Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.2 

AMENDMENT NO. 2 TO
REGISTRATION RIGHTS
AGREEMENT 

THIS AMENDMENT NO. 2 TO
REGISTRATION RIGHTS AGREEMENT, dated as of June 28, 2007 (this “Amendment), is
by and between Digital Angel Corporation, a Delaware corporation (the
“Company”), Imperium Master Fund, Ltd. (“Imperium”) and Gemini
Master Fund, Ltd. (“Gemini” and together with Imperium, the
“Investors”). 

WHEREAS, the Company
and the Investors are parties to a Registration Rights Agreement dated as of
February 6, 2007, as amended March 7, 2007 (the “Registration Rights
Agreement”); and 

WHEREAS, the Company and
each Investor desire to amend the Registration Rights Agreement to reflect certain changes
agreed to by the parties in connection with Amendment No. 5 to the Securities Purchase
Agreement entered into by the parties hereto on the date hereof. 

NOW, THEREFORE, in
consideration of the aforesaid and of the mutual obligations hereinafter contained,
and for other good and valuable consideration, the receipt of which is hereby acknowledged
by the Company and the Investors, the parties agree as follows: 

1. The definition “Registration
Deadlines” contained in the Registration Rights Agreement shall be amended
to read as follows: 

“Registration
Deadlines” means the ninety-seventh (97th) calendar day following the
Closing Date; provided, however, that if the Commission reviews and has written
comments to the filed Registration Statement that would require the filing of a
pre-effective amendment thereto with the Commission, the Registration Deadline shall mean
October 1, 2007. 

2. Except as amended hereby, the
Registration Rights Agreement shall remain in full force and effect in accordance with
its original terms. 

[The remainder of this page has been intentionally left blank] 

 

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    [Signature Page to Amendment No. 2 to Registration Rights Agreement] 

    IN WITNESS WHEREOF, the Company and the Investors have executed and delivered to the other parties this Registration Rights Amendment No. 2 effective as of the day and year first above written. 

    COMPANY: 

    DIGITAL ANGEL CORPORATION 

 
By: /s/ Kevin N. McGrath                          
Name: Kevin N. McGrath 
Title: President and CEO 

    INVESTOR: 

    IMPERIUM MASTER FUND, LTD. 

 
By: /s/ Maurice Hryshko                         
Name: Maurice Hryshko 
Title: Counsel 

    2 

     

    2Filed by Bowne Pure Compliance

 

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:

	 	Warrant No. 

THIS CERTIFIES that [HOLDER], or any permitted subsequent holder hereof (the “Holder”), has the right to purchase
from DIGITAL ANGEL CORPORATION, a Delaware corporation (the “Company”), up to [SHARES] 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 date on which this Warrant is issued (the “Issue Date”) and ending at 5:00 p.m., New York City time,
on the seventh (7th) anniversary of the Issue Date or, if such day is not a Business Day, on the next
succeeding Business Day (the “Expiration Date”). This Warrant is issued pursuant to Amendment No. 5 to the Securities
Purchase Agreement, dated as of the date hereof (“Amendment No. 5”) among the Company and each of the Investors (as
defined therein). It is the intent of the Company and the Holder that the provisions of this Warrant be construed the
same as the warrants issued pursuant to the Securities Purchase Agreement dated as of February 6, 2007, as amended,
among the Company and each of the Investors (as defined therein) (the “Securities Purchase Agreement”). As such,
capitalized

 

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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 $1.701, subject to adjustment for the events
specified in Section 6 of this Warrant.

(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

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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. 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

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“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.

(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.

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	 	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

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on or before the effective date thereof.

(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

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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.

(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

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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.

(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.

(C) Change In Option Price Or Conversion Rate. If there is a

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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.

(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

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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:

If to the Company:

Digital Angel Corporation

Suite 201

1690 South Congress

Delray Beach, Florida 33483

Attn: Kevin McGrath

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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.

(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)

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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]

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

DIGITAL ANGEL CORPORATION

By:                                                             

Name:

Title:

 

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