Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.18

STOCK PLEDGE AGREEMENT

This Stock Pledge Agreement (this “Agreement”), dated as of August 31, 2007, among
Kallina Corporation (the “Pledgee”), Digital Angel Corporation, a Delaware corporation (the
“Company”), and each of the other undersigned parties (other than the Pledgee) (the Company
and each such other undersigned party, a “Pledgor” and collectively, the
“Pledgors”).

BACKGROUND

The Company and certain subsidiaries of the Company have entered into a Security Agreement
dated as of the date hereof (as amended, modified, restated or supplemented from time to time, the
“Security Agreement”), pursuant to which the Pledgee provides or will provide certain
financial accommodations to the Company and certain subsidiaries of the Company.

In order to induce the Pledgee to provide or continue to provide the financial accommodations
described in the Security Agreement, each Pledgor has agreed to pledge and grant a security
interest in the collateral described herein to the Pledgee on the terms and conditions set forth
herein.

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration
the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1. Defined Terms. All capitalized terms used herein which are not defined shall have
the meanings given to them in the Security Agreement.

2. Pledge and Grant of Security Interest. To secure the full and punctual payment
and performance of (the following clauses (a) and (b), collectively, the “Obligations”)
(a) the obligations under the Security Agreement and the Ancillary Agreements (other than the
Registration Rights Agreement or Warrant) referred to in the Security Agreement (the Security
Agreement and the Ancillary Agreements, as each may be amended, restated, modified and/or
supplemented from time to time, collectively, the “Documents”) and (b) all other
obligations and liabilities of each Pledgor to the Pledgee whether now existing or hereafter
arising, direct or indirect, liquidated or unliquidated, absolute or contingent, due or not due
and whether under, pursuant to or evidenced by a note, agreement, guaranty, instrument or
otherwise (in each case, irrespective of the genuineness, validity, regularity or enforceability
of such Obligations, or of any instrument evidencing any of the Obligations or of any collateral
therefor or of the existence or extent of such collateral, and irrespective of the allowability,
allowance or disallowance of any or all of such in any case commenced by or against any Pledgor
under Title 11, United States Code, including, without limitation, obligations of each Pledgor for
post-petition interest, fees, costs and charges that would have accrued or been added to the
Obligations but for the commencement of such case), each Pledgor hereby pledges, assigns,
hypothecates, transfers and grants a security interest to Pledgee in all of the following (the
“Collateral”):

 

 

 

(a) the shares of stock or other equity interests set forth on Schedule A annexed
hereto and expressly made a part hereof (together with any additional shares of stock or other
equity interests acquired by any Pledgor, the “Pledged Stock”), the certificates
representing the Pledged Stock and all dividends, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Stock;

(b) all additional shares of stock or other equity interests of any issuer (each, an
“Issuer”) of the Pledged Stock from time to time acquired by any Pledgor in any manner,
including, without limitation, stock dividends or a distribution in connection with any increase or
reduction of capital, reclassification, merger, consolidation, sale of assets, combination of
shares, stock split, spin-off or split-off (which shares shall be deemed to be part of the
Collateral), and the certificates representing such additional shares, and all dividends, cash,
instruments and other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares; and

(c) all options and rights, whether as an addition to, in substitution of or in exchange for
any shares of any Pledged Stock and all dividends, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or in exchange for
any or all such options and rights.

3. Delivery of Collateral. All certificates representing or evidencing the Pledged
Stock shall be delivered to and held by or on behalf of Pledgee pursuant hereto and shall be
accompanied by duly executed instruments of transfer or assignments in blank, all in form and
substance satisfactory to Pledgee. Each Pledgor hereby authorizes the Issuer upon demand by the
Pledgee to deliver any certificates, instruments or other distributions issued in connection with
the Collateral directly to the Pledgee, in each case to be held by the Pledgee, subject to the
terms hereof. Upon the occurrence and during the continuance of an Event of Default (as defined
below), the Pledgee shall have the right, during such time in its discretion and without notice to
the Pledgor, to transfer to or to register in the name of the Pledgee or any of its nominees any
or all of the Pledged Stock. In addition, the Pledgee shall have the right at such time to
exchange certificates or instruments representing or evidencing Pledged Stock for certificates or
instruments of smaller or larger denominations.

4. Representations and Warranties of each Pledgor. Each Pledgor jointly and
severally represents and warrants to the Pledgee that except as set forth in the Companies’
Disclosure Schedules attached to the Security Agreement or in the Exchange Act Filings with
respect to those representations and warranties set forth below that have parallel representations
and warranties set forth in the Security Agreement which permit exceptions as set forth in the
Companies’ Disclosure Schedules and/or the Exchange Act Filings:

(a) the execution, delivery and performance by each Pledgor of this Agreement and the pledge
of the Collateral hereunder do not and will not result in any violation of any agreement,
indenture, instrument, license, judgment, decree, order, law, statute, ordinance or other
governmental rule or regulation applicable to any Pledgor;

 

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(b) this Agreement constitutes the legal, valid, and binding obligation of each Pledgor
enforceable against each Pledgor in accordance with its terms, except

i. as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors’ rights; and

ii. general principles of equity that restrict the availability of equitable or legal
remedies.

(c) (i) all Pledged Stock owned by each Pledgor is set forth on Schedule A hereto and
(ii) each Pledgor is the direct and beneficial owner of each share of the Pledged Stock;

(d) all of the shares of the Pledged Stock have been duly authorized, validly issued and are
fully paid and nonassessable;

(e) no consent or approval of any person, corporation, governmental body, regulatory authority
or other entity, is or will be necessary for (i) the execution, delivery and performance of this
Agreement, (ii) the exercise by the Pledgee of any rights with respect to the Collateral or (iii)
the pledge and assignment of, and the grant of a security interest in, the Collateral hereunder;

(f) there are no pending or, to each Pledgor’s knowledge, threatened actions or proceedings
before any court, judicial body, administrative agency or arbitrator which would have, or could
reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect
on the Collateral;

(g) each Pledgor has the requisite power and authority to enter into this Agreement and to
pledge and assign the Collateral to the Pledgee in accordance with the terms of this Agreement;

(h) each Pledgor owns each item of the Collateral and, except for the pledge and security
interest granted to Pledgee hereunder, the Collateral shall be, immediately following the closing
of the transactions contemplated by the Documents, free and clear of any other security interest,
mortgage, pledge, claim, lien, charge, hypothecation, assignment, offset or encumbrance whatsoever
(collectively, “Liens”), , other than:

i. those resulting from taxes which have not yet become delinquent;

ii. minor liens and encumbrances which do not materially detract from the value of the
property subject thereto or materially impair the operations of the Company or any of its
Subsidiaries, so long as in each such case, such liens and encumbrances have no effect on the lien
priority of the Pledgee in such property; and

iii. those that have otherwise arisen in the ordinary course of business, so long as they have
no effect on the lien priority of the Pledgee therein;

 

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(i) there are no restrictions on transfer of the Pledged Stock contained in the certificate of
incorporation or by-laws (or equivalent organizational documents) of the Issuer or otherwise which
have not otherwise been enforceably and legally waived by the necessary parties;

(j) none of the Pledged Stock has been issued or transferred in violation of the securities
registration, securities disclosure or similar laws of any jurisdiction to which such issuance or
transfer may be subject;

(k) the pledge and assignment of the Collateral and the grant of a security interest under
this Agreement vest in the Pledgee all rights of each Pledgor in the Collateral as contemplated by
this Agreement; and

(l) The Pledged Stock constitutes one hundred percent (100%) of the issued and outstanding
shares of capital stock of each Issuer.

5. Covenants. Each Pledgor jointly and severally covenants that, until the
Obligations shall be indefeasibly satisfied in full:

(a) No Pledgor will sell, assign, transfer, convey, or otherwise dispose of its rights in or
to the Collateral or any interest therein; nor will any Pledgor create, incur or permit to exist
any Lien whatsoever with respect to any of the Collateral or the proceeds thereof other than that
created hereby.

(b) Each Pledgor will, at its expense, defend Pledgee’s right, title and security interest in
and to the Collateral against the claims of any other party.

(c) Each Pledgor shall at any time, and from time to time, upon the written request of
Pledgee, execute and deliver such further documents and do such further acts and things as Pledgee
may reasonably request in order to effectuate the purposes of this Agreement including, but without
limitation, delivering to Pledgee, upon the occurrence of an Event of Default, irrevocable proxies
in respect of the Collateral in form satisfactory to Pledgee. Until receipt thereof, upon an Event
of Default that has occurred and is continuing beyond any applicable grace period, this Agreement
shall constitute Pledgor’s proxy to Pledgee or its nominee to vote all shares of Collateral then
registered in each Pledgor’s name.

(d) No Pledgor will consent to or approve the issuance of (i) any additional shares of any
class of capital stock or other equity interests of the Issuer; or (ii) any securities convertible
either voluntarily by the holder thereof or automatically upon the occurrence or nonoccurrence of
any event or condition into, or any securities exchangeable for, any such shares, unless, in either
case, such shares are pledged as Collateral pursuant to this Agreement.

(e) Each Pledgor agrees to execute and deliver to each Issuer that is a limited liability
company or a limited partnership a control acknowledgment (“Control Acknowledgement”) substantially
in the form of Exhibit A hereto. Each Pledgor shall cause each such Issuer to acknowledge in
writing its receipt and acceptance thereof. Such Control
Acknowledgement shall instruct such Issuer to follow instructions from Pledgee without any
Pledgor’s consultation or consent.

 

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6. Voting Rights and Dividends. So long as no Event of Default occurs and remains
continuing:

(a) i. Each Pledgor shall be entitled to exercise any and all voting and other consensual
rights pertaining to the Collateral, or any part thereof, for any purpose not inconsistent with the
terms of this Agreement; provided, however, that such Pledgor shall not exercise,
or shall refrain from exercising, any such right if it would result in an Event of Default.

ii. Any and all dividends or distributions declared in respect of the Collateral shall be
applied toward payment of the Note in accordance with Section 5(d) hereof.

(b) In addition to the Pledgee’s rights and remedies set forth in Section 8 hereof, in case an
Event of Default shall have occurred and be continuing, beyond any applicable cure period, the
Pledgee shall (i) be entitled to vote the Collateral, (ii) be entitled to give consents, waivers
and ratifications in respect of the Collateral (each Pledgor hereby irrevocably constituting and
appointing the Pledgee, with full power of substitution, the proxy and attorney-in-fact of each
Pledgor for such purposes) and (iii) be entitled to collect and receive for its own use cash
dividends paid on the Collateral. Unless and until there shall have occurred and be continuing an
Event of Default, each Pledgor shall be permitted to exercise or refrain from exercising any voting
rights or other powers; provided that, in each case, no vote shall be cast or any
consent, waiver or ratification given or any action taken or omitted to be taken if, in the
reasonable judgment of the Pledgee, such action would have a material adverse effect on the value
of the Collateral or any part thereof; and, provided, further, that each Pledgor
shall give at least five (5) days’ written notice of the manner in which such Pledgor intends to
exercise, or the reasons for refraining from exercising, any voting rights or other powers other
than with respect to any election of directors and voting with respect to any incidental matters.
Following the occurrence of an Event of Default, all rights of each Pledgor to vote and to give
consents, waivers and ratifications shall cease and all dividends and all other distributions in
respect of any of the Collateral, shall be delivered to the Pledgee to hold as Collateral and
shall, if received by any Pledgor, be received in trust for the benefit of the Pledgee, be
segregated from the other property or funds of any other Pledgor, and be forthwith delivered to the
Pledgee as Collateral in the same form as so received (with any necessary endorsement).

7. Event of Default. An “Event of Default” under this Agreement shall occur upon the
happening of any of the following events:

(a) An “Event of Default” under any Document shall have occurred and be continuing beyond any
applicable cure period;

(b) Any representation or warranty of any Pledgor made herein, in the Security Agreement or
the Note shall be false or misleading in any material respect;

(c) Any portion of the Collateral is subjected to a material post-judgment levy of execution,
attachment, distraint or other judicial process or any portion of the Collateral is the
subject of a claim (other than by the Pledgee) of a Lien or other right or interest in or to
the Collateral and such levy or claim shall not be cured, disputed or stayed within a period of
thirty (30) business days after the occurrence thereof; or

 

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(d) Any Pledgor shall (i) apply for, consent to, or suffer to exist the appointment of, or the
taking of possession by, a receiver, custodian, trustee, liquidator or other fiduciary of itself or
of all or a substantial part of its property, (ii) make a general assignment for the benefit of
creditors, (iii) commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to
take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any involuntary case
under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the
foregoing.

8. Remedies. In case an Event of Default shall have occurred and is continuing, the
Pledgee may:

(a) Transfer any or all of the Collateral into its name, or into the name of its nominee or
nominees;

(b) Exercise all corporate rights with respect to the Collateral including, without
limitation, all rights of conversion, exchange, subscription or any other rights, privileges or
options pertaining to any shares of the Collateral as if it were the absolute owner thereof,
including, but without limitation, the right to exchange, at its discretion, any or all of the
Collateral upon the merger, consolidation, reorganization, recapitalization or other readjustment
of the Issuer thereof, or upon the exercise by the Issuer of any right, privilege or option
pertaining to any of the Collateral, and, in connection therewith, to deposit and deliver any and
all of the Collateral with any committee, depository, transfer agent, registrar or other designated
agent upon such terms and conditions as it may determine, all without liability except to account
for property actually received by it; and

(c) Subject to any requirement of applicable law, sell, assign and deliver the whole or, from
time to time, any part of the Collateral at the time held by the Pledgee, at any private sale or at
public auction, with or without demand, advertisement or notice of the time or place of sale or
adjournment thereof or otherwise (all of which are hereby waived, except such notice as is required
by applicable law and cannot be waived), for cash or credit or for other property for immediate or
future delivery, and for such price or prices and on such terms as the Pledgee in its sole
discretion may determine, or as may be required by applicable law.

Each Pledgor hereby waives and releases any and all right or equity of redemption, whether
before or after sale hereunder. At any such sale, unless prohibited by applicable law, the Pledgee
may bid for and purchase the whole or any part of the Collateral so sold free from any such right
or equity of redemption. All moneys received by the Pledgee hereunder, whether upon sale of the
Collateral or any part thereof or otherwise, shall be held by the Pledgee and applied by it as
provided in Section 10 hereof. No failure or delay on the part of the Pledgee in exercising any
rights hereunder shall operate as a waiver of any such rights nor shall any single or partial
exercise of any such rights preclude any other or future exercise

 

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thereof or the exercise of any other rights hereunder. The Pledgee shall have no duty as to
the collection or protection of the Collateral or any income thereon nor any duty as to
preservation of any rights pertaining thereto, except to apply the funds in accordance with the
requirements of Section 10 hereof. The Pledgee may exercise its rights with respect to property
held hereunder without resort to other security for or sources of reimbursement for the
Obligations. In addition to the foregoing, Pledgee shall have all of the rights, remedies and
privileges of a secured party under the Uniform Commercial Code of New York (the “UCC”) regardless
of the jurisdiction in which enforcement hereof is sought.

9. Private Sale. Each Pledgor recognizes that the Pledgee may be unable to effect
(or to do so only after delay which would adversely affect the value that might be realized from
the Collateral) a public sale of all or part of the Collateral by reason of certain prohibitions
contained in the Securities Act, and may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obliged to agree, among other things, to acquire such
Collateral for their own account, for investment and not with a view to the distribution or resale
thereof. Each Pledgor agrees that any such private sale may be at prices and on terms less
favorable to the seller than if sold at public sales and that such private sales shall be deemed
to have been made in a commercially reasonable manner. Each Pledgor agrees that the Pledgee has
no obligation to delay sale of any Collateral for the period of time necessary to permit the
Issuer to register the Collateral for public sale under the Securities Act.

10. Proceeds of Sale. The proceeds of any collection, recovery, receipt,
appropriation, realization or sale of the Collateral shall be applied by the Pledgee as follows:

(a) First, to the payment of all costs, reasonable expenses and charges of the Pledgee and to
the reimbursement of the Pledgee for the prior payment of such costs, reasonable expenses and
charges incurred in connection with the care and safekeeping of the Collateral (including, without
limitation, the reasonable expenses of any sale or any other disposition of any of the Collateral),
attorneys’ fees and reasonable expenses, court costs, any other fees or expenses incurred or
expenditures or advances made by Pledgee in the protection, enforcement or exercise of its rights,
powers or remedies hereunder;

(b) Second, to the payment of the Obligations, in whole or in part, in such order as the
Pledgee may elect, whether or not such Obligations is then due;

(c) Third, to such persons, firms, corporations or other entities as required by applicable
law including, without limitation, Section 9-615(a)(3) of the UCC; and

(d) Fourth, to the extent of any surplus to the Pledgors or as a court of competent
jurisdiction may direct.

In the event that the proceeds of any collection, recovery, receipt, appropriation,
realization or sale are insufficient to satisfy the Obligations, each Pledgor shall be jointly and
severally liable for the deficiency plus the costs and fees of any attorneys employed by Pledgee to
collect such deficiency.

 

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11. Waiver of Marshaling. Each Pledgor hereby waives any right to compel any
marshaling of any of the Collateral.

12. No Waiver. Any and all of the Pledgee’s rights with respect to the Liens granted
under this Agreement shall continue unimpaired, and Pledgor shall be and remain obligated in
accordance with the terms hereof, notwithstanding (a) the bankruptcy, insolvency or reorganization
of any Pledgor, (b) the release or substitution of any item of the Collateral at any time, or of
any rights or interests therein, or (c) any delay, extension of time, renewal, compromise or other
indulgence granted by the Pledgee in reference to any of the Obligations. Each Pledgor hereby
waives all notice of any such delay, extension, release, substitution, renewal, compromise or
other indulgence, and hereby consents to be bound hereby as fully and effectively as if such
Pledgor had expressly agreed thereto in advance. No delay or extension of time by the Pledgee in
exercising any power of sale, option or other right or remedy hereunder, and no failure by the
Pledgee to give notice or make demand, shall constitute a waiver thereof, or limit, impair or
prejudice the Pledgee’s right to take any action against any Pledgor or to exercise any other
power of sale, option or any other right or remedy.

13. Expenses. The Collateral shall secure, and each Pledgor shall pay to Pledgee on
demand, from time to time, all reasonable costs and expenses, (including but not limited to,
reasonable attorneys’ fees and costs, taxes, and all transfer, recording, filing and other
charges) of, or incidental to, the custody, care, transfer, administration of the Collateral or
any other collateral, or in any way relating to the enforcement, protection or preservation of the
rights or remedies of the Pledgee under this Agreement or with respect to any of the Obligations.

14. The Pledgee Appointed Attorney-In-Fact and Performance by the Pledgee. Upon the
occurrence of an Event of Default, each Pledgor hereby irrevocably constitutes and appoints the
Pledgee as such Pledgor’s true and lawful attorney-in-fact, with full power of substitution, to
execute, acknowledge and deliver any instruments and to do in such Pledgor’s name, place and
stead, all such acts, things and deeds for and on behalf of and in the name of such Pledgor, which
such Pledgor could or might do or which the Pledgee may deem necessary, desirable or convenient to
accomplish the purposes of this Agreement, including, without limitation, to execute such
instruments of assignment or transfer or orders and to register, convey or otherwise transfer
title to the Collateral into the Pledgee’s name. Each Pledgor hereby ratifies and confirms all
that said attorney-in-fact may so do and hereby declares this power of attorney to be coupled with
an interest and irrevocable. If any Pledgor fails to perform any agreement herein contained, the
Pledgee upon the occurrence and during the continuance of an Event of Default, may itself perform
or cause performance thereof, and any costs and expenses of the Pledgee incurred in connection
therewith shall be paid by the Pledgors as provided in Section 10 hereof.

15. Waivers. THE PARTIES HERETO DESIRES THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE
JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE BETWEEN PLEDGEE, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH,
RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEN IN CONNECTION WITH THIS
AGREEMENT, ANY OTHER DOCUMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

 

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Recapture. Notwithstanding anything to the contrary in this Agreement, if the Pledgee
receives any payment or payments on account of the Obligations, which payment or payments or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver, or any other party under the United States
Bankruptcy Code, as amended, or any other federal or state bankruptcy, reorganization, moratorium
or insolvency law relating to or affecting the enforcement of creditors’ rights generally, common
law or equitable doctrine, then to the extent of any sum not finally retained by the Pledgee, each
Pledgor’s obligations to the Pledgee shall be reinstated and this Agreement shall remain in full
force and effect (or be reinstated) until payment shall have been made to Pledgee, which payment
shall be due on demand. 

16. Captions. All captions in this Agreement are included herein for convenience of
reference only and shall not constitute part of this Agreement for any other purpose.

17. Miscellaneous.

(a) This Agreement constitutes the entire and final agreement among the parties with respect
to the subject matter hereof and may not be changed, terminated or otherwise varied except by a
writing duly executed by the parties hereto.

(b) No waiver of any term or condition of this Agreement, whether by delay, omission or
otherwise, shall be effective unless in writing and signed by the party sought to be charged, and
then such waiver shall be effective only in the specific instance and for the purpose for which
given.

(c) In the event that any provision of this Agreement or the application thereof to any
Pledgor or any circumstance in any jurisdiction governing this Agreement shall, to any extent, be
invalid or unenforceable under any applicable statute, regulation, or rule of law, such provision
shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform to such statute, regulation or rule of law, and the remainder of this Agreement
and the application of any such invalid or unenforceable provision to parties, jurisdictions, or
circumstances other than to whom or to which it is held invalid or unenforceable shall not be
affected thereby, nor shall same affect the validity or enforceability of any other provision of
this Agreement.

(d) This Agreement shall be binding upon each Pledgor, and each Pledgor’s successors and
assigns, and shall inure to the benefit of the Pledgee and its successors and assigns.

(e) Any notice or other communication required or permitted pursuant to this Agreement shall
be given in accordance with the Security Agreement.

 

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(f) THIS AGREEMENT AND THE OTHER DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

(g) EACH PLEDGOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE
COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN ANY PLEDGOR, ON THE ONE HAND, AND THE PLEDGEE, ON THE OTHER HAND,
PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS, PROVIDED, THAT EACH PLEDGOR
ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN
THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE PLEDGEE FROM BRINGING SUIT OR TAKING
OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE INDEBTEDNESS, TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE INDEBTEDNESS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE PLEDGEE. EACH PLEDGOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH PLEDGOR HEREBY WAIVES ANY
OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS. EACH PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT
AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PLEDGOR AT THE
ADDRESS SET FORTH IN THE SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON
THE EARLIER OF THE SUCH PLEDGOR’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE
U.S. MAILS, PROPER POSTAGE PREPAID.

(h) It is understood and agreed that any person or entity that desires to become a Pledgor
hereunder, or is required to execute a counterpart of this Agreement after the date hereof pursuant
to the requirements of any Document, shall become a Pledgor hereunder by (x) executing a Joinder
Agreement in form and substance satisfactory to the Pledgee, (y) delivering supplements to such
exhibits and annexes to such Documents as the Pledgee shall reasonably request and/or set forth in
such joinder agreement and (z) taking all actions as specified in this Agreement as would have been
taken by such Pledgor had it been an original party to this Agreement, in each case with all
documents required above to be delivered to the Pledgee and with all documents and actions required
above to be taken to the reasonable satisfaction of the Pledgee.

 

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(i) This Agreement may be executed in one or more counterparts, each of which shall be deemed
an original and all of which when taken together shall constitute one and the same agreement. Any
signature delivered by a party by facsimile transmission shall be deemed an original signature
hereto.

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first
written above.

	 	 	 	 	 
	 	 	DIGITAL ANGEL CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Lorraine M. Breece
	 

	 	 	 	 
	 

	 	Name:
	 	Lorraine M. Breece
	 

	 	Title:
	 	Vice President, Acting Chief Financial

Officer
	 
	 	 	 	 
	 	 	DIGITAL ANGEL TECHNOLOGY CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Lorraine M. Breece
	 

	 	 	 	 
	 

	 	Name:
	 	Lorraine M. Breece
	 

	 	Title:
	 	Vice President, Acting Chief Financial

Officer
	 
	 	 	 	 
	 	 	KALLINA CORPORATION
	 	 	By: Laurus Capital Management, LLC, as investment

manager
	 
	 	 	 	 
	 

	 	By:
	 	/s/ David Grin
	 

	 	 	 	 
	 

	 	Name:
	 	David Grin
	 

	 	Title:
	 	Principal

 

12

 

SCHEDULE A to the Stock Pledge Agreement

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Stock	 	 	 	Number	 	% of
	 	 	 	 	 	 	Certificate	 	 	 	of	 	outstanding
	Pledgor	 	Issuer	 	Class of Stock	 	Number	 	Par Value	 	Shares	 	Shares
	Digital Angel 

Corporation
	 	Digital Angel

Technology

Corporation
	 	Common Stock
	 	1
	 	$0.01
	 	1,000
	 	100%
	Digital Angel 

Corporation
	 	Digital Angel

International
	 	Common Stock
	 	1
	 	$0.01
	 	1,000
	 	100%
	Digital Angel 

Corporation
	 	Digital Angel

Holdings, LLC
	 	Membership Units
	 	1
	 	$0.10
	 	1,000
	 	100%
	Digital Angel 

Technology 

Corporation
	 	Fearing

Manufacturing
Co.
Inc.
	 	Common Stock
	 	15
	 	$1.00
	 	1,000
	 	100%Filed by Bowne Pure Compliance

 

Exhibit 10.19

INTELLECTUAL PROPERTY SECURITY AGREEMENT

THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (the “Agreement”), dated as of August
31, 2007, is made by each of DIGITAL ANGEL CORPORATION, a Delaware corporation (“DOC”),
DIGITAL ANGEL TECHNOLOGY CORPORATION, a Minnesota corporation (“DATC”) and FEARING
MANUFACTURING CO., INC. (“FMC” and together with DOC and DATC, the “Grantors” and each, a
“Grantor”), in favor of KALLINA CORPORATION (“Lender”).

WHEREAS, pursuant to that certain Security Agreement dated as of the date hereof by and
between Grantors (collectively, the “Borrowers”) and Lender (as from time to time amended,
restated, supplemented or otherwise modified, the “Security Agreement”), Lender has agreed
to provide financial accommodations to the Borrowers;

WHEREAS, Lender is willing to enter into the Security Agreement, but only upon the condition,
among others, that each Grantor shall have executed and delivered to Lender this Agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Grantor hereby agrees as follows:

Section 1. DEFINED TERMS.

(a) When used herein the following terms shall have the following meanings:

“Copyrights” means all copyrights arising under the laws of the United States, any
other country or any political subdivision thereof, whether registered or unregistered and whether
published or unpublished, all registrations and recordings thereof, and all applications in
connection therewith, including all registrations, recordings and applications in the United States
Copyright Office, and the right to obtain all renewals of any of the foregoing.

“Copyright Licenses” means all written agreements naming any Grantor as licensor or
licensee, granting any right under any Copyright, including the grant of rights to manufacture,
distribute, exploit and sell materials derived from any Copyright.

“General Intangibles” shall have the meaning provided thereto in Section 9-102 of the
UCC, as amended, restated or otherwise modified from time to time.

“Obligations” Loans, all advances, debts, liabilities, obligations, covenants and
duties owing by each Company and each of its Eligible Subsidiaries to Lender (or any corporation
that directly or indirectly controls or is controlled by or is under common control with Lender),
other than those arising under the Registration Rights Agreement or the Warrant, of every kind and
description (whether or not evidenced by any note or other instrument and whether or not for the
payment of money or the performance or non-performance of any act), direct or indirect,

 

 

 

absolute or contingent, due or to become due, contractual or tortious, liquidated or
unliquidated, whether existing by operation of law or otherwise now existing or hereafter arising
including any debt, liability or obligation owing from any Company and/or each of its Eligible
Subsidiaries to others which Lender may have obtained by assignment or otherwise and further
including all interest (including interest accruing at the then applicable rate provided in the
Security Agreement after the maturity of the Loans and interest accruing at the then applicable
rate provided in the Security Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, whether or not a claim for
post-filing or post-petition interest is allowed or allowable in such proceeding), charges or any
other payments each Company and each of its Eligible Subsidiaries is required to make by law or
otherwise arising under or as a result of the Security Agreement, the Ancillary Agreements (other
than the Registration Rights Agreement or the Warrant) or otherwise, together with all reasonable
expenses and reasonable attorneys’ fees chargeable to the Companies’ or any of their Eligible
Subsidiaries’ accounts or incurred by Lender in connection therewith.

“Patents” means (a) all letters patent of the United States, any other country or any
political subdivision thereof, and all reissues and extensions of such letters patent, (b) all
applications for letters patent of the United States or any other county and all divisions,
continuations and continuations-in-part thereof, and (c) all rights to obtain any reissues or
extensions of the foregoing.

“Patent Licenses” means all agreements, whether written or oral, providing for the
grant by or to any Grantor of any right to manufacture, use or sell any invention covered in whole
or in part by a Patent.

“Trademarks” means (a) all trademarks, trade names, corporate names, business names,
fictitious business names, trade styles, services marks, logos and other source or business
identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired,
all registrations and recordings thereof, and all applications in connection therewith, whether in
the United States Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country or political subdivision thereof, or otherwise, and
all common-law rights thereto, and (b) the right to obtain all renewals thereof.

“Trademark Licenses” means, collectively, each agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any Trademark.

“UCC” shall have the meaning provided thereto in the Security Agreement.

(b) All capitalized terms used but not otherwise defined herein have the meanings given to
them in the Security Agreement.

Section 2. GRANT OF SECURITY INTEREST IN INTELLECTUAL PROPERTY COLLATERAL. To secure
the complete and timely payment of all the Obligations of such Grantor now or hereafter existing
from time to time, each Grantor hereby grants to Lender a continuing first priority security
interest in all of such Grantor’s right, title and interest in, to and under the following, whether
presently existing or hereafter created or acquired (collectively, the “Collateral”):

 

2

 

(a) all of its Patents and Patent Licenses to which it is a party including
those referred to on Schedule I hereto;

(b) all of its Trademarks and Trademark Licenses to which it is a party
including those referred to on Schedule II hereto;

(c) all of its Copyrights and Copyright Licenses to which it is a party
including those referred to on Schedule III hereto;

(d) all of the Patents, Trademarks and Copyrights identified in Schedule
I, Schedule II and Schedule III, respectively, that are material
to its business or operations, as referred to on Schedule IV hereto, said
Schedule IV, together with updated Schedules I, II and III, to be provided
to Lender within 45 days of the execution of this Agreement;

(e) all reissues, continuations or extensions of the foregoing;

(f) all goodwill of the business connected with the use of, and symbolized by,
each Patent, each Patent License, each Trademark, each Trademark License, each
Copyright and each Copyright License; and

(g) all products and proceeds of the foregoing, including, without limitation,
any claim by such Grantor against third parties for past, present or future (i)
infringement or dilution of any Patent or Patent licensed under any Patent License,
(ii) injury to the goodwill associated with any Patent or any Patent licensed under
any Patent License, (iii) infringement or dilution of any Trademark or Trademark
licensed under any Trademark License, (iv) injury to the goodwill associated with
any Trademark or any Trademark licensed under any Trademark License, (v)
infringement or dilution of any Copyright or Copyright licensed under any Copyright
License, and (vi) injury to the goodwill associated with any Copyright or any
Copyright licensed under any Copyright License.

Section 3. REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants that
Grantor does not have any interest in, or title to, any Patent, Trademark or Copyright except as
set forth in Schedule I, Schedule II and Schedule III, respectively,
hereto. Grantor’s Patents, Trademarks and Copyrights are valid and enforceable, are solely owned
by Grantor and there is no claim that the use of any of them violates the rights of any third
person. This Agreement is effective to create a valid and continuing lien on and perfected
security interests in favor of Lender in all of Grantor’s Patents, Trademarks and Copyrights and
such perfected security interests are enforceable as such as against any and all creditors of, and
purchasers from, Grantor. Upon filing of this Intellectual Property Security Agreement with the
United States Patent and Trademark Office and the United States Copyright Office and the filing of
appropriate financing statements, all action necessary or desirable to protect and perfect Lender’s
Lien on each Grantor’s Patents, Trademarks and Copyrights shall have been duly taken, including
clearing up any gaps or inaccuracies in the chain of title in the Patents, Trademarks and
Copyrights identified in Schedules I, II and III, respectively, at the sole cost of Grantor, which
action shall take place within 45 days of the execution of this Agreement.

 

3

 

Section 4. COVENANTS. Each Grantor covenants and agrees with Lender that from and
after the date of this Agreement:

(a) Grantor shall notify Lender immediately if it knows or has reason to know
that any application or registration relating to any Patent, Trademark or Copyright
(now or hereafter existing) that is material to the conduct of its business or
operations may become abandoned or dedicated, or of any adverse determination or
development (including the institution of, or any such determination or development
in, any proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any similar foreign office or agency or any court)
regarding Grantor’s ownership of any Patent, Trademark or Copyright that is material
to the conduct of its business or operations, its right to register the same, or to
keep and maintain the same.

(b) In the event Grantor, either directly or through any agent, employee,
licensee or designee, files an application for the registration of any Patent,
Trademark or Copyright with the United States Patent and Trademark Office or the
United States Copyright Office or any similar office or agency after the effective
date of this Agreement, Grantor shall provide Lender written notice thereof, and,
upon request of Lender, Grantor shall execute and deliver a supplement hereto (in
form and substance satisfactory to Lender) to evidence Lender’s lien on such Patent,
Trademark or Copyright, and the General Intangibles of Grantor relating thereto or
represented thereby.

(c) Grantor shall take all commercially reasonable actions necessary or
requested by Lender to maintain and pursue each application, to obtain the relevant
registration and to maintain the registration of each of the Patents or Trademarks
(now or hereafter existing) which applications and registrations are material to the
conduct of its business or operations, including, but not limited to, the filing of
applications for renewal, affidavits of use, affidavits of noncontestability and
opposition and interference and cancellation proceedings. Grantor shall also, upon
Lender’s request, execute any necessary documents to evidence Lender’s lien on
Grantor’s Patents, Trademarks and Copyrights.

(d) In the event that any of the Intellectual Property that is material to the
conduct of its business or operations is infringed upon, or misappropriated or
diluted by a third party, Grantor shall notify Lender promptly after Grantor learns
thereof. Grantor shall take all commercially reasonable actions to protect such
Intellectual Property and to seek any and all damages for such infringement,
misappropriation or dilution..

Section 5. SECURITY AGREEMENT. The security interests granted pursuant to this
Agreement are granted in conjunction with the security interests granted to Lender by each Grantor
pursuant to the Security Agreement. Each Grantor hereby acknowledges and affirms that the rights
and remedies of Lender with respect to the security interest in the Collateral made and granted
hereby are more fully set forth in the Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.

 

4

 

Section 6. REINSTATEMENT. This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against any Grantor for liquidation or
reorganization, should any Grantor become insolvent or make an assignment for the benefit of any
creditor or creditors or should a receiver or trustee be appointed for all or any significant part
of such Grantor’s assets, and shall continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any
obligee of the Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or
returned.

Section 7. INDEMNIFICATION. (A) Each Grantor assumes all responsibility and liability
arising from the use of the Patents, Trademarks and/or Copyrights and each Grantor hereby
indemnifies and holds Lender harmless from and against any claim, suit, loss, damage or expense
(including reasonable attorneys’ fees) arising out of such Grantor’s operations of its business
from the use of the Patents, Trademarks and/or Copyrights. (B) In any suit, proceeding or action
brought by Lender under any Patent License, Trademark License or Copyright License for any sum
owing thereunder, or to enforce any provisions of such license, such Grantor will indemnify and
keep Lender harmless from and against all expense, loss or damage suffered by reason of any
defense, set off, counterclaim, recoupment or reduction or liability whatsoever of the obligee
thereunder, arising out of a breach of any Grantor of any obligation thereunder or arising out of
any other agreement, indebtedness or liability at any time owing to or in favor of such obligee or
its successors from such Grantor, and all such obligations of any Grantor shall be and remain
enforceable against and only against such Grantor and shall not be enforceable against Lender.

Section 8. NOTICES. Whenever it is provided herein that any notice, demand, request,
consent, approval, declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to give and serve upon
any other party any communication with respect to this Agreement, each such notice, demand,
request, consent, approval, declaration or other communication shall be in writing and shall be
given in the manner, and deemed received, as provided for in the Security Agreement.

Section 9. TERMINATION OF THIS AGREEMENT. Subject to Section 6 hereof, this
Agreement shall terminate upon payment in full in cash of all Obligations and irrevocable
termination of the Security Agreement.

Section 10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which shall constitute one instrument.
It is understood and agreed that if facsimile copies of this Agreement bearing facsimile
signatures are exchanged between the parties hereto, such copies shall in all respects have the
same weight, force and legal effect and shall be fully as valid, binding, and enforceable as if
such signed facsimile copies were original documents bearing original signature.

 

5

 

[Signature Page to Follow]

 

6

 

IN WITNESS WHEREOF, Grantor has caused this Intellectual Property Security Agreement to be
executed and delivered by its duly authorized officer as of the date first set forth above.

	 	 	 	 	 
	 	DIGITAL ANGEL CORPORATION 

 	 
	 	By:  	/s/ Lorraine M. Breece
 	 
	 	 	Name:  	Lorraine M. Breece                                                               	 
	 	 	Title:  	Vice President, Acting Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	DIGITAL ANGEL TECHNOLOGY CORPORATION 

 	 
	 	By:  	/s/ Lorraine M. Breece
 	 
	 	 	Name:  	Lorraine M. Breece                                                               	 
	 	 	Title:  	Vice President, Acting Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	FEARING MANUFACTURING CO., INC. 

 	 
	 	By:  	/s/ Lorraine M. Breece
 	 
	 	 	Name:  	Lorraine M. Breece                                                               	 
	 	 	Title:  	Vice President, Acting Chief Financial Officer 	 
	 

ACCEPTED and ACKNOWLEDGED by:

KALLINA CORPORATION

By: Laurus Capital Management, LLC, as
investment manager

By: /s/ David Grin 

Name: David Grin

Title: Principal

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