Exhibit 10.4
SECURITY AGREEMENT
This Security Agreement is made as of August 28, 2003 by and between LAURUS
MASTER FUND, LTD., a Cayman Islands corporation ("Laurus") and DIGITAL ANGEL
CORPORATION, a Delaware corporation (the "Company").
BACKGROUND
Company has requested that Laurus make advances available to Company; and
Laurus has agreed to make such advances to Company on the terms and conditions
set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and undertakings and
the terms and conditions contained herein, the parties hereto agree as follows:
1.
(A)
GENERAL DEFINITIONS.
CAPITALIZED TERMS USED IN THIS AGREEMENT SHALL
HAVE THE MEANINGS ASSIGNED TO THEM IN ANNEX A.
(B)
ACCOUNTING TERMS.
ANY ACCOUNTING TERMS USED IN THIS AGREEMENT WHICH ARE
NOT SPECIFICALLY DEFINED SHALL HAVE THE MEANINGS CUSTOMARILY GIVEN THEM IN
ACCORDANCE WITH GAAP AND ALL FINANCIAL COMPUTATIONS SHALL BE COMPUTED, UNLESS
SPECIFICALLY PROVIDED HEREIN, IN ACCORDANCE WITH GAAP CONSISTENTLY APPLIED.
(C)
OTHER TERMS.
ALL OTHER TERMS USED IN THIS AGREEMENT AND DEFINED IN THE
UCC, SHALL HAVE THE MEANING GIVEN THEREIN UNLESS OTHERWISE DEFINED HEREIN.
(D)
RULES OF CONSTRUCTION.
ALL SCHEDULES, ADDENDA, ANNEXES AND EXHIBITS HERETO
OR EXPRESSLY IDENTIFIED TO THIS AGREEMENT ARE INCORPORATED HEREIN BY REFERENCE
AND TAKEN TOGETHER WITH THIS AGREEMENT CONSTITUTE BUT A SINGLE AGREEMENT.
THE
WORDS "HEREIN", HEREOF" AND "HEREUNDER" OR OTHER WORDS OF SIMILAR IMPORT REFER
TO THIS AGREEMENT AS A WHOLE, INCLUDING THE EXHIBITS, ADDENDA, ANNEXES AND
SCHEDULES THERETO, AS THE SAME MAY BE FROM TIME TO TIME AMENDED, MODIFIED,
RESTATED OR SUPPLEMENTED, AND NOT TO ANY PARTICULAR SECTION, SUBSECTION OR
CLAUSE CONTAINED IN THIS AGREEMENT.
WHEREVER FROM THE CONTEXT IT APPEARS
APPROPRIATE, EACH TERM STATED IN EITHER THE SINGULAR OR PLURAL SHALL INCLUDE THE
SINGULAR AND THE PLURAL, AND PRONOUNS STATED IN THE MASCULINE, FEMININE OR
NEUTER GENDER SHALL INCLUDE THE MASCULINE, THE FEMININE AND THE NEUTER.
THE
TERM "OR" IS NOT EXCLUSIVE.
THE TERM "INCLUDING" (OR ANY FORM THEREOF) SHALL
NOT BE LIMITING OR EXCLUSIVE.
ALL REFERENCES TO STATUTES AND RELATED
REGULATIONS SHALL INCLUDE ANY AMENDMENTS OF SAME AND ANY SUCCESSOR STATUTES AND
REGULATIONS.
ALL REFERENCES IN THIS AGREEMENT OR IN THE SCHEDULES, ADDENDA,
ANNEXES AND EXHIBITS TO THIS AGREEMENT TO SECTIONS, SCHEDULES, DISCLOSURE
SCHEDULES, EXHIBITS, AND ATTACHMENTS SHALL REFER TO THE CORRESPONDING SECTIONS,
SCHEDULES, DISCLOSURE SCHEDULES, EXHIBITS, AND ATTACHMENTS OF OR TO THIS
AGREEMENT.
ALL REFERENCES TO ANY INSTRUMENTS OR AGREEMENTS, INCLUDING
REFERENCES TO ANY OF THIS AGREEMENT OR
the Ancillary Agreements shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof.
2.
LOANS.
(A)
(I) SUBJECT TO THE TERMS AND CONDITIONS SET FORTH HEREIN AND IN THE
ANCILLARY AGREEMENTS, LAURUS AGREES TO MAKE LOANS (THE "LOANS") TO COMPANY FROM
TIME TO TIME DURING THE TERM WHICH, IN THE AGGREGATE AT ANY TIME OUTSTANDING,
WILL NOT EXCEED THE LESSER OF (X) (I) THE CAPITAL AVAILABILITY AMOUNT MINUS (II)
SUCH RESERVES AS LAURUS MAY REASONABLY IN ITS GOOD FAITH JUDGMENT DEEM PROPER
AND NECESSARY FROM TIME TO TIME (THE "RESERVES") OR