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Exhibit 10.2    
    

 
 

REGISTRATION RIGHTS AGREEMENT    
    

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

        This
Agreement is being entered into in connection with a Securities Purchase Agreement dated as of the date hereof between the Purchase and the Company (the "Purchase Agreement") and
pursuant to the Note and Warrant. 

        The
Company and the Purchaser hereby agree as follows: 

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

        "Commission" means the U.S. Securities and Exchange Commission. 

        "Effectiveness Date" means the 90th day following the Closing Date. 

        "Effectiveness Period" shall have the meaning set forth in Section 2(a). 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended. 

        "Filing Date" means, with respect to the Registration Statement required to be filed hereunder, the 30th day following the Closing Date. 

        "Holder" or "Holders" means the Purchaser or any of its affiliates or transferees to the
extent any of them hold Registrable Securities. 

        "Indemnified Party" shall have the meaning set forth in Section 5(c). 

        "Indemnifying Party" shall have the meaning set forth in Section 5(c). 

        "Losses" shall have the meaning set forth in Section 5(a). 

        "Note" means the convertible promissory note issued by the Company to the Purchaser on the date hereof. 

        "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened. 

        "Prospectus" means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. 

        "Registrable Securities" means the shares of Common Stock issued upon the conversion of the Note and issuable upon exercise of the
Warrant. 

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

 

        "Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. 

        "Rule 415" means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. 

        "Rule 424" means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. 

        "Securities Act" means the Securities Act of 1933, as amended. 

        "Warrant" means the Common Stock purchase warrant issued pursuant to the Purchase Agreement. 

        2.    Registration.    

        (a)   On
or prior to the Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the Registrable Securities for an offering to be
made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith). The Company shall cause the Registration Statement
to become effective and remain effective as provided herein. The Company shall use its reasonable commercial efforts to cause the Registration Statement to be declared effective under the Securities
Act as promptly as possible after the filing thereof, but in any event no later than the Effectiveness Date, and shall keep the Registration Statement continuously effective under the Securities Act
until the date which is the earlier date of when (i) all Registrable Securities have been sold or (ii) all Registrable Securities may be sold immediately without registration under the
Securities Act and without volume restrictions pursuant to Rule 144(k), as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable
to the Company's transfer agent and the affected Holders (the "Effectiveness Period"). 

        (b)   If:
(i) any Registration Statement is not filed on or prior to the Filing Date; (ii) a Registration Statement filed hereunder is not declared effective by
the Commission by the Effectiveness Date; (iii) after a Registration Statement is filed with and declared effective by the Commission, such Registration Statement ceases to be effective (by
suspension or otherwise) as to all Registrable Securities to which it is required to relate at any time prior to the expiration of the Effectiveness Period (without being succeeded immediately by an
additional registration statement filed and declared effective) for a period of time which shall exceed 30 days in the aggregate per year or more than 20 consecutive calendar days (defined as a
period of 365 days commencing on the date the Registration Statement is declared effective); or (iv) the Common Stock is not listed or quoted, or is suspended from trading on any Trading
Market, for a period of three (3) consecutive Trading Days (provided the Company shall not have been able to cure such trading suspension within 30 days of the notice thereof or list the
Common Stock on any of the NASD OTC Bulletin Board, BBX Exchange, NASDAQ 

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SmallCap
Market, the Nasdaq National Market, American Stock Exchange or New York Stock Exchange (the "Trading Market")) (any such failure or breach being referred to as an "Event," and for purposes of
clause (i), (ii) or (iv) the date on which such Event occurs, or for purposes of clause (iii) the date which such 30 day or 20 consecutive day period (as the case
may be) is exceeded, or for purposes of clause (iv) the date on which such three (3) Trading Day period is exceeded, being referred to as "Event Date"), then until the applicable Event
is cured, the Company shall pay to each Holder an amount in cash, as liquidated damages and not as a penalty, equal to 2.0% for each thirty (30) day period (prorated for partial periods) on a
daily basis of the original principal amount of the Note. Such liquidation damages shall be paid not less than each thirty (30) days during an Event and within three (3) days following
the date on which such Event has been cured by the Company. 

        3.    Registration Procedures.    If and whenever the Company is required by the provisions hereof to effect the
registration of the Registrable Securities under the Act, the Company will, as expeditiously as possible: 

        (a)   prepare
and file with the Commission a registration statement with respect to such securities, promptly as possible respond to any comments received from the Commission
and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as herein provided), and promptly
provide to the Purchaser copies of all filings and Commission letters of comment; 

        (b)   prepare
and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary
to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the registration statement and to keep such registration statement effective until the
earlier of: (i) six months after the latest exercise period of the Warrant; (ii) four years after the Closing Date; or (iii) the date on which the Purchaser has disposed of all of
the Registrable Securities covered by such registration statement in accordance with the Purchaser's intended method of disposition set forth in such registration statement for such period; 

        (c)   furnish
to the Purchaser such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as the Purchaser
reasonably may request to facilitate the public sale or disposition of the securities covered by such registration statement; 

        (d)   use
its commercially reasonable efforts to register or qualify the Purchaser's Registrable Securities covered by such registration statement under the securities or
"blue sky" laws of such jurisdictions as the Purchaser reasonably requests; provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as
a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; 

        (e)   list
the Registrable Securities covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed; 

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

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        (g)   make
available for inspection by the Purchaser and any attorney, accountant or other agent retained by the Purchaser all publicly available, non-confidential
financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the attorney, accountant or agent of the Purchaser. 

        4.    Registration Expenses.    All expenses relating to the Company's compliance with Sections 2 and 3 hereof,
including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the NASD, transfer taxes, fees of transfer agents and registrars, fees of, and
disbursements incurred by, one counsel for the Holders, and costs of insurance are called "Registration Expenses". All selling commissions applicable to the sale of Registrable Securities, including
any fees and disbursements of any special counsel to the Holders beyond those included in Registration Expenses, are called "Selling Expenses." The Company shall be responsible for all Registration
Expenses and for all Selling Expenses, other than Selling Expenses consisting of brokerage commissions. 

        5.    Indemnification.    

        (a)   In
the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the
Purchaser, and its officers, directors and each other person, if any, who controls the Purchaser within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which the Purchaser or such persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Securities were registered under the
Securities Act pursuant to this Agreement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Purchaser, and each such person for
any reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be
liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by or on behalf of the Purchaser or any such person in writing specifically for use in any such document. 

        (b)   In
the event of a registration of the Registrable Securities under the Securities Act pursuant to this Agreement, the Purchaser will indemnify and hold harmless the
Company, and its officers, directors and each other person, if any, who controls the Company within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any material fact which was furnished in writing by or on behalf of the Purchaser to the Company expressly for use in (and such
information is contained in) the registration statement under which such Registrable Securities were registered under the Securities Act pursuant to this Agreement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements 

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therein
not misleading, and will reimburse the Company and each such person for any reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that the Purchaser will be liable in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished in writing to the Company by or on behalf of the Purchaser
specifically for use in any such document. Notwithstanding the provisions of this paragraph, the Purchaser shall not be required to indemnify any person or entity in excess of the amount of the
aggregate net proceeds received by the Purchaser of Registrable Securities in connection with any such registration under the Securities Act. 

        (c)   Promptly
after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which
it may have to such indemnified party other than under this Section 5(c) and shall only relieve it from any liability which it may have to such indemnified party under this Section 5(c)
if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 5(c) for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof; if the indemnified party retains
its own counsel, then the indemnified party shall pay all fees, costs and expenses of such counsel, provided, however, that, if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified parties shall have the right to
select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying party as incurred. 

        (d)   In
order to provide for just and equitable contribution in the event of joint liability under the Securities Act in any case in which either (i) the Purchaser, or
any controlling person of the Purchaser, makes a claim for indemnification pursuant to this Section 5(c) but it is judicially determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this
Section 5(c) provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of the Purchaser or controlling person of the Purchaser
in circumstances for which indemnification is provided under this Section 5(c); then, and in each such case, the Company and the Purchaser will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Purchaser is responsible only for the portion represented by the percentage that the
public offering price of its securities offered by the registration statement bears to the public offering price of all securities offered by such registration statement, provided, however, that, in
any such case, (A) the Purchaser will not be required to contribute any amount in excess of the public offering price of all such securities offered by it pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person
or entity who was not guilty of such fraudulent misrepresentation. 

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        6.    Representations and Warranties.    

        (a)   The
Common Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and, since January 1, 2002, the Company has timely
filed all proxy statements, reports, schedules, forms, statements and other documents required to be filed by it under the Exchange Act, except for the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2002. The Company has filed (i) its Annual Report on Form 10-K for the fiscal year ended
December 31, 2002 and (ii) its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003 (collectively, the "SEC Reports"). The Company is
eligible to file with the Commission a registration statement on Form S-3 pursuant to Instruction I.B.3 thereof. Each SEC Report was, at the time of its filing, in substantial
compliance with the requirements of its respective form, and none of the SEC Reports, nor the financial statements (and the notes thereto) included in the SEC Reports, as of their respective filing
dates, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed) and fairly present in all material respects the financial condition, the
results of operations and the cash flows of the Company and its subsidiaries, on a consolidated basis, as of, and for, the periods presented in each such SEC Report. 

        (b)   The
Company Common Stock is listed for trading on the American Stock Exchange and satisfies all requirements for the continuation of such listing. The Company has not
received any notice that its Common Stock will be delisted from the American Stock Exchange or that the Common Stock does not meet all requirements for the continuation of such listing. 

        (c)   Neither
the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would cause the offering of the Registrable Securities pursuant to this Agreement to be integrated with prior offerings by the Company
for purposes of the Securities Act which would prevent the Company from selling the Common Stock pursuant to Rule 506 under the Securities Act, or any applicable exchange-related stockholder
approval provisions. Nor will the Company or any of its affiliates or subsidiaries take any action or steps that would cause the offering of the Registrable Securities to be integrated with other
offerings. 

        (d)   The
Registrable Securities are restricted securities under the Securities Act as of the date of this Agreement. The Company will not issue any stop transfer order or
other order impeding the sale and delivery of any of the Registrable Securities at such time as the Registrable Securities are registered for public sale or an exemption from registration is
available, except as required by federal or state securities laws. 

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

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        (f)    Except
for agreements made in the ordinary course of business, there is no agreement that has not been filed with the Commission as an exhibit to a registration
statement or to a form required to be filed by the Company under the Exchange Act the breach of which could have a material and adverse effect on the Company and its subsidiaries, or would prohibit or
otherwise interfere with the ability of the Company to enter into and perform any of its obligations under this Agreement in any material respect. 

        (g)   The
Company will at all times have authorized and reserved a sufficient number of shares of Common Stock for the full conversion of the Note and exercise of the Warrant. 

        7.    Miscellaneous.    

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

        (b)    No Piggyback on Registrations.    Except as and to the extent specified in
Schedule 7(b) hereto, neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in the Registration
Statement other than the Registrable Securities, and the Company shall not after the date hereof enter into any agreement providing any such right for inclusion of shares in the Registration Statement
to any of its security holders. Except as and to the extent specified in Schedule 7(b) hereto, the Company has not previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person that has not been fully satisfied. 

        (c)    Compliance.    Each Holder covenants and agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement. 

        (d)    Discontinued Disposition.    Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of a Discontinuation Event (as hereinafter defined), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the copies of the supplemented Prospectus and/or amended Registration Statement or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to
be incorporated by reference in such Prospectus or Registration Statement. The Company may provide appropriate stop orders to enforce the provisions of this paragraph. For purposes of this
Section 7(d), a "Discontinuation Event" shall mean (i) when the Commission notifies the Company whether there will be a "review" of such Registration Statement; (ii) whenever the
Commission comments in writing on such Registration Statement (the Company shall provide true and complete copies thereof and all written responses thereto to each of the Holders); (iii) any
request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iv) the
issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (v) the receipt by the Company of any notification 

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with
respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) the occurrence of any event or passage of time that makes the financial statements included in the Registration Statement ineligible for inclusion therein
or any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any
revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not
misleading. 

        (e)    Piggy-Back Registrations.    If at any time during the Effectiveness
Period, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit plans, then the Company shall send to each Holder written notice of such determination and, if within fifteen days after
receipt of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such holder requests to be
registered, subject to customary underwriter cutbacks applicable to all holders of registration rights and subject to the consent of any selling stockholder(s) under such registration statement. 

        (f)    Amendments and Waivers.    The provisions of this Agreement, including the provisions
of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the
Company and the Holders of the then outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of certain Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to
which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately
preceding sentence. 

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        (g)    Notices.    Any notice or request hereunder may be given to the Company or Purchaser at
the respective addresses set forth below or as may hereafter be specified in a notice designated as a change of address under this Section 7(g). Any notice or request hereunder shall be given
by registered or certified mail, return receipt requested, hand delivery, overnight mail or telecopy (confirmed by mail). Notices and requests shall be, in the case of those by hand delivery, deemed
to have been given when delivered to any officer of the party to whom it is addressed, in the case of those by mail or overnight mail, deemed to have been given when deposited in the mail or with the
overnight mail carrier, and, in the case of a telecopy, when confirmed. The address for such notices and communications shall be as follows: 

	If to the Company:	 	Digital Angel Corporation

490 Villaume Avenue

South St. Paul, MN 55075

Attention: Mr. James P. Santelli

Facsimile: 651-455-0217
	

With a copy to:	
 	

Michele D. Vaillancourt, Esq.

Winthrop & Weinstine, P.A.

Suite 3500

225 South Sixth Street

Minneapolis, MN 55402

Facsimile: 612-604-6800
	

If to a Purchaser:	
 	

To the address set forth under such Purchaser name on the signature pages hereto.
	

If to any other Person who is then the registered Holder:
	

 	
 	

To the address of such Holder as it appears in the stock transfer books of the Company

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

        (h)    Successors and Assigns.    This Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights or obligations hereunder without the prior written
consent of each Holder. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under the Note. 

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

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        (j)    Governing Law.    This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state courts of New York or in the federal courts located in the state of New York. Both parties and the individual signing this Agreement on behalf of the Company agree
to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorneys' fees and costs. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision
of this Agreement. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement, all documents,
instruments and agreements entered into in connection herewith and/or the transactions contemplated hereby. 

        (k)    Cumulative Remedies.    The remedies provided herein are cumulative and not exclusive
of any remedies provided by law. 

        (l)    Severability.    If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force
and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 

        (m)    Headings.    The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof. 

        IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. 

	

 	
 	
DIGITAL ANGEL CORPORATION
	

 	
 	

By:	
 	

/s/  JAMES P. SANTELLI      

	 	 	Name:	 	James P. Santelli
	 	 	Title:	 	Vice President

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF PURCHASER TO FOLLOW] 

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        IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. 

	

 	
 	
LAURUS MASTER FUND, LTD.
	

 	
 	

By:	
 	

/s/  DAVID GRIN      

	 	 	Name:	 	 
	 	 	Title:	 	 
	

 	
 	

Address for Notice:
	 	 	c/o Laurus Capital Management, LLC

152 West 57th Street, 4th Floor

New York, New York 10019

Attention: David Grin

11

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Exhibit 10.2

REGISTRATION RIGHTS AGREEMENTQuickLinks
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Exhibit 10.3    
    

 
 

SECURITY AGREEMENT    
    

	To:
	Laurus
Master Fund, Ltd.

c/o Onshore Corporate Services, Ltd.

P.O. Box 1234 G.T

Queensgate House

South Church Street

Grand Cayman, Cayman Islands 

Gentlemen: 

        1.     To
secure the payment of all Obligations (as hereafter defined), we hereby grant to you a continuing security interest in all of the following property now owned or at
any time hereafter acquired by us, or in which we now have or at any time in the future may acquire any right, title or interest (the "Collateral"): all accounts, inventory, equipment, goods,
documents, instruments (including, without limitation, promissory notes), contract rights, general intangibles (including, without limitation, payment intangibles), chattel paper, supporting
obligations, investment property, letter-of-credit rights, trademarks and tradestyles in which we now have or hereafter may acquire any right, title or interest, all proceeds
and products thereof (including, without limitation, proceeds of insurance) and all additions, accessions and substitutions thereto or therefor. 

        2.     The
term "Obligations" as used herein shall mean and include all debts, liabilities and obligations owing by us to you and all loans, advances, extensions of credit,
endorsements, guaranties, benefits and/or financial accommodations heretofore or hereafter made, granted or extended by you to us or which you have or will become obligated to make, grant or extend to
us or for our account and any and all interest, charges and/or expenses heretofore or hereafter owing by us to you and any and all renewals or extensions of any of the foregoing, no matter how or when
arising, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether under any present or future agreement or instruments between or among us, you or otherwise, including,
without limitation, all obligations owing by us to you under the Secured Convertible Note dated as of the date hereof made by us in favor of you in the original principal amount of $2,000,000 (as
amended, modified and supplemented from time to time, the "Note"). 

        3.     We
hereby represent, warrant and covenant to you that: (a) we are a company validly existing, in good standing and formed under the laws of the State of Delaware
with an organization identification number of 0927269 and we will provide you thirty days' prior written notice of any change in our state of formation; (b) our legal name is "Digital Angel
Corporation", as set forth in our Certificate of Incorporation as amended through the date hereof; (c) we are the lawful owner of the Collateral and have the sole right to grant a security
interest therein and will defend the Collateral against all claims and demands of all persons and entities; (d) we will keep the Collateral free and clear of all attachments, levies, taxes,
liens, security interests and encumbrances of every kind and nature, other than those liens and security interests set forth on Schedule 2.9 to the Securities Purchase Agreement dated as of the
date hereof between us and you; (e) we will at our own cost and expense keep the Collateral in good state of repair and will not waste or destroy the same or any part thereof; (f) we
will not without your prior written consent, sell, exchange, lease or otherwise dispose of the Collateral or any of our rights therein or permit any lien or security interest to attach to same, except
that created by this Agreement; (g) we will insure the Collateral in your name against loss or damage 

by
fire, theft, burglary, pilferage, loss in transit and such other hazards as you shall specify in amounts and under policies by insurers acceptable to you and all premiums thereon shall be paid by
us and the policies delivered to you. If we fail to do so, you may procure such insurance and the cost thereof shall constitute Obligations; (h) we will at all times allow you or your
representatives free access to and the right of inspection of the Collateral; and (i) we hereby indemnify and save you harmless from all loss, costs, damage, liability and/or expense, including
reasonable attorneys' fees, that you may sustain or incur to enforce payment, performance or fulfillment of any of the Obligations and/or in the enforcement of this Agreement or the Note or in the
prosecution or defense of any action or proceeding either against you or us concerning any matter growing out of or in connection with this Agreement, the Note and/or any of the Obligations and/or any
of the Collateral. 

        4.     We
shall be in default under this Agreement upon the happening of any of the following events or conditions, each such event or condition an "Event of Default":
(a) an Event of Default shall have occurred under and as defined in the Note, which shall not have been cured during any applicable cure or grace period, (b) the loss, theft, substantial
damage, destruction or sale of any Collateral having a value in the aggregate for all such occurrences of $250,000 or more, (c) the encumbrance of any of the Collateral, other than in favor of
Wells Fargo Business Credit, Inc., the lien priorities with respect to which are governed by the terms of a Subordination Agreement dated as of the date hereof or (d) a default shall
have occurred under the Registration Rights Agreement dated as of the date hereof between you and us, as the same may be amended, modified and supplemented from time to time, which shall not have been
cured during any applicable cure or grace period. 

        5.     Upon
the occurrence of any Event of Default and at any time thereafter, you may declare all Obligations immediately due and payable and you shall have the remedies of a
secured party provided in the Uniform Commercial Code as in effect in the State of New York, this Agreement and other applicable law. You will at all times have the right to take possession of the
Collateral and to maintain such possession on our premises or to remove the Collateral or any part thereof to such other premises as you may desire. Upon your request, we shall assemble the Collateral
and make it available to you at a place designated by you. If any notification of intended disposition of any Collateral is required by law, such notification, if mailed, shall be deemed properly and
reasonably given if mailed at least ten days before such disposition, postage prepaid, addressed to us either at our address shown herein or at any address appearing on your records for us. Any
proceeds of any disposition of any of the Collateral shall be applied by you to the payment of all expenses in connection with the sale of the Collateral, including reasonable attorneys' fees and
other legal expenses and disbursements and the reasonable expense of retaking, holding, preparing for sale, selling, and the like, and any balance of such proceeds may be applied by you toward the
payment of the Obligations in such order of application as you may elect, and we shall be liable for any deficiency. 

        6.     If
we default in the performance or fulfillment of any of the terms, conditions, promises, covenants, provisions or warranties on our part to be performed or fulfilled
under or pursuant to this Agreement which you deem material in the good faith exercise of your reasonable discretion, you may, at your option without waiving your right to enforce this Agreement
according to its terms, immediately or at any time thereafter and without notice to us, perform or fulfill the same or cause the performance or fulfillment of the same for our account and at our sole
cost and expense, and the cost and expense thereof (including reasonable attorneys' fees) shall be added to the Obligations and shall be payable on demand with interest thereon at the highest rate
permitted by law. 

        7.     We
appoint you, any of your officers, employees or any other person or entity whom you may designate as our attorney, with power to execute such documents in our behalf
and to supply any omitted information and correct patent errors in any documents executed by us or on our behalf; to file financing statements against us covering the Collateral; to sign our name on
public records; and to do all other things you deem necessary to carry out this Agreement. We hereby ratify and approve all acts of the attorney and neither you nor the attorney will be liable for any
acts of commission or omission, nor for any error of judgment or mistake of fact or law. This power, being coupled with an interest, is irrevocable so long as any Obligations remains unpaid. 

        8.     No
delay or failure on your part in exercising any right, privilege or option hereunder shall operate as a waiver of such or of any other right, privilege, remedy or
option, and no waiver whatever shall be valid unless in writing, signed by you and then only to the extent therein set forth, and no waiver by you of any default shall operate as a waiver of any other
default or of the same default on a future occasion. Your books and records containing entries with respect to the Obligations shall be admissible in evidence in any action or proceeding, shall be
binding upon us for the purpose of establishing the items therein set forth and shall constitute prima facie proof thereof. You shall have the right to enforce any one or more of the remedies
available to you, successively, alternately or concurrently. We agree to join with you in executing financing statements or other instruments to the extent required by the Uniform Commercial Code in
form satisfactory to you and in executing such other documents or instruments as may be required or deemed necessary by you for purposes of affecting or continuing your security interest in the
Collateral. 

        9.     This
Agreement shall be governed by and construed in accordance with the laws of the State of New York and cannot be terminated orally. All of the rights, remedies,
options, privileges and elections given to you hereunder shall inure to the benefit of your successors and assigns. The term "you" as herein used shall include your company, any parent of your
company, any of your subsidiaries and any co-subsidiaries of your parent, whether now existing or hereafter created or acquired, and all of the terms, conditions, promises, covenants,
provisions and warranties of this Agreement shall inure to the benefit of and shall bind the representatives, successors and assigns of each of us and them. You and we hereby (a) waive any and
all right to trial by jury in litigation relating to this Agreement and the transactions contemplated hereby and we agree not to assert any counterclaim in such litigation, (b) submit to the
nonexclusive jurisdiction of any New York State court sitting in the borough of Manhattan, the city of New York and (c) waive any objection you or we may have as to the bringing or maintaining
of such action with any such court. 

        10.   All
notices from you to us shall be sufficiently given if mailed or delivered to us at our address set forth below. 

	 	 	 	 	 	 	Very truly yours,
	

 	
 	

 	
 	

 	
 	

DIGITAL ANGEL CORPORATION
	

 	
 	

 	
 	

 	
 	

By:	
 	

 	
 	

 
	 	 	 	 	 	 	 	 	/s/  JAMES P. SANTELLI      

	 	 	 	 	 	 	 	 	Name:	 	James P. Santelli
	 	 	 	 	 	 	 	 	Title:	 	Vice President
	

 	
 	

 	
 	

 	
 	

Address:	
 	

490 Villaume Avenue

South St. Paul, MN 55075
	

 	
 	

 	
 	

 	
 	

Dated as of:	
 	

July 31, 2003
	

ACKNOWLEDGED:	
 	

 	
 	

 	
 	

 
	

LAURUS MASTER FUND, LTD.	
 	

 	
 	

 	
 	

 
	

By:	
 	

 	
 	

 	
 	

 	
 	

 	
 	

 
	 	 	/s/  DAVID GRIN      
	 	 	 	 	 	 
	 	 	Name:	 	David Grin	 	 	 	 	 	 
	 	 	Title:	 	 	 	 	 	 	 	 

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Exhibit 10.3

SECURITY AGREEMENT

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