Document:

Exhibit 10.2

    
      
        

      

    

    Exhibit
      10.2

     

    

    THIS
      SENIOR SECURED DEBENTURE (THIS “DEBENTURE”) HAS NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE OR SOLD
      UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
      LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM REGISTRATION
      UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE
      IN
      CONNECTION WITH SUCH OFFER OR SALE. THIS DEBENTURE (I) MAY BE PLEDGED OR
      HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN LOAN OR OTHER FINANCING
      SECURED BY THIS DEBENTURE AND (II) MAY BE TRANSFERRED OR ASSIGNED TO AN
      AFFILIATE OF THE HOLDER HEREOF WITHOUT THE NECESSITY OF AN OPINION OF COUNSEL
      OR
      THE CONSENT OF THE ISSUER HEREOF.

    

    THIS
      DEBENTURE
      DOES
      NOT REQUIRE PHYSICAL SURRENDER HEREOF IN ORDER TO EFFECT A PARTIAL PAYMENT
      OR
      REDEMPTION HEREOF. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS
DEBENTURE
      MAY
      BE LESS THAN THE PRINCIPAL AMOUNT SHOWN BELOW.

     

    

    DIGITAL
      ANGEL CORPORATION

    

    10.25%
      SENIOR SECURED DEBENTURE

    

    

    $6,000,000.00

    Issue
      Date: February 6, 2007

    

    FOR
      VALUE RECEIVED, DIGITAL
      ANGEL CORPORATION, a
      Delaware corporation (the
      “Company”),
      hereby promises to pay to the order of IMPERIUM MASTER FUND, LTD., or its
      permitted successors or assigns (the “Holder”),
      the
      sum of SIX MILLION DOLLARS ($6,000,000.00) in same day funds, on or before
      the
      three (3) year anniversary of the Issue Date (the “Maturity
      Date”).
      

    

    Except
      as
      specifically provided by the terms of Section
      4
      and the
      Monthly Payments contemplated in Section
      2(a),
      the
      Company shall not have the right to prepay any principal of this
      Debenture.

     

    The
      Company has issued this Debenture pursuant to a Securities Purchase Agreement,
      dated as of the date hereof (the “Securities
      Purchase Agreement”),
      between the Company and the investors named therein. The Debentures issued
      by
      the Company pursuant to the Securities Purchase Agreement, including this
      Debenture, are collectively referred to herein as the “Debentures”.
      The
      Company’s obligations under the Debentures, including, without limitation, its
      obligation to make payments of principal and interest thereon, are guaranteed
      by
      the Company Subsidiaries of the Company and secured by the assets and properties
      of the Company and the Company Subsidiaries. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    The
      following terms shall apply to this Debenture:

    

    
      	
              1.

            	
              DEFINITIONS.

            

    

    

    “Change
      of Control”
means
      the existence, occurrence, public announcement or entering into an agreement
      contemplating of any of the following: (a) the effectuation of a transaction
      or
      series of transactions in which more than fifty percent (50%) of the equity
      or
      voting power of the Company is disposed of; (b) the effectuation of a
      transaction or series of transactions in which any of the equity or voting
      power
      of any Company Subsidiary is disposed to a Person other than the Company or
      another Company Subsidiary; (c) the consolidation, merger or other business
      combination of the Company with or into any other entity, immediately following
      which the prior stockholders of the Company fail to own, directly or indirectly,
      at least fifty percent (50%) of the equity and voting power of the surviving
      entity; (d) the consolidation, merger or other business combination of any
      Company Subsidiary with or into any other entity other than the Company or
      another Company Subsidiary; or (e) the Continuing Directors do not at any time
      constitute at least a majority of the Board of Directors of the Company;
provided,
      however,
      that a
      Change of Control shall not be deemed to have occurred if (i) the Company enters
      into a consolidation, merger, share exchange or other business combination
      with
      an Affiliate or Subsidiary of the Company and prior to effecting such business
      combination, the Company has obtained the written consent of the Holder for
      such
      business combination, (ii) the surviving entity of such transaction assumes
      all
      of the obligations of the Company under all of the Debentures and the other
      Transaction Documents, and (iii) after assuming all such obligations, such
      surviving entity is and would be solvent until such obligations are paid in
      full
      or otherwise discharged.

    

    “Continuing
      Director”
means,
      at any date, a member of the Company’s Board of Directors (i) who was a member
      of such board on the date of the Securities Purchase Agreement or (ii) who
      was
      nominated or elected by at least a majority of the directors who were Continuing
      Directors at the time of such nomination or election or whose election to the
      Company’s Board of Directors was recommended or endorsed by at least a majority
      of the directors who were Continuing Directors at the time of such nomination
      or
      election or such lesser number comprising a majority of a nominating committee
      if authority for such nominations or elections has been delegated to a
      nominating committee whose authority and composition have been approved by
      at
      least a majority of the directors who were Continuing Directors at the time
      such
      committee was formed.

    

    “Default
      Interest Rate”
means
      the lower of eighteen (18%) and the maximum rate permitted by applicable law
      or
      by the applicable rules or regulations of any governmental agency or of any
      stock exchange or other self-regulatory organization having jurisdiction over
      the Company or the trading of its securities.

    

    “Equity
      Conditions”
means
      each of the following:

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    

    (i)   the
      Registration Statement shall have been declared effective, not be the subject
      of
      any stop order, be available to the Holder, and cover the number of Registrable
      Securities (as defined in the Registration Rights Agreement) required by the
      Registration Rights Agreement;

    

    (ii)  the
      Reserved Amount must be equal to or greater than the number of shares of Common
      Stock that the Company is required to reserve under the Securities Purchase
      Agreement;

    

    (iii)  the
      Stock
      Option Shares shall have been listed on the Principal Market and trading in
      the
      Common Stock shall not have been suspended on the Principal Market;

    

    (iv)    
      the
      shares of Common Stock that the Holder would beneficially own, after giving
      effect to the contemplated issuance of Company securities for which these Equity
      Conditions must be satisfied, shall not exceed the limitation set forth in
      Section
      2(b)(iii) or
      Section 4.16 of the Securities Purchase Agreement;

    

    (v)      an
      Event
      of Default, or an event that with the passage of time or giving of notice,
      or
      both, would constitute an Event of Default, has not occurred and is not
      continuing; and

    

    (vi)    
      the
      Stockholder Amendment Approval Date shall have occurred.

    

    “Event
      of Default”
means
      the occurrence of any of the following events: 

     

    (i)       
      a
      Liquidation Event occurs or is publicly announced;

     

    (ii)  the
      Company fails to make any payment of principal or interest on this Debenture
      as
      and when due, and such payment remains unpaid for two (2) Business Days
      following written notice thereof from the Holder; 

     

    (iii)     the
      Company or any Company Subsidiary breaches or provides notice of its intent
      to
      breach any financial covenant contained in Section 4.10(b) of the Securities
      Purchase Agreement; and such breach continues for a period of five (5) Business
      Days following written notice thereof from the Holder;

     

    (iv)    other
      than a breach described in clauses
      (ii) or
      (iii)
      above,
      the Company or any Company Subsidiary breaches or provides notice of its intent
      to breach any material term or condition of this Debenture or any other
      Transaction Document (including, without limitation, an Exercise Default (as
      defined in the Warrants) and a Registration Default (as defined in the
      Registration Rights Agreement)); and such breach continues for a period of
      five
      (5) Business Days following written notice thereof from the Holder;

     

    (v)  any
      representation or warranty made by the Company or any Company Subsidiary in
      this
      Debenture or any other Transaction Document was inaccurate or misleading in
      any
      material respect as of the date such representation or warranty was made;
      or

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    (vi)    
      a
      default
      occurs or is declared, or any amounts are accelerated, under or with respect
      to
      any instrument that evidences Debt of the Company or any Company Subsidiary
      in a
      principal amount exceeding $100,000.

     

    “Interest”
has
      the
      meaning set forth in Section
      2(a)(i)
      of this
      Debenture.

    

    “Issue
      Date”
means
      February 6, 2007.

    

    “Liquidation
      Event”
means
      the (i) institution of any insolvency or bankruptcy proceedings, or any
      receivership, liquidation, reorganization or other similar proceedings in
      connection therewith, relative to the Company or
      any
      Company Subsidiary,
      or (ii)
      the dissolution or other winding up of the Company
      or any
      material Company Subsidiary,
      or
      (iii) any assignment for the benefit of creditors or any marshalling of the
      material assets or material liabilities of the Company
      or any
      Company Subsidiary.

    

    “Mandatory
      Redemption,”
      “Mandatory
      Redemption Date”
and
      “Mandatory
      Redemption Notice”
have
      the respective meanings set forth in Section
      3(a)
      of this
      Debenture.

    

    “Mandatory
      Redemption Price”
means
      an amount equal to the sum of (i) 110% of the outstanding principal amount
      of
      this Debenture on the date of determination, plus
      (ii) all
      accrued and unpaid Interest (including default interest (if any)) hereon,
plus
      (iii) all
      other
      amounts due hereunder.

    

    “Maturity
      Date”
has
      the
      meaning set forth in the preamble of this Debenture.

    

    “Monthly
      Payment”
      has
      the
      meaning set forth in Section
      2(a)(ii)
      of this
      Debenture. 

    

    “Monthly
      Payment Date”
means
      the first Business Day of each calendar month.

    

    “Prepayment”
has
      the
      meaning set forth in Section
      4(a)
      of this
      Debenture.

    

    “Prepayment
      Amount”
      means
      an
      amount equal to the sum of (A) 102% of the outstanding principal amount of
      this
      Debenture on the date of determination plus
      (B) all
      accrued and unpaid Interest (including default interest (if any)) hereon,
plus
      (C) all
      other amounts due hereunder.

    

    “Prepayment
      Date”
and
      “Prepayment
      Notice”
have
      the respective meanings set forth in Section
      4(a) of
      this
      Debenture.

    

    “Stock
      Option”
      has
      the
      meaning set forth in Section
      2(b)
      of this
      Debenture

    

    “Stock
      Option Month”
      means,
      with respect to a Monthly Payment for which the Stock Option is being exercised,
      the calendar month for which such Monthly Payment is being made. To illustrate,
      the Stock Option Month for the Monthly Payment due on June 1, 2007 is the month
      of May, 2007.

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    

    “Stock
      Option Notice”
      has
      the
      meaning set forth in Section
      2(b)(i)
      of this
      Debenture.

    

    “Stock
      Option Notice Date”
means,
      with
      respect to a Monthly Payment for which the Stock Option is being
      exercised, the
      date
      that is thirteen (13) Trading Days prior to the last day of the Stock Option
      Month for which such Monthly Payment is being made. To illustrate, the Stock
      Option Notice Date for the Monthly Payment due on June 1, 2007 is May 14, 2007,
      which takes into account that May 28, 2007 is a federal holiday and not a
      Trading Day.

    

    “Stock
      Option Shares”
has
      the
      meaning set forth in Section
      2(b)(ii)
      of this
      Debenture.

    

    “Trading
      Day”
means
      a
      Business Day on which shares of Common Stock are purchased and sold on the
      Principal Market.

    

    “VWAP”
on
      a
      Trading Day means the volume weighted average price of the Common Stock for
      such
      Trading Day on the Principal Market as reported by Bloomberg Financial Markets
      or, if Bloomberg Financial Markets is not then reporting such prices, by a
      comparable reporting service of national reputation selected by the Holders
      and
      reasonably satisfactory to the Company. If the VWAP cannot be calculated for
      the
      Common Stock on such Trading Day on any of the foregoing bases, then the Company
      shall submit such calculation to an independent investment banking firm of
      national reputation reasonably acceptable to the Holders of a majority of the
      Registrable Securities then outstanding, and shall cause such investment banking
      firm to perform such determination and notify the Company and the Holders of
      the
      results of determination no later than two (2) Business Days from the time
      such
      calculation was submitted to it by the Company. All such determinations shall
      be
      appropriately adjusted for any stock dividend, stock split, reverse stock split
      or other similar transaction during such period.

    

    Any
      capitalized term used but not defined herein has the meaning specified in the
      Securities Purchase Agreement.

    

    All
      definitions contained in this Debenture are equally applicable to the singular
      and plural forms of the terms defined. The words “hereof”, “herein” and
“hereunder” and words of similar import refer to this Debenture as a whole and
      not to any particular provision of this Debenture. 

    

    
      	
              2.

            	
              PAYMENT
                OF PRINCIPAL AND INTEREST.

            

    

    

    
      	 	
              (a)

            	
              Interest;
                Amortization.

            

    

    

    (i)      
      Interest.
      This
      Debenture shall bear interest on the unpaid principal amount hereof
      (“Interest”)
      at an
      annual rate equal to 10.25%, computed on the basis of a 360-day year and
      calculated using the actual number of days elapsed since the Issue Date or
      the
      date on which Interest was most recently paid, as the case may be.

    

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    
      (ii)  Amortization.
        The
        Company shall, on June 1, 2007 and on each Monthly Payment Date thereafter,
        pay
        the Holder an amount (each such payment, a “Monthly
        Payment”) equal
        to
        the sum of (i) the lesser of (x) 3.333% of the original principal amount
        of this
        Debenture and (y) the then total remaining unpaid principal of this Debenture
        plus
        (ii) the
        accrued and unpaid Interest (including default interest (if any)) on this

        Debenture up to but not including the date of such payment. Notwithstanding
        the
        foregoing, the outstanding principal amount of this Debenture plus
        all
        accrued and unpaid Interest (including default interest (if any)) hereon,
        plus
        all
        other
        amounts due hereunder shall be paid in full on the Maturity Date.

       

    

    (iii)    
      Payment
      in Cash.
      Except
      to the extent permitted under Section
      2(b),
      all
      payments of principal and Interest (including default interest (if any)) on
      this
      Debenture shall be paid in
      cash
      by wire transfer of immediately available funds pursuant to the written wire
      instructions provided by the Holder to the Company.

    

    (iv)    
      Default
      Interest.
      Any
      amount of principal or Interest that is not paid (whether in cash or stock)
      as
      and when due in accordance with this Debenture shall bear interest at the
      Default Interest Rate, compounded
      monthly,
      until
      paid.

    

    (b)   Stock
      Option.
      Subject
      to the terms of this Section
      2(b),
      including the satisfaction of all of the Equity Conditions as specified in
      Section
      2(b)(iii),
      the
      Company may elect to pay all or any of the Monthly Payments in shares of Common
      Stock (the “Stock
      Option”).

    

    (i)   Exercise
      Notice.
      In
      order to exercise the Stock Option for a Monthly Payment, the Company shall
      give
      the Holder written notice thereof (a “Stock
      Option Notice”)
      on or
      prior to the Stock Option Notice Date for such Monthly Payment. A Stock Option
      Notice, once delivered by the Company, shall be irrevocable, provided
      that
      if
      the applicable Equity Conditions are neither satisfied nor waived, then such
      Stock Option Notice shall be deemed cancelled, and the Company shall be required
      to make the applicable Monthly Payment in cash in accordance with Section
      2(a)(iii).
      If the
      Company does not deliver a Stock Option Notice on or before the applicable
      Stock
      Option Notice Date, then the Company will be deemed to have elected to pay
      the
      applicable Monthly Payment in cash in accordance with Section
      2(a)(iii).
      If the
      Company exercises the Stock Option for a Monthly Payment, such exercise must
      be
      made with respect to all of the Debentures.

     

    (ii)  Stock
      Option Shares; Delivery; Pricing.
      The
      number of shares of Common Stock to be issued to the Holder in satisfaction
      of a
      Monthly Payment (the “Stock
      Option Shares”),
      and
      the delivery thereof to the Holder, shall be as follows: (i) on or prior to
      the
      5th
      Trading
      Day prior to the Monthly Payment Date for such Monthly Payment (e.g., if the
      Monthly Payment Date is June 1, 2007, then on or prior to May 24, 2007), the
      Company shall deliver to the Holder a number of Stock Option Shares equal to
      the
      quotient of (x) 50% of such Monthly Payment divided
      by
      (y) 92%
      of the average of the daily VWAP for each of the five consecutive Trading Days
      occurring immediately prior to (but not including) such date, and (ii) on the
      Monthly Payment Date for such Monthly Payment, the Company shall deliver to
      the
      Holder a number of Stock Option Shares equal to the difference of (x) the
      quotient of (A) the amount of such Monthly Payment divided
      by (B)
      92%
      of the average of the daily VWAP for each of the ten consecutive Trading Days
      occurring immediately prior to (but not including) such date minus
      (y)
      the
      number of Stock Option Shares previously delivered to the Holder pursuant to
      clause
      (i) of
      this
      sentence. If any fractional share would be issuable upon exercise of a Stock
      Option, such fractional share shall be disregarded and the number of shares
      issuable shall, in the aggregate, be equal to the nearest whole number of
      shares.

    

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    (iii)    
      Equity
      Conditions; Beneficial Ownership Limitation.
      All
      Stock Option Shares shall have been registered in accordance with the
      Registration Statement. The
      Company shall not be permitted to effect delivery of Stock Option Shares unless
      all of the Equity Conditions are satisfied in full on the date of such delivery
      and on each of the twenty (20) Trading Days immediately preceding such delivery
      date. If
      any of
      the Equity Conditions are not satisfied (or waived by the Holder) as of a
      delivery date or on any of the twenty (20) Trading Days preceding such delivery
      date (except, in the case of the Monthly Payment due June 1, 2007, it shall
      be
      any of the five (5) Trading Days (and not twenty Trading Days) preceding the
      first delivery date for such payment, and any of the ten (10) Trading Days
      (and
      not twenty Trading Days) preceding the second delivery date for such payment),
      the Company shall be required to pay the portion of the Monthly Payment
      represented by such Stock Option Shares in cash in accordance with Section
      2(a)(iii).
      Notwithstanding
      the foregoing, the Company shall not be permitted to effect delivery of Stock
      Option Shares to the extent that, upon receipt of the shares of Common Stock
      deliverable thereby, the Holder would beneficially own more than 4.99% of the
      number of shares of Common Stock then outstanding (provided
      that
      such
      beneficial ownership limitation may be waived by the Holder in accordance with
      Section
      4(c)).
      As
      used herein, beneficial ownership shall be determined in accordance with Section
      13(d) of the Exchange Act. If,
      as a
      result of the foregoing beneficial ownership limitation, the Company is
      prohibited from effecting delivery
      of Stock Option Shares,
      the
      Company shall be required to pay the portion of the Monthly Payment represented
      by such Stock Option Shares in cash in accordance with Section
      2(a)(iii).

     

    (iv)    
      DTC;
      Physical Certificates.
      The
      Company shall effect delivery of Stock Option Shares, as long as the
      Company’s
      designated transfer agent or co-transfer agent in the United States for the
      Common Stock (the “Transfer
      Agent”)
      participates in the Depository Trust Company (“DTC”)
      Fast
      Automated Securities Transfer program (“FAST”),
      by
      crediting the account of the Holder or its nominee at DTC (as specified by
      the
      Holder) with the number of Stock Option Shares required to be delivered, no
      later than the close of business on the date on which such Stock Option Shares
      are due. In the event that the Transfer Agent is not a participant in FAST
      or if
      the Holder so specifies in writing, the Company shall effect delivery of Stock
      Option Shares by delivering to the Holder or its nominee physical certificates
      representing such Stock Option Shares, no later than the close of business
      on
      the date on which such Stock Option Shares are due. Stock
      Option Shares delivered to the Holder shall not contain any restrictive
      legend.

     

    (v)    
      Failure
      to Deliver Stock Option Shares.
      In the
      event that the Company fails for any reason to deliver to the Holder the number
      of Stock Option Shares due to such Holder on or before the date on which such
      Stock Option Shares are due (a “Stock
      Option Default”),
      the
      Holder shall have the right to receive from the Company an amount equal to
      (i)
      (N/365) multiplied
      by
      (ii) the
      principal amount of, and any Interest and any other amounts accrued on, this
      Debenture represented by such Stock Option Shares multiplied
      by (iii)
      the
      Default Interest Rate, where “N” equals the number of days elapsed between the
      date on which such Stock Option Shares were due and the date on which such
      Stock
      Option Default has been cured. In the event that shares of Common Stock are
      purchased by or on behalf of the Holder in order to
      make
      delivery on a sale effected in anticipation of receiving Stock Option Shares,
      and there is a Stock Option Default with respect to such Stock Option Shares,
      the Holder shall have the right to receive from the Company, in addition to
      the
      foregoing amounts, (i) the aggregate amount paid by or on behalf of the Holder
      for such shares of Common Stock minus
      (ii) the
      aggregate amount of net proceeds, if any, received by the Holder from the sale
      of such Stock Option Shares after such shares are actually delivered to the
      Holder. Amounts
      payable under this Section
      2(b)(v) shall
      be
      paid to the Holder in immediately available funds on or before the second
      (2nd)
      Business Day following written notice from the Holder to the
      Company.
      In
      addition to its rights under this Section
      2(b)(v),
      the
      Holder shall have the right to pursue all other remedies available to it at
      law
      or in equity (including, without limitation, a decree of specific performance
      and/or injunctive relief). 

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    
      	
              3.

            	
              EVENTS
                OF DEFAULT; MANDATORY REDEMPTION.

            

    

     

    (a)   Mandatory
      Redemption.
      In the
      event that an Event of Default or a Change of Control occurs, the Holder shall
      have the right, upon written notice to the Company (a “Mandatory
      Redemption Notice”),
      to
      have all of the unpaid principal amount of this Debenture, plus
      all
      accrued and unpaid Interest (including default interest (if any), redeemed
      by
      the Company (a “Mandatory
      Redemption”)
      at the
      Mandatory Redemption Price in same day funds. The Mandatory Redemption Notice
      shall specify the effective date of such Mandatory Redemption (the “Mandatory
      Redemption Date”),
      which
      date must be at least two (2) Business Days following the Business Day on which
      the Mandatory Redemption Notice is delivered to the Company, and the amount
      of
      principal and interest (and other amounts, if any) to be redeemed. In order
      to
      effect a Mandatory Redemption hereunder, the Holder must deliver a Mandatory
      Redemption Notice no later than, in the case of an Event of Default, the close
      of business on the third (3rd)
      Business Day following the date on which an Event of Default is no longer
      continuing and, with respect to a Change of Control, the close of business
      on
      the third (3rd)
      Business Day following the date on which the Change of Control is
      completed.

     

    (b)  
Payment
      of Mandatory Redemption Price.

     

    (i)      
      The
      Company shall pay the Mandatory Redemption Price to the Holder on the Mandatory
      Redemption Date. After the Company has paid the Mandatory Redemption Price
      to
      the Holder in cash, the Holder shall return this Debenture to the Company for
      cancellation.

     

    (ii)  If
      the
      Company fails to pay the Mandatory Redemption Price to the Holder on or prior
      to
      the Mandatory Redemption Date, the Holder shall be entitled to interest thereon
      at the Default Interest Rate from the Mandatory Redemption Date until the date
      on which the Mandatory Redemption Price has been paid in full.

     

    
      	
              4.

            	
              PREPAYMENT.

            

    

    

    (a)   Prepayment.
      The
      Company may, at any time after the Issue Date, prepay all but not less than
      all,
      of the unpaid principal amount of this Debenture, plus
      all
      accrued and unpaid Interest, by delivering to the Holder the Prepayment Amount
      (“Prepayment”).
      In
      order to effect a Prepayment, the Company must deliver to the Holder written
      notice thereof (a “Prepayment Notice”),
      specifying the
      intended payment date of such Prepayment (the “Prepayment
      Date”),
      which
      date must be at
      least
      sixty (60)
      days
      following delivery of such Prepayment
      Notice
      to the Holder. A Prepayment Notice, once delivered, is irrevocable and may
      only
      be waived by the Holder in its sole discretion upon request. In the event that
      the Company effects a Prepayment with respect to this Debenture, it must
      contemporaneously effect a Prepayment of all but not less than all of the other
      Debentures.
      

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    (b)   Payment
      of Prepayment Amount.

     

    (i)      
      The
      Company shall pay the Prepayment Amount to the Holder on the Prepayment Date.
      After the Company has paid the Prepayment Amount in full, the Holder shall
      return this Debenture to the Company for cancellation.

     

    (ii)  If
      the
      Company fails to pay the Prepayment Amount to the Holder on the Prepayment
      Date,
      the Holder shall be entitled to interest thereon at the Default Interest Rate
      from the Prepayment Date until the date on which Prepayment Amount and accrued
      and unpaid default interest thereon have been paid in full.

     

    
      	
              5.

            	
              MISCELLANEOUS.

            

    

     

    (a)   Failure
      to Exercise Rights not Waiver.
      No
      failure or delay on the part of the Holder in the exercise of any power, right
      or privilege hereunder shall operate as a waiver thereof, nor shall any single
      or partial exercise of any such power, right or privilege preclude any other
      or
      further exercise thereof. All rights and remedies of the Holder hereunder are
      cumulative and not exclusive of any rights or remedies otherwise available.
      In
      the event that the Company does not pay any amount under this Debenture when
      such amount becomes due, the Company shall bear all costs incurred by the Holder
      in collecting such amount, including without limitation reasonable legal fees
      and expenses. 

     

    (b)   Notices.
      Any
      notice, demand or request required or permitted to be given by the Company
      or
      the Holder pursuant to the terms of this Debenture shall be in writing and
      shall
      be deemed delivered (i) when delivered personally or by verifiable facsimile
      transmission, unless such delivery is made on a day that is not a Business
      Day,
      in which case such delivery will be deemed to be made on the next succeeding
      Business Day, (ii) on the next Business Day after timely delivery to an
      overnight courier and (iii) on the Business Day actually received if deposited
      in the U.S. mail (certified or registered mail, return receipt requested,
      postage prepaid), addressed as follows:

    

    
      	 	
              If
                to the Company:

            

    

    

    
      	 	
              Digital
                Angel Corporation

            

    

    
      	 	
              Suite
                201

            

    

    
      	 	
              1690
                South Congress

            

    

    
      	 	
              Delray
                Beach, Florida 33483

            

    

    
      	 	
              Attn:
                

            	
              Kevin
                McGrath

            

    

    
      	 	
              Tel:

            	
              (561)
                276-0477

            

    

    
      	 	
              Fax:
                

            	
              (561)
                805-8001

            

    

    

    
      	 	
              with
                a copy (which
                shall not constitute notice) to:

            

    

    

    
      	 	
              Winthrop
                & Weinstine, P.A.

            

    

    
      	 	
              Suite
                3500

            

    

    
      	 	
              225
                South 6th
                Street

            

    

    
      	 	
              Minneapolis,
                Minnesota 55402

            

    

    
      	 	
              Attn:

            	
              Philip
                T. Colton

            

    

    
      	 	
              Tel:

            	
              (612)
                604-6729

            

    

    
      	 	
              Fax:

            	
              (612)
                604-6929

            

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    and
      if to
      the Holder, to such address for the Holder as shall appear on the signature
      page
      of the Securities Purchase Agreement executed by the Holder, or as shall be
      designated by the Holder in writing to the other parties hereto in accordance
      this Section
      5(b).

    

    (c)   Amendments
      and Waivers.
      No
      amendment, modification or other change to, or waiver of any provision of,
      this
      Debenture or any other Debenture may be made unless such amendment, modification
      or change, or request for waiver, is (A) set forth in writing and is signed
      by
      the Company, (B) consented to in writing by the holders of at least sixty-six
      percent (66%) of the unpaid principal amount of the Debentures, and (C) applied
      to all of the Debentures. Upon the satisfaction of the conditions described
      in
      (A), (B) and (C) above, this Debenture shall be deemed to incorporate any
      amendment, modification, change or waiver effected thereby as of the effective
      date thereof, even if the Holder did not consent to such amendment,
      modification, change or waiver. Notwithstanding
      the foregoing, the limitation on beneficial ownership set forth in Section
      2(b)(iii)
      may not
      be amended without the consent of the holders of a majority of the shares of
      Common Stock then outstanding; provided,
      however,
      that
      such limitation may be waived by the Holder upon sixty (60) days’ prior written
      notice to the Company, and such waiver shall be valid and shall not require
      the
      consent of the Company or any other holder of Common Stock or
      Debentures.

    

    (d)   Transfer
      of Debenture.
      The
      Holder may sell, transfer or otherwise dispose of all or any part of this
      Debenture (including without limitation pursuant to a pledge) to any person or
      entity as long as such sale, transfer or disposition is the subject of an
      effective registration statement under the Securities Act of 1933, as amended,
      and applicable state securities laws, or is exempt from registration thereunder,
      and is otherwise made in accordance with the applicable provisions of the
      Securities Purchase Agreement. From and after the date of any such sale,
      transfer or disposition, the transferee hereof shall be deemed to be the holder
      of a Debenture in the principal amount acquired by such transferee, and upon
      notice the Company shall, as promptly as practicable, issue and deliver to
      such
      transferee a new Debenture identical in all respects to this Debenture, in
      the
      name of such transferee. The Company shall be entitled to treat the original
      Holder as the holder of this entire Debenture unless and until it receives
      written notice of the sale, transfer or disposition hereof.

    

    (e)   Lost
      or Stolen Debenture.
      Upon
      receipt by the Company of evidence of the loss, theft, destruction or mutilation
      of this Debenture, and (in the case of loss, theft or destruction) of indemnity
      or security reasonably satisfactory to the Company, and upon surrender and
      cancellation of the Debenture, if mutilated, the Company shall execute and
      deliver to the Holder a new Debenture identical in all respects to this
      Debenture.

     

    (f)        Governing
      Law.
      This
      Debenture shall be governed by and construed in accordance with the laws of
      the
      State of New York applicable
      to contracts made and to be performed entirely within the State of New
      York.

     

    (g)   Successors
      and Assigns.
      The
      terms and conditions of this Debenture
      shall
      inure to the benefit of and be binding upon the respective successors (whether
      by merger or otherwise) and permitted assigns of the Company and the Holder.
      The
      Company may not assign its rights or obligations under this Debenture
      except
      as specifically required or permitted pursuant to the terms
      hereof.

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    (h)   Usury.
      This
      Debenture is subject to the express condition that at no time shall the Company
      be obligated or required to pay interest hereunder at a rate which could subject
      the Holder to either civil or criminal liability as a result of being in excess
      of the maximum interest rate which the Company is permitted by applicable law
      to
      contract or agree to pay.  If by the terms of this Debenture, the Company
      is at any time required or obligated to pay interest hereunder at a rate in
      excess of such maximum rate, the rate of interest under this Debenture shall
      be
      deemed to be immediately reduced to such maximum rate and the interest payable
      shall be computed at such maximum rate and all prior interest payments in excess
      of such maximum rate shall be applied and shall be deemed to have been payments
      in reduction of the principal balance of this Debenture.  

    

    (i)      
           Cap
      Amount Limitation.
      Notwithstanding anything to the contrary in this Debenture, the aggregate number
      of shares of Common Stock that may be issued by the Company to the Holder
      pursuant to this Debenture shall be subject to the shareholder cap limitations
      set forth in Section 4.16 of the Securities Purchase Agreement.

     

    

    [Signature
      Page to Follow]

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Debenture to be signed in its
      name
      by its duly authorized officer on the date first above written.

    

    DIGITAL
      ANGEL CORPORATION

    

    

    
      	
              By:

            	
              /s/
                Kevin N. McGrath

            	 
	 	
              Name: 
                Kevin N. McGrath

            	 
	 	
              Title:   
                President and Chief Executive Officer

            	 

    

     

     

    -12-Exhibit 10.3

    
      

    

    Exhibit
      10.3

    

    THIS
      WARRANT (THIS “WARRANT”) AND
      THE
      SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
      OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE OR SOLD UNLESS
      A
      REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
      SHALL
      BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER
      THE
      SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION
      WITH SUCH OFFER OR SALE. THIS WARRANT AND THE SECURITIES ISSUABLE UPON
EXERCISE
      HEREOF
      (I) MAY BE PLEDGED OR HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN LOAN
      OR
      OTHER FINANCING SECURED BY SUCH SECURITIES OR (II) MAY BE TRANSFERRED OR
      ASSIGNED TO AN AFFILIATE OF THE HOLDER HEREOF WITHOUT THE NECESSITY OF AN
      OPINION OF COUNSEL OR THE CONSENT OF THE ISSUER HEREOF.

     

    WARRANT
      

     

    TO
      PURCHASE COMMON STOCK 

    

    OF

     

    DIGITAL
      ANGEL CORPORATION

     

     

    
      
        	
                Issue
                  Date: February 6, 2007

              	
                Warrant
                  No. 2007A

              

      

    

     

    THIS
      CERTIFIES that IMPERIUM
      MASTER
      FUND, LTD., or
      any
      permitted subsequent holder hereof (the “Holder”),
      has
      the right to purchase from DIGITAL ANGEL CORPORATION,
      a
      Delaware corporation (the
      “Company”),
      up to
      699,600 fully paid and nonassessable shares of the Company’s common stock, par
      value $0.005 per share (the “Common
      Stock”),
      subject to adjustment as provided herein, at a price per share equal to the
      Exercise Price (as defined below), at any time and from time to time beginning
      on the earlier of (i) March 2, 2007 (the “Listing
      Deadline Date”)
      and
      (ii) the date on which the Company obtains listing approval from the American
      Stock Exchange for the issuance of the Warrant Shares (the “Listing
      Date”)
      and
      ending at 5:00 p.m., New York City time (the “Expiration
      Time”),
      on
      the Expiration Date (as defined below) or, if such day is not a Business Day,
      on
      the next succeeding Business Day. As used herein, the term “Expiration
      Date”
means
      February 6, 2012; provided,
      however,
      that if
      the Company has not obtained listing approval from the American Stock Exchange
      for the issuance of the Warrant Shares by the Listing Deadline Date, then the
      “Expiration
      Date”
shall
      be extended by a number days equal to the number of days between the Listing
      Deadline Date and the Listing Date. 

    

    This
      Warrant is issued pursuant to a Securities Purchase Agreement, dated as of
      the
      date hereof (the “Securities
      Purchase Agreement”),
      between the Company and the investors named therein. Capitalized terms used
      herein and not otherwise defined shall have the respective meanings set forth
      in
      the Securities Purchase Agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	 	
              1.

            	
              EXERCISE.

            

    

    

    (a)    Right
      to Exercise; Exercise Price.
      The
      Holder shall have the right to exercise this Warrant as to all or any part
      of
      the shares of Common Stock covered hereby (the “Warrant
      Shares”).
      The
“Exercise
      Price”
for
      each Warrant Share purchased by the Holder upon the exercise of this Warrant
      shall be $2.973,
      subject
      to adjustment for the events specified in Section
      6
      of this
      Warrant. No issuances of Warrant Shares hereunder shall be made in violation
      of
      Article 9 of the Company’s certificate of incorporation unless and until the
      Stockholder Amendment Approval Date. 

    

    (b)    Exercise
      Notice.
      In
      order to exercise this Warrant, the Holder shall (i) send by facsimile
      transmission at any time prior to 5:00 p.m., New York City time, on the Business
      Day on which the Holder wishes to effect such exercise (the “Exercise
      Date”),
      to
      the Company an executed copy of the notice of exercise in the form attached
      hereto as Exhibit
      A
      (the
“Exercise
      Notice”)
      and
      (ii) in the case of a Cash Exercise (as defined below), deliver on the Exercise
      Date the Exercise Price to the Company by wire transfer of immediately available
      funds. The Holder shall promptly thereafter deliver the original Warrant to
      the
      Company for cancellation (and replacement with a new Warrant if exercised in
      part) pursuant to Section
      1(d).
      Subject
      to Section
      8(d),
      the
      Exercise Notice shall also state the name or names in which the Warrant Shares
      issuable on such exercise shall be issued if other than the Holder. In
      the
      case of a dispute as to the calculation of the Exercise Price or the number
      of
      Warrant Shares issuable hereunder (including, without limitation, the
      calculation of any adjustment pursuant to Section
      6),
      the
      Company shall promptly issue to the Holder the number of Warrant Shares that
      are
      not disputed, the Company and the Holder shall provide each other with their
      respective calculations, and the Company shall submit the disputed calculations
      to a certified public accounting firm of national recognition (other than the
      Company’s independent accountants) within two (2) Business Days following the
      later of the date on which the Holder delivers its calculations to the Company
      and the date on which the Exercise Notice is delivered to the Company. The
      Company shall use its best efforts to cause such accountant to calculate the
      Exercise Price and/or the number of Warrant Shares issuable hereunder and to
      notify the Company and the Holder of the results in writing no later than two
      (2) Business Days following the day on which such accountant received the
      disputed calculations (the “Dispute
      Procedure”).
      Such
      accountant’s calculation shall be deemed conclusive absent manifest error. The
      fees of any such accountant shall be borne by the party whose calculations
      were
      most at variance with those of such accountant.

    

    (c)    Holder
      of Record.
      The
      Holder shall, for all purposes, be deemed to have become the holder of record
      of
      the Warrant Shares specified in an Exercise Notice on the Exercise Date
      specified therein, irrespective of the date of delivery of such Warrant Shares.
      Except as specifically provided herein, nothing in this Warrant shall be
      construed as conferring upon the Holder any rights as a stockholder of the
      Company prior to the Exercise Date.

    

    (d)    Cancellation
      of Warrant.
      This
      Warrant shall be canceled upon its exercise and, if this Warrant is exercised
      in
      part, the Company shall, at the time that it delivers Warrant Shares to the
      Holder pursuant to such exercise as provided herein, issue a new warrant, and
      deliver to the Holder a certificate representing such new warrant, with terms
      identical in all respects to this Warrant (except that such new warrant shall
      be
      exercisable into the number of shares of Common Stock with respect to which
      this
      Warrant shall remain unexercised); provided,
      however,
      that
      the Holder shall be entitled to exercise all or any portion of such new warrant
      at any time following the time at which this Warrant is exercised, regardless
      of
      whether the Company has actually issued such new warrant or delivered to the
      Holder a certificate therefor.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
      	 	
              2.

            	
              DELIVERY
                OF WARRANT SHARES UPON EXERCISE.
                

            

    

    

    Upon
      receipt of an Exercise Notice and payment of the Exercise Price, if applicable,
      pursuant to Section
      1,
      the
      Company shall, (A) in the case of a Cash Exercise (as defined below) no later
      than the close of business on the later to occur of (i) the third (3rd) Business
      Day following the Exercise Date set forth in such Exercise Notice and (ii)
      the
      date on which the Company has received payment of the Exercise Price, (B) in
      the
      case of a Cashless Exercise (as defined below), no later than the close of
      business on the third (3rd) Business Day following the Exercise Date set forth
      in such Exercise Notice, and (C) with respect to Warrant Shares that are the
      subject of a Dispute Procedure, the close of business on the third (3rd)
      Business Day following the determination made pursuant to Section
      1(b)
      (each of
      the dates specified in the foregoing clauses
      (A),
      (B)
      or
(C)
      being
      referred to as a “Delivery
      Date”),
      issue
      and deliver or cause to be delivered to the Holder the number of Warrant Shares
      as shall be determined as provided herein. The Company shall use reasonable
      efforts to effect delivery of Warrant Shares to the Holder, as long as the
      Company’s designated transfer agent or co-transfer agent in the United States
      for the Common Stock (the “Transfer
      Agent”)
      participates in the Depository Trust Company (“DTC”)
      Fast
      Automated Securities Transfer program (“FAST”),
      by
      crediting the account of the Holder or its nominee at DTC (as specified in
      the
      applicable Exercise Notice) with the number of Warrant Shares required to be
      delivered, no later than the close of business on such Delivery Date. In the
      event that the Transfer Agent is not a participant in FAST, or if the Holder
      so
      specifies in an Exercise Notice or otherwise in writing on or before the
      Exercise Date, the Company shall use reasonable efforts to effect delivery
      of
      Warrant Shares by delivering to the Holder or its nominee physical certificates
      representing such Warrant Shares, no later than the close of business on such
      Delivery Date. If any exercise would create a fractional Warrant Share, such
      fractional Warrant Share shall be disregarded and the number of Warrant Shares
      issuable upon such exercise, in the aggregate, shall be the nearest whole number
      of Warrant Shares. Warrant Shares delivered to the Holder shall not contain
      any
      restrictive legend unless such legend is required pursuant to the terms of
      the
      Securities Purchase Agreement.

    

    
      	 	
              3.

            	
              FAILURE
                TO DELIVER WARRANT SHARES.
                

            

    

    

    (a)    In
      the
      event that the Company fails for any reason (other than as a result of the
      Holder’s failure, in the case of a Cash Exercise (as defined below), to pay the
      aggregate Exercise Price for the Warrant Shares being purchased) to deliver
      to
      the Holder the number of Warrant Shares specified in the applicable Exercise
      Notice (without any restrictive legend to the extent permitted by applicable
      law
      and the terms of the Securities Purchase Agreement) on or before the Delivery
      Date therefor, or fails to remove any restrictive legend from outstanding
      Warrant Shares at the request of the Holder in accordance with Section 2.5
      of
      the Securities Purchase Agreement on or before the fifth (5th) Business Day
      following such request (an “Exercise
      Default”),
      the
      Holder shall have the right to receive from the Company an amount equal to
      (i)
      (N/365) multiplied
      by
      (ii) the
      aggregate Exercise Price of the Warrant Shares which are the subject of such
      Exercise Default multiplied
      by
      (iii)
      the lower of eighteen percent (18%) and the maximum rate permitted by applicable
      law or by the applicable rules or regulations of any Governmental Agency (the
      “Default
      Interest Rate”),
      where
“N” equals the number of days elapsed between the original Delivery Date of such
      Warrant Shares (or from such fifth Business Day in the event of a failure to
      remove a legend from outstanding Warrant Shares) and the date on which such
      Exercise Default has been cured. In the event that shares of Common Stock are
      purchased by or on behalf of the Holder in order to
      make
      delivery on a sale effected in anticipation of receiving Warrant Shares upon
      an
      exercise, and there is an Exercise Default with respect to such exercise, the
      Holder shall have the right to receive from the Company, in addition to the
      foregoing amounts, (i) the aggregate amount paid by or on behalf of the Holder
      for such shares of Common Stock minus
      (ii) the
      aggregate amount of net proceeds, if any, received by the Holder from the sale
      of the Warrant Shares issued by the Company pursuant to such exercise after
      such
      shares are actually delivered to the Holder. Amounts
      payable under this Section
      3(a) shall
      be
      paid to the Holder in immediately available funds on or before the second (2nd)
      Business Day following written notice from the Holder to the
      Company.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (b)    In
      addition to its rights under Section
      3(a),
      the
      Holder shall have the right to pursue all other remedies available to it at
      law
      or in equity (including, without limitation, a decree of specific performance
      and/or injunctive relief).

     

    
      	 	
              4. 

            	
              EXERCISE
                LIMITATION.
                

            

    

    

    (a)    In
      no
      event shall the Holder be permitted to exercise this Warrant, or part thereof,
      if, upon such exercise, the number of shares of Common Stock beneficially owned
      by the Holder (other than shares which may be deemed beneficially owned except
      for being subject to a limitation on exercise or exercise analogous to the
      limitation contained in this Section
      4),
      would
      exceed 4.99% of the number of shares of Common Stock then issued and
      outstanding, it being the intent of the Company and the Holder that the Holder
      not be deemed at any time to have the power to vote or dispose of greater than
      4.99% of the number of shares of Common Stock issued and outstanding at any
      time. Nothing contained herein shall be deemed to restrict the right of the
      Holder to exercise this Warrant at such time as such exercise will not violate
      the provisions of this Section
      4.
      As
      used
      herein, beneficial ownership shall be determined in accordance with Section
      13(d) of the Exchange Act. To the extent that the limitation contained in this
      Section
      4
      applies
      (and without limiting any rights the Company may otherwise have), the submission
      of an Exercise Notice by the Holder shall be deemed to be the Holder’s
      representation that this Warrant is exercisable
      pursuant
      to the terms hereof,
      the
      Company may rely on the Holder’s representation that this Warrant
      is
      exercisable pursuant to the terms hereof,
      and the
      Company shall have no obligation whatsoever to verify or confirm the accuracy
      of
      such representation. The Company shall have no liability to any person if the
      Holder’s determination of whether this Warrant is exercisable pursuant to the
      terms hereof is incorrect. 

    

    (b)    Notwithstanding
      anything to the contrary in this Warrant, the aggregate number of shares of
      Common Stock that may be issued by the Company to the Holder pursuant to this
      Warrant shall be subject to the shareholder cap limitations set forth in Section
      4.16 of the Securities Purchase Agreement.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    
      	 	
              5.

            	
              PAYMENT
                OF THE EXERCISE PRICE; CASHLESS EXERCISE.
                

            

    

    

    The
      Holder may pay the Exercise Price in either of the following forms or, at the
      election of Holder, a combination thereof:

    

    (a)    through
      a
      cash exercise (a “Cash
      Exercise”)
      by
      delivering immediately available funds, or

    

    (b)    through
      a
      cashless exercise (a “Cashless
      Exercise”)
      but
      only if (i) an effective Registration Statement is not available for the resale
      of all of the Warrant Shares issuable hereunder at the time an Exercise Notice
      is delivered to the Company, or (ii) if the Company in its discretion otherwise
      consents in writing. The Holder shall effect a Cashless Exercise by surrendering
      this Warrant to the Company and noting on the Exercise Notice that the Holder
      wishes to effect a Cashless Exercise, upon which the Company shall issue to
      the
      Holder a number of Warrant Shares determined as follows:

    

    
      	 	
              X
                =
                Y x (A-B)/A

            

    

    

    
      	
              where:

            	
              X
                =
                the number of Warrant Shares to be issued to the
                Holder;

            

    

    

    
      	 	
              Y
                =
                the number of Warrant Shares with respect to which this Warrant is
                being
                exercised;

            

    

    

    
      	 	
              A
                =
                the VWAP as of the Exercise Date (or if the Exercise Date is not
                a Trading
                Day, then the VWAP as of the Trading Day immediately preceding such
                Exercise Date); and

            

    

    

    
      	 	
              B
                =
                the Exercise Price.

            

    

    

    It
      is
      intended and acknowledged that the Warrant Shares issued in a Cashless Exercise
      transaction shall be deemed to have been acquired by the Holder, and the holding
      period for the Warrant Shares required by Rule 144 shall be deemed, subject
      to
      applicable law, to have been commenced, on the Issue Date. 

    

    
      	 	
              6.

            	
              ANTI-DILUTION
                ADJUSTMENTS; DISTRIBUTIONS; OTHER EVENTS.
                

            

    

    

    The
      Exercise Price and the number of Warrant Shares issuable hereunder shall be
      subject to adjustment from time to time as provided in this Section
      6.
      

    

    (a)    Stock
      Splits, Stock Interests, Etc.
      If, at
      any time on or after the Issue Date, the number of outstanding shares of Common
      Stock is increased by a stock split, stock dividend, reclassification or other
      similar event, the Exercise Price shall be proportionately reduced, or if the
      number of outstanding shares of Common Stock is decreased by a reverse stock
      split, combination, reclassification or other similar event, the Exercise Price
      shall be proportionately increased. In such event, the Company shall notify
      the
      Company’s transfer agent of such change on or before the effective date
      thereof.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (b)    Major
      Transactions.
      In the
      event of a merger, consolidation, business combination, tender offer, exchange
      of shares, recapitalization, reorganization, redemption or other similar event,
      as a result of which shares of Common Stock shall be changed into the same
      or a
      different number of shares of the same or another class or classes of stock
      or
      securities or other assets of the Company or another entity or the Company
      shall
      sell all or substantially all of its assets (each of the foregoing being a
      “Major
      Transaction”),
      the
      Company will give the Holder at least ten (10) Trading Days’ written notice
      prior to the earlier of (i) the closing or effectiveness of such Major
      Transaction and (ii) the record date for the receipt of such shares of stock
      or
      securities or other assets, and the Holder shall be permitted to either (x)
      require the Company to repurchase this Warrant for cash in an amount equal
      to
      the value of this Warrant calculated pursuant to the Black-Scholes pricing
      model
      or (y) exercise this Warrant in whole or in part at any time prior to, on or
      after the record date for the receipt of such consideration and shall be
      entitled to receive, in lieu of the shares of Common Stock otherwise issuable
      upon exercise of this Warrant, such shares of stock, securities and/or other
      assets as would have been issued or payable upon such Major Transaction with
      respect to or in exchange for the number of shares of Common Stock which would
      have been issuable upon exercise of this Warrant had such Major Transaction
      not
      taken place (without giving effect to any limitations on such exercise contained
      in this Warrant or the Securities Purchase Agreement). If and to the extent
      that
      the Holder retains this Warrant or any portion hereof following such record
      date, the Company will cause the surviving or, in the event of a sale of assets,
      purchasing entity, as a condition precedent to such Major Transaction, to assume
      by written instrument (in form and substance reasonably satisfactory to the
      Holder) the obligations of the Company with respect to this Warrant, with such
      adjustments to the Exercise Price and the securities covered hereby as may
      be
      necessary in order to preserve the economic benefits of this Warrant to the
      Holder.

     

    (c)    Distributions.
      If, at
      any time after the Issue Date, the Company declares or makes any distribution
      of
      cash or any other assets (or rights to acquire such assets) to holders of Common
      Stock, including without limitation any dividend or distribution to the
      Company’s stockholders in shares (or rights to acquire shares) of capital stock
      of a subsidiary) (a “Distribution”),
      the
      Company shall deliver written notice of such Distribution (a “Distribution
      Notice”)
      to the
      Holder at least ten (10) Trading Days prior to the earlier to occur of (i)
      the
      record date for determining stockholders entitled to such Distribution (the
      “Record
      Date”)
      and
      (ii) the date on which such Distribution is made (the “Distribution
      Date”)
      (the
      earlier of such dates being referred to as the “Determination
      Date”).
      Upon
      receipt of the Distribution Notice, the Holder shall promptly (but in no event
      later than three (3) Business Days) notify the Company whether it has elected
      (A) to receive the same amount and type of assets (including, without
      limitation, cash) being distributed as though the Holder were, on the
      Determination Date, a holder of a number of shares of Common Stock into which
      this Warrant is exercisable as of such Determination Date (such number of shares
      to be determined without giving effect to any limitations on such exercise)
      or
      (B) upon any exercise of this Warrant on or after the Distribution Date, to
      reduce the Exercise Price in effect on the Business Day immediately preceding
      the Record Date by an amount equal to the fair market value of the assets to
      be
      distributed divided
      by
      the
      number of shares of Common Stock as to which such Distribution is to be made,
      such fair market value to be reasonably determined in good faith by the
      independent members of the Company’s Board of Directors. Upon receipt of such
      election notice from the Holder, the Company shall timely effectuate the
      transaction or adjustment contemplated in the foregoing clause
      (A) or
      (B),
      as
      applicable. 
      If the
      Holder does not notify the Company of its election pursuant to the preceding
      sentence on or prior to the Determination Date, the Holder shall be deemed
      to
      have elected clause
      (A)
      of the
      preceding sentence.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (d)    Dilutive
      Issuances.

     

    (i)    Adjustment
      Upon Dilutive Issuance.
      If, at
      any time after the Issue Date, the Company issues or sells, or in accordance
      with Section
      6(d)(ii) is
      deemed
      to have issued or sold, any shares of Common Stock for no consideration or
      for a
      consideration per share less than the Exercise Price on the date of such
      issuance or sale (or deemed issuance or sale) (a “Dilutive
      Issuance”),
      then
      the Exercise Price shall be adjusted so as to equal the consideration received
      or receivable by the Company (on a per share basis) for the additional shares
      of
      Common Stock so issued, sold or deemed issued or sold in such Dilutive Issuance
      (which, in the case of a deemed issuance or sale, shall be calculated in
      accordance with Section
      6(d)(ii)).
      Notwithstanding the foregoing, no adjustment shall be made pursuant to this
      Section
      6(d)(i)
      if such
      adjustment would result in an increase in the Exercise Price.

     

    (ii)   Effect
      On Exercise Price Of Certain Events.
      For
      purposes of determining the adjusted Exercise Price under Section
      6(d)(i),
      the
      following will be applicable:

     

    (A)    Issuance
      Of Options.
      If the
      Company issues or sells any rights, warrants or options to subscribe for,
      purchase or receive Common Stock or Convertible Securities (any of the
      foregoing, “Options”),
      whether or not immediately exercisable, and the price per share for which Common
      Stock is issuable upon the exercise of such Options (and the price of any
      conversion of Convertible Securities (as defined below), if applicable) is
      less
      than the Exercise Price in effect on the date of issuance or sale of such
      Options, then the maximum total number of shares of Common Stock issuable upon
      the exercise of all such Options (assuming full conversion, exercise or exchange
      of Convertible Securities (as defined below), if applicable) shall, as of the
      date of the issuance or sale of such Options, be deemed to be outstanding and
      to
      have been issued and sold by the Company for such price per share. For purposes
      of the preceding sentence, the “price per share for which Common Stock is
      issuable upon the exercise of such Options” shall be determined by dividing
      (x) the
      total amount, if any, received or receivable by the Company as consideration
      for
      the issuance or sale of all such Options, plus
      the
      minimum aggregate amount of additional consideration, if any, payable to the
      Company upon the exercise of all such Options, plus,
      in the
      case of Convertible Securities (as defined below) issuable upon the exercise
      of
      such Options, the minimum aggregate amount of additional consideration payable
      upon the conversion, exercise or exchange thereof (determined in accordance
      with
      the calculation method set forth in Section
      6(d)(ii)(B))
      at the
      time such Convertible Securities first become convertible, exercisable or
      exchangeable, by (y) the maximum total number of shares of Common Stock issuable
      upon the exercise of all such Options (assuming full conversion, exercise or
      exchange of Convertible Securities, if applicable). No further adjustment to
      the
      Exercise Price shall be made upon the actual issuance of such Common Stock
      upon
      the exercise of such Options or upon the conversion, exercise or exchange of
      Convertible Securities (as defined below) issuable upon exercise of such
      Options.
      To the
      extent that shares of Common Stock or Convertible Securities (as defined below)
      are not delivered pursuant to such Options, upon the expiration or termination
      of such Options, the Exercise Price shall be readjusted to the Exercise Price
      that would then be in effect had the adjustments made upon the issuance of
      such
      Options been made on the basis of delivery of only the number of shares of
      Common Stock actually delivered.

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    (B)    Issuance
      Of Convertible Securities.
      If the
      Company issues or sells any stock
      or
      securities (other than Options) of the Company convertible into or exercisable
      or exchangeable for Common Stock (any of the foregoing, “Convertible
      Securities”),
      whether or not immediately convertible, exercisable or exchangeable, and the
      price per share for which Common Stock is issuable upon such conversion,
      exercise or exchange is less than the Exercise Price in effect on the date
      of
      issuance or sale of such Convertible Securities, then the maximum total number
      of shares of Common Stock issuable upon the conversion, exercise or exchange
      of
      all such Convertible Securities shall, as of the date of the issuance or sale
      of
      such Convertible Securities, be deemed to be outstanding and to have been issued
      and sold by the Company for such price per share. If the Convertible Securities
      so issued or sold do not have a fluctuating conversion or exercise price or
      exchange ratio, then for the purposes of the immediately preceding sentence,
      the
“price per share for which Common Stock is issuable upon such conversion,
      exercise or exchange” shall be determined by dividing
      (A) the
      total amount, if any, received or receivable by the Company as consideration
      for
      the issuance or sale of all such Convertible Securities, plus
      the
      minimum aggregate amount of additional consideration, if any, payable to the
      Company upon the conversion, exercise or exchange thereof (determined in
      accordance with the calculation method set forth in this Section
      6(d)(ii)(B))
      at the
      time such Convertible Securities first become convertible, exercisable or
      exchangeable, by (B) the maximum total number of shares of Common Stock issuable
      upon the exercise, conversion or exchange of all such Convertible Securities.
      If
      the Convertible Securities so issued or sold have a fluctuating conversion
      or
      exercise price or exchange ratio (a “Variable
      Rate Convertible Security”),
      then
      for purposes of the first sentence of this Section
      6(d)(ii)(B),
      the
“price per share for which Common Stock is issuable upon such conversion,
      exercise or exchange” shall be deemed to be the lowest price per share which
      would be applicable (assuming all holding period and other conditions to any
      discounts contained in such Variable Rate Convertible Security have been
      satisfied) if the conversion price of such Variable Rate Convertible Security
      on
      the date of issuance or sale thereof were equal to the actual conversion price
      on such date (or such higher minimum conversion price if such Variable Rate
      Convertible Security is subject to a minimum conversion price) (the
“Assumed
      Variable Market Price”),
      and,
      further, if the conversion price of such Variable Rate Convertible Security
      at
      any time or times thereafter is less than or equal to the Assumed Variable
      Market Price last used for making any adjustment under this Section
      6(d)
      with
      respect to any Variable Rate Convertible Security, the Exercise Price in effect
      at such time shall be readjusted to equal the Exercise Price which would have
      resulted if the Assumed Variable Market Price at the time of issuance of the
      Variable Rate Convertible Security had been equal to the actual conversion
      price
      of such Variable Rate Convertible Security existing at the time of the
      adjustment required by this sentence; provided,
      however,
      that if
      the conversion or exercise price or exchange ratio of a Convertible Security
      may
      fluctuate solely as a result of provisions designed to protect against dilution,
      such Convertible Security shall not be deemed to be a Variable Rate Convertible
      Security. No further adjustment to the Exercise Price shall be made upon the
      actual issuance of such Common Stock upon conversion, exercise or exchange
      of
      such Convertible Securities.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (C)    Change
      In Option Price Or Conversion Rate.
      If
      there is a change at any time (including, without limitation, a change with
      respect to any Options or Convertible Securities outstanding as of the Issue
      Date) in (x) the amount of additional consideration payable to the Company
      upon
      the exercise of any Options; (y) the amount of additional consideration, if
      any,
      payable to the Company upon the conversion, exercise or exchange of any
      Convertible Securities; or (z) the rate at which any Convertible Securities
      are
      convertible into or exercisable or exchangeable for Common Stock (in each such
      case, other than under or by reason of provisions designed to protect against
      dilution), the Exercise Price in effect at the time of such change shall be
      readjusted to the Exercise Price which would have been in effect at such time
      had such Options or Convertible Securities still outstanding provided for such
      changed additional consideration or changed conversion, exercise or exchange
      rate, as the case may be, at the time initially issued or sold.

     

    (D)   Calculation
      Of Consideration Received.
      If any
      Common Stock, Options or Convertible Securities are issued or sold for cash,
      the
      consideration received therefor will be the amount received by the Company
      therefor. In case any Common Stock, Options or Convertible Securities are issued
      or sold for a consideration part or all of which shall be other than cash,
      the
      amount of the consideration other than cash received by the Company (including
      the net present value of the consideration expected by the Company for the
      provided or purchased services) shall be the fair market value of such
      consideration. In case any Common Stock, Options or Convertible Securities
      are
      issued in connection with any merger or consolidation in which the Company
      is
      the surviving corporation, the amount of consideration therefor will be deemed
      to be the fair market value of such portion of the net assets and business
      of
      the non-surviving corporation as is attributable to such Common Stock, Options
      or Convertible Securities, as the case may be. The independent members of the
      Company’s Board of Directors shall calculate reasonably and in good faith, using
      standard commercial valuation methods appropriate for valuing such assets,
      the
      fair market value of any consideration.

    

    (iii)   Exceptions
      To Adjustment Of Exercise Price.
      Notwithstanding the foregoing, no adjustment to the Exercise Price shall be
      made
      pursuant to this Section
      6(d)
      upon the
      issuance of any Excluded Securities. 

    

    (f)    Change
      of Control; Events of Default.
      If, at
      any time after the Issue Date, a Change of Control (as defined in the Notes)
      or
      an Event of Default (as defined in the Notes) occurs, then upon each such
      occurrence (and, in the case of an Event of Default that is continuing, on
      the
      last day of each calendar month during which such Event of Default remains
      uncured), the Exercise Price shall be adjusted so as to equal the lowest of
      the
      following (i) the average
      of the daily VWAP for each of the ten (10) consecutive Trading Days occurring
      immediately prior to (but not including) the date on which such Event of Default
      or Change of Control occurred, (ii) the
      average
      of the daily VWAP for each of the ten (10) consecutive Trading Days occurring
      on
      and immediately after the date on which such Event of Default or Change of
      Control occurred, and (iii) the Exercise Price in effect on the date on which
      such Event of Default or Change of Control occurred.
      Notwithstanding the foregoing, no adjustment shall be made pursuant to this
      Section
      6(f)
      if such
      adjustment would result in an increase in the Exercise Price.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (g)    Notice
      Of Adjustments.
      Upon
      the occurrence of each adjustment or readjustment of the Exercise Price pursuant
      to this Section
      6
      resulting in a change in the Exercise Price by more than one percent (1%),
      or
      any change in the number or type of stock, securities and/or other property
      issuable upon exercise of this Warrant, the Company, at its expense, shall
      promptly compute such adjustment, readjustment or change and prepare and furnish
      to the Holder a certificate setting forth such adjustment, readjustment or
      change and showing in detail the facts upon which such adjustment, readjustment
      or change is based. The Company shall, upon the written request at any time
      of
      the Holder, furnish to the Holder a like certificate setting forth (x) such
      adjustment, readjustment or change, (y) the Exercise Price at the time in effect
      and (z) the number of shares of Common Stock and the amount, if any, of other
      securities or property which at the time would be received upon exercise of
      this
      Warrant.

     

    (h)    Adjustments;
      Additional Shares, Securities or Assets.
      In the
      event that at any time, as a result of an adjustment made pursuant to this
      Section
      6,
      the
      Holder of this Warrant shall, upon exercise of this Warrant, become entitled
      to
      receive securities or assets (other than Common Stock) then, wherever
      appropriate, all references herein to shares of Common Stock shall be deemed
      to
      refer to and include such shares and/or other securities or assets; and
      thereafter the number of such shares and/or other securities or assets shall
      be
      subject to adjustment from time to time in a manner and upon terms as nearly
      equivalent as practicable to the provisions of this Section
      6.
      Any
      adjustment made herein that results in a decrease in the Exercise Price shall
      also effect a proportional increase in the number of shares of Common Stock
      into
      which this Warrant is exercisable.

     

    
      	 	
              7.

            	
              MISCELLANEOUS.

            

    

     

    (a)    Failure
      to Exercise Rights not Waiver.
      No
      failure or delay on the part of the Holder in the exercise of any power, right
      or privilege hereunder shall operate as a waiver thereof, nor shall any single
      or partial exercise of any such power, right or privilege preclude any other
      or
      further exercise thereof. All rights and remedies of the Holder hereunder are
      cumulative and not exclusive of any rights or remedies otherwise available.
      In
      the event that the Company breaches any of its obligations hereunder to issue
      Warrant Shares or pay any amounts as and when due, the Company shall bear all
      costs incurred by the Holder in collecting such amount, including without
      limitation reasonable legal fees and expenses. 

     

    (b)    Notices.
      Any
      notice, demand or request required or permitted to be given by the Company
      or
      the Holder pursuant to the terms of this Warrant shall be in writing and shall
      be deemed delivered (i) when delivered personally or by verifiable facsimile
      transmission, unless such delivery is made on a day that is not a Business
      Day,
      in which case such delivery will be deemed to be made on the next succeeding
      Business Day, (ii) on the next Business Day after timely delivery to an
      overnight courier and (iii) on the Business Day actually received if deposited
      in the U.S. mail (certified or registered mail, return receipt requested,
      postage prepaid), addressed as follows: 

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    
      	 	
              If
                to the Company:

            

    

    

    
      	 	
              Digital
                Angel Corporation

            

    

    
      	 	
              Suite
                201

            

    

    
      	 	
              1690
                South Congress

            

    

    
      	 	
              Delray
                Beach, Florida 33483

            

    

    
      	 	
              Attn:
                

            	
              Kevin
                McGrath

            

    

    
      	 	
              Tel:

            	
              (561)
                276-0477

            

    

    
      	 	
              Fax:
                

            	
              (561)
                805-8001

            

    

    

    
      	 	
              with
                a copy (which
                shall not constitute notice) to:

            

    

    

    
      	 	
              Winthrop
                & Weinstine, P.A.

            

    

    
      	 	
              Suite
                3500

            

    

    
      	 	
              225
                South 6th
                Street

            

    

    
      	 	
              Minneapolis,
                Minnesota 55402

            

    

    
      	 	
              Attn:

            	
              Philip
                T. Colton

            

    

    
      	 	
              Tel:

            	
              (612)
                604-6729

            

    

    
      	 	
              Fax:

            	
              (612)
                604-6929

            

    

    

    and
      if to
      the Holder, to such address for such party as shall appear on the signature
      page
      of the Securities Purchase Agreement executed by such party, or as shall be
      designated by such party in writing to the other parties hereto in accordance
      this Section
      7(b).

    

    (c)    Amendments
      and Waivers.
      No
      amendment, modification or other change to, or waiver of any provision of,
      this
      Warrant or any other Warrant may be made unless such amendment, modification
      or
      change, or request for waiver, is (A) set forth in writing and is signed by
      the
      Company, (B) consented to in writing by the holders of at least sixty-six
      percent (66%) of the Warrant Shares underlying the Warrants then outstanding,
      and (C) applied to all of the Warrants. Upon the satisfaction of the conditions
      described in (A), (B) and (C) above, this Warrant shall be deemed to incorporate
      the amendment, modification, change or waiver effected thereby as of the
      effective date thereof, even if the Holder did not consent to such amendment,
      modification, change or waiver.
      Notwithstanding the foregoing, the limitation on beneficial ownership set forth
      in Section
      4
      may not
      be amended without the consent of the holders of a majority of the shares of
      Common Stock then outstanding; provided,
      however,
      that
      such limitation may be waived by the Holder upon sixty (60) days’ prior written
      notice to the Company, and such waiver shall be valid and shall not require
      the
      consent of the Company or any other holder of Common Stock or
      Warrants.

     

    (d)    Transfer
      of Warrant.
      The
      Holder may sell, transfer or otherwise dispose of all or any part of this
      Warrant (including without limitation pursuant to a pledge) to any person or
      entity as long as such sale, transfer or disposition is the subject of an
      effective registration statement under the Securities Act of 1933, as amended,
      and applicable state securities laws, or is exempt from registration thereunder,
      and is otherwise made in accordance with the applicable law and applicable
      provisions of the Securities Purchase Agreement. From and after the date of
      any
      such sale, transfer or disposition, the transferee hereof shall be deemed to
      be
      the holder of the portion of this Warrant acquired by such transferee, and
      the
      Company shall upon notice, as promptly as practicable, issue and deliver to
      such
      transferee a new Warrant identical in all respects to this Warrant, in the
      name
      of such transferee. The Company shall be entitled to treat the original Holder
      as the holder of this entire Warrant unless and until it receives written notice
      of the sale, transfer or disposition hereof.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (e)    Lost
      or Stolen Warrant.
      Upon
      receipt by the Company of evidence of the loss, theft, destruction or mutilation
      of this Warrant, and (in the case of loss, theft or destruction) of indemnity
      or
      security reasonably satisfactory to the Company, and upon surrender and
      cancellation of this Warrant, if mutilated, the Company shall execute and
      deliver to the Holder a new Warrant identical in all respects to this
      Warrant.

     

    (f)    Governing
      Law.
      This
      Warrant shall be governed by and construed in accordance with the laws of the
      State of New York applicable
      to contracts made and to be performed entirely within the State of New
      York.

     

    (g)    Successors
      and Assigns.
      The
      terms and conditions of this Warrant shall inure to the benefit of and be
      binding upon the respective successors (whether by merger or otherwise) and
      permitted assigns of the Company and the Holder. The Company may not assign
      its
      rights or obligations under this Warrant except as specifically required or
      permitted pursuant to the terms hereof.

      

    

    [Signature
      Page to Follow]

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has duly executed and delivered this Warrant as
      of
      the Issue Date.

    

    
      	 	
              DIGITAL
                ANGEL CORPORATION

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Kevin N. McGrath

            	 
	 	 	
              Name:
                Kevin N. McGrath

            	 
	 	 	
              Title:  
                President and Chief Executive Officer

            	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A to WARRANT

    

    EXERCISE
      NOTICE

     

    The
      undersigned Holder hereby irrevocably exercises the right to purchase
 
      of the
      shares of Common Stock (“Warrant
      Shares”)
      of
      DIGITAL ANGEL CORPORATION evidenced
      by the attached Warrant (the “Warrant”).
      Capitalized terms used herein and not otherwise defined shall have the
      respective meanings set forth in the Warrant.

    

    1.     Form
      of
      Exercise Price. The Holder intends that payment of the Exercise Price shall
      be
      made as:

    

    ______
      a
Cash
      Exercise
      with
      respect to _________________ Warrant Shares; and/or 

    

    ______
      a
Cashless
      Exercise
      with
      respect to _________________ Warrant Shares, as permitted by Section 5(b) of
      the
      attached Warrant.

     

    2.    Payment
      of Exercise Price. In the event that the Holder has elected a Cash Exercise
      with
      respect to some or all of the Warrant Shares to be issued pursuant hereto,
      the
      Holder shall pay the sum of $________________ to the Company in accordance
      with
      the terms of the Warrant.

    
 

    
      	
              Date:

            	
                
                

            	 

    

    

    

    
      	
                
                

            	 
	
              Name
                of Registered Holder

            	 

    

    

    
      	
              By:

            	
                
                

            	 
	 	
              Name:

            	 
	 	
              Title:

            	 

    

     

    

    Holder
      Requests Delivery to be made:
      (check
      one)

    

    
      	
              
                o

              

            	
              By
                Delivery of Physical Certificates to the Above
                Address

            

    

    

    
      	
              o

            	
              Through
                Depository Trust Corporation

            

    

    
      	 	
              (DWAC
                to _____________ DTC #
                __________________)

            

    

    
      	 	
              (FBO
                ___________________________)

            

    

    
      	 	
              (Account
                # _______________________)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00117-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00117-of-00352.parquet"}]]