospectus*” means theprospectus included in a Registration Statement (including, without limitation,a prospectus that includes any information previously omitted from a prospectusfiled as part of an effective registration statement in reliance upon Rule 430Apromulgated under the Securities Act), as amended or supplemented by anyprospectus supplement, with respect to the terms of the offering of any portionof the Registrable Securities

 

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covered by the Registration Statement, and all other amendments andsupplements to the Prospectus, including post-effective amendments, and allmaterial incorporated by reference or deemed to be incorporated by reference insuch Prospectus.

 

“*Registrable Securities*”means the shares of Common Stock issued upon the conversion of the Note andissuable upon exercise of the Warrant.

 

“*Registration Statement*”means the registration statement required to be filed hereunder, including theProspectus, amendments and supplements to such registration statement orProspectus, including pre- and post-effective amendments, all exhibits thereto,and all material incorporated by reference or deemed to be incorporated byreference in such registration statement.

 

“*Rule 144*” means Rule 144promulgated by the Commission pursuant to the Securities Act, as such Rule maybe amended from time to time, or any similar rule or regulation hereafteradopted by the Commission having substantially the same effect as such Rule.

 

“*Rule 415*” means Rule 415promulgated by the Commission pursuant to the Securities Act, as such Rule maybe amended from time to time, or any similar rule or regulation hereafteradopted by the Commission having substantially the same effect as such Rule.

 

“*Rule 424*” means Rule 424promulgated by the Commission pursuant to the Securities Act, as such Rule maybe amended from time to time, or any similar rule or regulation hereafteradopted by the Commission having substantially the same effect as such Rule.

 

*“Securities Act”* means the Securities Actof 1933, as amended.

 

“*Warrant*” means the CommonStock purchase warrant issued pursuant to the Purchase Agreement.

 

# 2.                                       **Registration**.

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## (a)                                  Onor prior to the Filing Date, the Company shall prepare and file with theCommission a Registration Statement covering the Registrable Securities for anoffering to be made on a continuous basis pursuant to Rule 415.  The Registration Statement shall be on FormS-3 (except if the Company is not then eligible to register for resale theRegistrable Securities on Form S-3, in which case such registration shall be onanother appropriate form in accordance herewith).  The Company shall cause the Registration Statement to becomeeffective and remain effective as provided herein.  The Company shall use its reasonable commercial efforts to causethe Registration Statement to be declared effective under the Securities Act aspromptly as possible after the filing thereof, but in any event no later thanthe Effectiveness Date, and shall keep the Registration Statement continuouslyeffective under the Securities Act until the date which is the earlier date ofwhen (i) all Registrable Securities have been sold or (ii) all RegistrableSecurities may be sold immediately without registration under the SecuritiesAct and without volume restrictions pursuant to Rule 144(k), as determined bythe counsel to the Company pursuant to a written opinion letter to such effect,addressed and acceptable to the Company’s transfer agent and the affectedHolders (the “Effectiveness Period”).

 

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## (b)                                 If:(i) any Registration Statement is not filed on or prior to the Filing Date;(ii) a Registration Statement filed hereunder is not declared effective by theCommission by the Effectiveness Date; (iii) after a Registration Statement isfiled with and declared effective by the Commission, such RegistrationStatement ceases to be effective (by suspension or otherwise) as to allRegistrable Securities to which it is required to relate at any time prior tothe expiration of the Effectiveness Period (without being succeeded immediatelyby an additional registration statement filed and declared effective) for aperiod of time which shall exceed 30 days in the aggregate per year or morethan 20 consecutive calendar days (defined as a period of 365 days commencingon the date the Registration Statement is declared effective); or (iv) theCommon Stock is not listed or quoted, or is suspended from trading on anyTrading Market, for a period of three (3) consecutive Trading Days (providedthe Company shall not have been able to cure such trading suspension within 30days of the notice thereof or list the Common Stock on any of the NASD OTCBulletin Board, BBX Exchange, NASDAQ SmallCap Market, the Nasdaq NationalMarket, American Stock Exchange or New York Stock Exchange (the “TradingMarket”)) (any such failure or breach being referred to as an “Event,” and forpurposes of clause (i), (ii) or (iv) the date on which such Event occurs, orfor purposes of clause (iii) the date which such 30 day or 20 consecutive dayperiod (as the case may be) is exceeded, or for purposes of clause (iv) thedate on which such three (3) Trading Day period is exceeded, being referred toas “Event Date”), then until the applicable Event is cured, the Company shallpay to each Holder an amount in cash, as liquidated damages and not as apenalty, equal to 2.0% for each thirty (30) day period (prorated for partialperiods) on a daily basis of the original principal amount of the Note.  Such liquidation damages shall be paid notless than each thirty (30) days during an Event and within three (3) daysfollowing the date on which such Event has been cured by the Company.

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# 3.                                       **RegistrationProcedures**.  If and wheneverthe Company is required by the provisions hereof to effect the registration ofthe Registrable Securities under the Act, the Company will, as expeditiously aspossible:

 

## (a)                                  prepareand file with the Commission a registration statement with respect to suchsecurities, promptly as possible respond to any comments received from theCommission and use its best efforts to cause such registration statement tobecome and remain effective for the period of the distribution contemplatedthereby (determined as herein provided), and promptly provide to the Purchasercopies of all filings and Commission letters of comment;

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## (b)                                 prepareand file with the Commission such amendments and supplements to suchregistration statement and the prospectus used in connection therewith as maybe necessary to comply with the provisions of the Securities Act with respectto the disposition of all securities covered by the registration statement andto keep such registration statement effective until the earlier of: (i) sixmonths after the latest exercise period of the Warrant; (ii) four years afterthe Closing Date; or (iii) the date on which the Purchaser has disposed of allof the Registrable Securities covered by such registration statement inaccordance with the Purchaser’s intended method of disposition set forth insuch registration statement for such period;

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## (c)                                  furnishto the Purchaser such number of copies of the registration statement and theprospectus included therein (including each preliminary prospectus) as the

 

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Purchaser reasonably may request to facilitate the public sale ordisposition of the securities covered by such registration statement;

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## (d)                                 useits commercially reasonable efforts to register or qualify the Purchaser’sRegistrable Securities covered by such registration statement under thesecurities or “blue sky” laws of such jurisdictions as the Purchaser reasonablyrequests; provided, however, that the Company shall not for any such purpose berequired to qualify generally to transact business as a foreign corporation inany jurisdiction where it is not so qualified or to consent to general serviceof process in any such jurisdiction;

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## (e)                                  listthe Registrable Securities covered by such registration statement with anysecurities exchange on which the Common Stock of the Company is then listed;

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## (f)                                    immediatelynotify the Purchaser at any time when a prospectus relating thereto is requiredto be delivered under the Securities Act of the happening of any event of whichthe Company has knowledge as a result of which the prospectus contained in suchregistration statement, as then in effect, includes an untrue statement of amaterial fact or omits to state a material fact required to be stated thereinor necessary to make the statements therein not misleading in light of thecircumstances then existing; and

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## (g)                                 makeavailable for inspection by the Purchaser and any attorney, accountant or otheragent retained by the Purchaser all publicly available, non-confidentialfinancial and other records, pertinent corporate documents and properties ofthe Company, and cause the Company’s officers, directors and employees tosupply all publicly available, non-confidential information reasonablyrequested by the attorney, accountant or agent of the Purchaser.

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# 4.                                       **RegistrationExpenses**.  All expensesrelating to the Company’s compliance with Sections 2 and 3 hereof, including,without limitation, all registration and filing fees, printing expenses, feesand disbursements of counsel and independent public accountants for theCompany, fees and expenses (including reasonable counsel fees) incurred inconnection with complying with state securities or “blue sky” laws, fees of theNASD, transfer taxes, fees of transfer agents and registrars, fees of, anddisbursements incurred by, one counsel for the Holders, and costs of insuranceare called “Registration Expenses”. All selling commissions applicable to thesale of Registrable Securities, including any fees and disbursements of anyspecial counsel to the Holders beyond those included in Registration Expenses,are called “Selling Expenses.”   TheCompany shall be responsible for all Registration Expenses and for all SellingExpenses, other than Selling Expenses consisting of brokerage commissions.

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# 5.                                       **Indemnification**.

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## (a)                                  Inthe event of a registration of any Registrable Securities under the SecuritiesAct pursuant to this Agreement, the Company will indemnify and hold harmlessthe Purchaser, and its officers, directors and each other person, if any, whocontrols the Purchaser within the meaning of the Securities Act, against anylosses, claims, damages or liabilities, joint or several, to which thePurchaser or such persons may become subject under the Securities Act orotherwise, insofar as such losses, claims, damages or liabilities (or actionsin respect thereof)

 

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arise out of or are based upon any untrue statement or alleged untrue statementof any material fact contained in any registration statement under which suchRegistrable Securities were registered under the Securities Act pursuant tothis Agreement, any preliminary prospectus or final prospectus containedtherein, or any amendment or supplement thereof, or arise out of or are basedupon the omission or alleged omission to state therein a material fact requiredto be stated therein or necessary to make the statements therein notmisleading, and will reimburse the Purchaser, and each such person for anyreasonable legal or other expenses incurred by them in connection withinvestigating or defending any such loss, claim, damage, liability or action;provided, however, that the Company will not be liable in any such case if and tothe extent that any such loss, claim, damage or liability arises out of or isbased upon an untrue statement or alleged untrue statement or omission oralleged omission so made in conformity with information furnished by or onbehalf of the Purchaser or any such person in writing specifically for use inany such document.

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## (b)                                 Inthe event of a registration of the Registrable Securities under the SecuritiesAct pursuant to this Agreement, the Purchaser will indemnify and hold harmlessthe Company, and its officers, directors and each other person, if any, whocontrols the Company within the meaning of the Securities Act, against alllosses, claims, damages or liabilities, joint or several, to which the Companyor such persons may become subject under the Securities Act or otherwise,insofar as such losses, claims, damages or liabilities (or actions in respectthereof) arise out of or are based upon any untrue statement or alleged untruestatement of any material fact which was furnished in writing by or on behalfof the Purchaser to the Company expressly for use in (and such information iscontained in) the registration statement under which such RegistrableSecurities were registered under the Securities Act pursuant to this Agreement,any preliminary prospectus or final prospectus contained therein, or anyamendment or supplement thereof, or arise out of or are based upon the omissionor alleged omission to state therein a material fact required to be statedtherein or necessary to make the statements therein not misleading, and willreimburse the Company and each such person for any reasonable legal or otherexpenses incurred by them in connection with investigating or defending anysuch loss, claim, damage, liability or action, provided, however, that the Purchaserwill be liable in any such case if and only to the extent that any such loss,claim, damage or liability arises out of or is based upon an untrue statementor alleged untrue statement or omission or alleged omission so made inconformity with information furnished in writing to the Company by or on behalfof the Purchaser specifically for use in any such document.  Notwithstanding the provisions of thisparagraph, the Purchaser shall not be required to indemnify any person orentity in excess of the amount of the aggregate net proceeds received by thePurchaser of Registrable Securities in connection with any such registrationunder the Securities Act.

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## (c)                                  Promptlyafter receipt by an indemnified party hereunder of notice of the commencementof any action, such indemnified party shall, if a claim in respect thereof isto be made against the indemnifying party hereunder, notify the indemnifyingparty in writing thereof, but the omission so to notify the indemnifying partyshall not relieve it from any liability which it may have to such indemnifiedparty other than under this Section 5(c) and shall only relieve it from anyliability which it may have to such indemnified party under this Section 5(c)if and to the extent the indemnifying party is prejudiced by such omission. Incase any such action shall be brought against any indemnified party and itshall notify the indemnifying party of the commencement thereof, theindemnifying party shall be entitled to participate in and, to the

 

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extent it shall wish, to assume and undertake the defense thereof withcounsel satisfactory to such indemnified party, and, after notice from theindemnifying party to such indemnified party of its election so to assume andundertake the defense thereof, the indemnifying party shall not be liable tosuch indemnified party under this Section 5(c) for any legal expensessubsequently incurred by such indemnified party in connection with the defensethereof; if the indemnified party retains its own counsel, then the indemnifiedparty shall pay all fees, costs and expenses of such counsel, provided,however, that, if the defendants in any such action include both theindemnified party and the indemnifying party and the indemnified party shallhave reasonably concluded that there may be reasonable defenses available to itwhich are different from or additional to those available to the indemnifyingparty or if the interests of the indemnified party reasonably may be deemed toconflict with the interests of the indemnifying party, the indemnified partiesshall have the right to select one separate counsel and to assume such legaldefenses and otherwise to participate in the defense of such action, with thereasonable expenses and fees of such separate counsel and other expensesrelated to such participation to be reimbursed by the indemnifying party asincurred.

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## (d)                                 Inorder to provide for just and equitable contribution in the event of jointliability under the Securities Act in any case in which either (i) thePurchaser, or any controlling person of the Purchaser, makes a claim forindemnification pursuant to this Section 5(c) but it is judicially determined(by the entry of a final judgment or decree by a court of competent jurisdictionand the expiration of time to appeal or the denial of the last right of appeal)that such indemnification may not be enforced in such case notwithstanding thefact that this Section 5(c) provides for indemnification in such case, or (ii)contribution under the Securities Act may be required on the part of thePurchaser or controlling person of the Purchaser in circumstances for whichindemnification is provided under this Section 5(c); then, and in each suchcase, the Company and the Purchaser will contribute to the aggregate losses,claims, damages or liabilities to which they may be subject (after contributionfrom others) in such proportion so that the Purchaser is responsible only forthe portion represented by the percentage that the public offering price of itssecurities offered by the registration statement bears to the public offeringprice of all securities offered by such registration statement, provided,however, that, in any such case, (A) the Purchaser will not be required tocontribute any amount in excess of the public offering price of all suchsecurities offered by it pursuant to such registration statement; and (B) noperson or entity guilty of fraudulent misrepresentation (within the meaning ofSection 11(f) of the Securities Act) will be entitled to contribution from anyperson or entity who was not guilty of such fraudulent misrepresentation.

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# 6.                                       **Representationsand Warranties**.

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## (a)                                  TheCommon Stock of the Company is registered pursuant to Section 12(b) or 12(g) ofthe Exchange Act and, since January 1, 2002, the Company has timely filedall proxy statements, reports, schedules, forms, statements and other documentsrequired to be filed by it under the Exchange Act, except for the Company’sQuarterly Report on Form 10-Q for the quarter ended March 31, 2002.  The Company has filed (i) its Annual Reporton Form 10-K for the fiscal year ended December 31, 2002 and (ii) itsQuarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003(collectively, the “SEC Reports”).  TheCompany is eligible to file with the Commission a registration statement onForm S-3 pursuant to Instruction I.B.3 thereof.  Each SEC Report was, at the time of its filing, in substantialcompliance with the

 

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requirements of its respective form, and none of the SEC Reports, northe financial statements (and the notes thereto) included in the SEC Reports,as of their respective filing dates, contained any untrue statement of amaterial fact or omitted to state a material fact required to be stated thereinor necessary to make the statements therein, in light of the circumstancesunder which they were made, not misleading. The financial statements of the Company included in the SEC Reportscomply as to form in all material respects with applicable accountingrequirements and the published rules and regulations of the Commission or otherapplicable rules and regulations with respect thereto.  Such financial statements have been preparedin accordance with generally accepted accounting principles (“GAAP”) applied ona consistent basis during the periods involved (except (i) as may be otherwiseindicated in such financial statements or the notes thereto or (ii) in the caseof unaudited interim statements, to the extent they may not include footnotesor may be condensed) and fairly present in all material respects the financialcondition, the results of operations and the cash flows of the Company and itssubsidiaries, on a consolidated basis, as of, and for, the periods presented ineach such SEC Report.

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## (b)                                 TheCompany Common Stock is listed for trading on the American Stock Exchange andsatisfies all requirements for the continuation of such listing.  The Company has not received any notice thatits Common Stock will be delisted from the American Stock Exchange or that theCommon Stock does not meet all requirements for the continuation of suchlisting.

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## (c)                                  Neitherthe Company, nor any of its affiliates, nor any person acting on its or theirbehalf, has directly or indirectly made any offers or sales of any security orsolicited any offers to buy any security under circumstances that would causethe offering of the Registrable Securities pursuant to this Agreement to beintegrated with prior offerings by the Company for purposes of the SecuritiesAct which would prevent the Company from selling the Common Stock pursuant toRule 506 under the Securities Act, or any applicable exchange-relatedstockholder approval provisions.  Norwill the Company or any of its affiliates or subsidiaries take any action orsteps that would cause the offering of the Registrable Securities to beintegrated with other offerings.

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## (d)                                 TheRegistrable Securities are restricted securities under the Securities Act as ofthe date of this Agreement.  The Companywill not issue any stop transfer order or other order impeding the sale anddelivery of any of the Registrable Securities at such time as the RegistrableSecurities are registered for public sale or an exemption from registration isavailable, except as required by federal or state securities laws.

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## (e)                                  TheCompany understands the nature of the Registrable Securities issuable upon theconversion of the Note and the exercise of the Warrant and recognizes that theRegistrable Securities may have a potential dilutive effect.  The Company specifically acknowledges thatits obligation to issue the Registrable Securities is binding upon the Companyand enforceable regardless of the dilution such issuance may have on theownership interests of other shareholders of the Company.

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## (f)                                    Exceptfor agreements made in the ordinary course of business, there is no agreementthat has not been filed with the Commission as an exhibit to a registrationstatement or to a form required to be filed by the Company under the ExchangeAct the breach of which

 

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could have a material and adverse effect on the Company and itssubsidiaries, or would prohibit or otherwise interfere with the ability of theCompany to enter into and perform any of its obligations under this Agreementin any material respect.

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## (g)                                 TheCompany will at all times have authorized and reserved a sufficient number ofshares of Common Stock for the full conversion of the Note and exercise of theWarrant.

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# 7.                                       **Miscellaneous**.

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## (a)                                  **Remedies**.  In the event of a breach by the Company orby a Holder of any of their obligations under this Agreement, each Holder orthe Company, as the case may be, in addition to being entitled to exercise allrights granted by law and under this Agreement, including recovery of damages,will be entitled to specific performance of its rights under this Agreement.

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## (b)                                 **No Piggybackon Registrations**.  Except asand to the extent specified in Schedule 7(b) hereto, neither the Company norany of its security holders (other than the Holders in such capacity pursuanthereto) may include securities of the Company in the Registration Statementother than the Registrable Securities, and the Company shall not after the datehereof enter into any agreement providing any such right for inclusion ofshares in the Registration Statement to any of its security holders. Except asand to the extent specified in Schedule 7(b) hereto, the Company has notpreviously entered into any agreement granting any registration rights withrespect to any of its securities to any Person that has not been fullysatisfied.

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## (c)                                  **Compliance**.  Each Holder covenants and agrees that itwill comply with the prospectus delivery requirements of the Securities Act asapplicable to it in connection with sales of Registrable Securities pursuant tothe Registration Statement.

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## (d)                                 **DiscontinuedDisposition**.  Each Holderagrees by its acquisition of such Registrable Securities that, upon receipt ofa notice from the Company of the occurrence of a Discontinuation Event (ashereinafter defined), such Holder will forthwith discontinue disposition ofsuch Registrable Securities under the Registration Statement until suchHolder’s receipt of the copies of the supplemented Prospectus and/or amendedRegistration Statement or until it is advised in writing (the “Advice”) by theCompany that the use of the applicable Prospectus may be resumed, and, ineither case, has received copies of any additional or supplemental filings thatare incorporated or deemed to be incorporated by reference in such Prospectusor Registration Statement. The Company may provide appropriate stop orders toenforce the provisions of this paragraph. For purposes of this Section 7(d), a“Discontinuation Event” shall mean (i) when the Commission notifies the Companywhether there will be a “review” of such Registration Statement; (ii) wheneverthe Commission comments in writing on such Registration Statement (the Companyshall provide true and complete copies thereof and all written responsesthereto to each of the Holders); (iii) any request by the Commission or anyother Federal or state governmental authority for amendments or supplements tothe Registration Statement or Prospectus or for additional information; (iv)the issuance by the Commission of any stop order suspending the effectivenessof the Registration Statement covering any or all of the Registrable Securitiesor the initiation of any Proceedings for that purpose; (v) the receipt by

 

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the Company of any notification with respect to the suspension of thequalification or exemption from qualification of any of the RegistrableSecurities for sale in any jurisdiction, or the initiation or threatening ofany Proceeding for such purpose; and (vi) the occurrence of any event orpassage of time that makes the financial statements included in theRegistration Statement ineligible for inclusion therein or any statement madein the Registration Statement or Prospectus or any document incorporated ordeemed to be incorporated therein by reference untrue in any material respector that requires any revisions to the Registration Statement, Prospectus orother documents so that, in the case of the Registration Statement or theProspectus, as the case may be, it will not contain any untrue statement of amaterial fact or omit to state any material fact required to be stated thereinor necessary to make the statements therein, in light of the circumstancesunder which they were made, not misleading.

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## (e)                                  **Piggy-BackRegistrations**.  If at anytime during the Effectiveness Period, there is not an effective RegistrationStatement covering all of the Registrable Securities and the Company shalldetermine to prepare and file with the Commission a registration statementrelating to an offering for its own account or the account of others under theSecurities Act of any of its equity securities, other than on Form S-4 or FormS-8 (each as promulgated under the Securities Act) or their then equivalentsrelating to equity securities to be issued solely in connection with anyacquisition of any entity or business or equity securities issuable inconnection with stock option or other employee benefit plans, then the Companyshall send to each Holder written notice of such determination and, if withinfifteen days after receipt of such notice, any such Holder shall so request inwriting, the Company shall include in such registration statement all or anypart of such Registrable Securities such holder requests to be registered,subject to customary underwriter cutbacks applicable to all holders ofregistration rights and subject to the consent of any selling stockholder(s)under such registration statement.

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## (f)                                    **Amendmentsand Waivers**.  The provisionsof this Agreement, including the provisions of this sentence, may not beamended, modified or supplemented, and waivers or consents to departures fromthe provisions hereof may not be given, unless the same shall be in writing andsigned by the Company and the Holders of the then outstanding RegistrableSecurities. Notwithstanding the foregoing, a waiver or consent to depart fromthe provisions hereof with respect to a matter that relates exclusively to therights of certain Holders and that does not directly or indirectly affect therights of other Holders may be given by Holders of at least a majority of theRegistrable Securities to which such waiver or consent relates; provided,however, that the provisions of this sentence may not be amended, modified, orsupplemented except in accordance with the provisions of the immediatelypreceding sentence.

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## (g)                                 **Notices**.  Any notice or request hereunder may be givento the Company or Purchaser at the respective addresses set forth below or asmay hereafter be specified in a notice designated as a change of address underthis Section 7(g).  Any notice orrequest hereunder shall be given by registered or certified mail, returnreceipt requested, hand delivery, overnight mail or telecopy (confirmed bymail).  Notices and requests shall be,in the case of those by hand delivery, deemed to have been given when deliveredto any officer of the party to whom it is addressed, in the case of those bymail or overnight mail, deemed to have been given when deposited in the mail orwith the overnight mail carrier, and, in the case of a telecopy, whenconfirmed.  The address for such noticesand communications shall be as follows:

 

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If to the Company:                                             DigitalAngel Corporation490 Villaume Avenue South St. Paul, MN 55075 Attention:  Mr. James P. SantelliFacsimile:  651-455-0217

 

With a copy to:                                                             MicheleD. Vaillancourt, Esq.Winthrop & Weinstine, P.A.Suite 3500225 South Sixth StreetMinneapolis, MN  55402Facsimile:  612-604-6800

 

If to a Purchaser:                                                      Tothe address set forth under such Purchaser name on thesignature pages hereto.

 

If to any other Personwho is then the registered Holder:

 

To the address ofsuch Holder as itappears in the stock transfer booksof the Company

 

or such other address asmay be designated in writing hereafter, in the same manner, by such Person.

 

## (h)                                 **Successorsand Assigns**.  This Agreementshall inure to the benefit of and be binding upon the successors and permittedassigns of each of the parties and shall inure to the benefit of each Holder.The Company may not assign its rights or obligations hereunder without theprior written consent of each Holder. Each Holder may assign their respectiverights hereunder in the manner and to the Persons as permitted under the Note.

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## (i)                                     **Executionand Counterparts**. This Agreement may be executed in any number ofcounterparts, each of which when so executed shall be deemed to be an original,and all of which taken together shall constitute one and the same Agreement. Inthe event that any signature is delivered by facsimile transmission, suchsignature shall create a valid binding obligation of the party executing (or onwhose behalf such signature is executed) the same with the same force andeffect as if such facsimile signature were the original thereof.

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## (j)                                     **GoverningLaw**.  This Agreement shall begoverned by and construed in accordance with the laws of the State of New York,without regard to principles of conflicts of laws.  Any action brought by either party against the other concerningthe transactions contemplated by this Agreement shall be brought only in thestate courts of New York or in the federal courts located in the state of NewYork.  Both parties and the individualsigning this Agreement on behalf of the Company agree to submit to thejurisdiction of such courts.  Theprevailing party shall be entitled to recover from the other party itsreasonable attorneys’ fees and costs. In the event that any provision of this Agreement is invalid or unenforceableunder

 

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any applicable statute or rule of law, then such provision shall bedeemed inoperative to the extent that it may conflict therewith and shall bedeemed modified to conform with such statute or rule of law.  Any such provision which may prove invalidor unenforceable under any law shall not affect the validity orunenforceability of any other provision of this Agreement.  Each party hereto hereby irrevocably waivespersonal service of process and consents to process being served in any suchProceeding by mailing a copy thereof via registered or certified mail orovernight delivery (with evidence of delivery) to such party at the address ineffect for notices to it under this Agreement and agrees that such serviceshall constitute good and sufficient service of process and noticethereof.  Nothing contained herein shallbe deemed to limit in any way any right to serve process in any mannerpermitted by law.  Each party heretohereby irrevocably waives, to the fullest extent permitted by applicable law,any and all right to trial by jury in any legal proceeding arising out of orrelating to this Agreement, all documents, instruments and agreements enteredinto in connection herewith and/or the transactions contemplated hereby.

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## (k)                                  **CumulativeRemedies**. The remedies provided herein are cumulative and notexclusive of any remedies provided by law.

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## (l)                                     **Severability**.  If any term, provision, covenant orrestriction of this Agreement is held by a court of competent jurisdiction tobe invalid, illegal, void or unenforceable, the remainder of the terms,provisions, covenants and restrictions set forth herein shall remain in fullforce and effect and shall in no way be affected, impaired or invalidated, andthe parties hereto shall use their reasonable efforts to find and employ analternative means to achieve the same or substantially the same result as thatcontemplated by such term, provision, covenant or restriction. It is herebystipulated and declared to be the intention of the parties that they would haveexecuted the remaining terms, provisions, covenants and restrictions withoutincluding any of such that may be hereafter declared invalid, illegal, void orunenforceable.

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## (m)                               **Headings**.The headings in this Agreement are for convenience of reference only and shallnot limit or otherwise affect the meaning hereof.

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IN WITNESS WHEREOF, theparties have executed this Registration Rights Agreement as of the date firstwritten above.

 
|   | **DIGITAL  ANGEL CORPORATION** |
|--------|--------------------------------|
|   |                           |   |
|   | By:                            |   |
|   |                           | Name: |
|   |                           | Title: |

 

[REMAINDEROF PAGE INTENTIONALLY LEFT BLANKSIGNATURE PAGES OF PURCHASER TO FOLLOW]

 

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IN WITNESS WHEREOF, theparties have executed this Registration Rights Agreement as of the date firstwritten above.

 
|   | **LAURUS  MASTER FUND, LTD.**                                                                                               |   |
|--------|-----------------------------------------------------------------------------------------------------------------------------|--------|
|   |                                                                                                                        |   |   |
|   | By:                                                                                                                         |   |   |
|   |                                                                                                                        | Name:  |   |
|   |                                                                                                                        | Title: |   |
|   |                                                                                                                        |   |   |
|   | Address  for Notice:                                                                                                        |   |
|   |                                                                                                                        |   |
|   | c/o  Laurus Capital Management, LLC  152 West 57th Street, 4th Floor  New York, New York 10019  Attention:  David Grin |   |
|        |                                                                                                                             |        |  |  |

 

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