Document:

Exhibit 10.4

    
      

    

    Exhibit
      10.4

    

    SECURITY
      AGREEMENT

    

    THIS
      SECURITY AGREEMENT, dated as of February 6, 2007 (this “Agreement”),
      is by
      and among DIGITAL ANGEL CORPORATION, a Delaware corporation (the “Company”),
      each
      of the subsidiaries of the Company
      that are
      signatories hereto (together with any other entity that may become an additional
      party hereto,
      the
“Company Subsidiaries”
      and,
collectively
      with the Company, the “Debtors”),
      Imperium
      Advisers, LLC, in its capacity as collateral agent (in such capacity, the
“Collateral
      Agent”),
      for
      the benefit of the
      undersigned holders (the “Holders”) of
      the
      Company’s Senior Secured Debentures, dated as of the date hereof (the
“Debentures”).
      The
      Holders, Collateral Agent and their endorsees, transferees and assigns are
      sometimes collectively referred to herein as
      the
“Secured
      Parties”).

    

    W
      I T N E S S E T H:

    

    WHEREAS,
      pursuant to that certain Securities Purchase Agreement, dated as of the date
      hereof, by and between the Company and the Secured Parties (the “Purchase
      Agreement”),
      the
      Company has agreed to sell and the Secured Parties have severally agreed to
      purchase, the Debentures;
      and

    

    WHEREAS,
      pursuant to a certain Subsidiary Guarantee dated as of the date hereof (the
      “Guarantee”),
      the
      Company Subsidiaries have jointly
      and
      severally agreed to guaranty and act as surety for satisfaction of all payment
      and other obligations of the Company arising under the Debentures and the other
      Transaction Documents (as defined in the Purchase Agreement); and

    

    WHEREAS,
      it is a condition to the obligation of the Secured Parties to enter into the
      transactions contemplated by the Purchase Agreement, the Debentures and the
      other Transaction Documents, that the Debtors execute and deliver to the
Collateral
      Agent for the benefit of the Secured
      Parties this Agreement and that the Debtors grant the
      Collateral Agent for the benefit of each Secured Party, pari
      passu
      with
      each of the other
      Secured
      Parties, a perfected security interest in the assets and properties of the
      Debtors described herein, to secure the prompt payment, performance and
      discharge in full of all of the Company’s obligations under the Debentures and
      the other Transaction Documents.

    

    NOW,
      THEREFORE, in consideration of the agreements herein contained and for other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties hereto hereby agree as follows:

    

    1.    
CERTAIN
      DEFINITIONS.
      

    

    Capitalized
      terms used herein and not otherwise defined shall have the meanings given to
      them in the Purchase Agreement. Terms used herein that are defined in Article
      9
      of the UCC but not otherwise defined in this Agreement (such as “account”,
      “chattel
      paper”,
      “commercial
      tort claim”,
      “deposit
      account”,
      “document”,
      “equipment”,
      “fixtures”,
      “general
      intangibles”,
      “goods”,
      “instruments”,
      “inventory”,
      “investment
      property”,
      “letter-of-credit
      rights”,
      “proceeds”
and
      “supporting
      obligations”)
      shall
      have the respective meanings given such terms in Article 9 of the UCC. As used
      in this Agreement, the following terms shall have the meanings set forth in
      this
Section
      1.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Collateral”
means
      all of the Debtors’ respective rights, title and interest in and to the
      collateral in which the Secured Parties are granted a security interest by
      this
      Agreement and which shall include all assets and properties of the Debtors,
      including the following personal property presently
      owned or hereafter acquired by the Debtors,
      wherever situated, and all additions and accessions thereto and all
      substitutions and replacements thereof, and all proceeds, products and accounts
      thereof, including, without limitation, all proceeds from the sale or transfer
      of the Collateral and of insurance covering the same and of any tort claims
      in
      connection therewith, and all dividends, interest, cash, notes, securities,
      equity interest or other property at any time and from time to time acquired,
      receivable or otherwise distributed in respect of, or in exchange for, any
      or
      all of the Pledged Securities (as defined below):

    

    (i)
    All
      goods, including, without limitation, (A) all machinery, equipment, computers,
      motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
      and
      general tools, fixtures, test and quality control devices and other equipment
      of
      every kind and nature and wherever situated, together with all documents of
      title and documents representing the same, all additions and accessions thereto,
      replacements therefor, all parts therefor, and all substitutes for any of the
      foregoing and all other items used and useful in connection with any Debtor’s
      businesses and all improvements thereto; and (B) all inventory;

    

    (ii)    All
      contract rights and other general intangibles, including, without limitation,
      all partnership interests, membership interests, stock or other securities,
      rights
      under any of the Organizational Documents, agreements related to the Pledged
      Securities, licenses,
      distribution and other agreements, computer software (whether “off-the-shelf”,
      licensed from any third party or developed by any Debtor), computer software
      development rights, leases, franchises, customer lists, quality control
      procedures, grants and rights, goodwill, trademarks, service marks, trade
      styles, trade names, patents, patent applications, copyrights, Intellectual
      Property, and income tax refunds;

    

    (iii)   All
      accounts, together with all instruments, all documents of title representing
      any
      of the foregoing, all rights in any merchandising, goods, equipment, motor
      vehicles and trucks which any of the same may represent, and all right, title,
      security and guaranties with respect to each account, including any right of
      stoppage in transit;

    

    (iv)   All
      documents, letter-of-credit rights, instruments and chattel paper;

    

    (v)    All
      commercial tort claims;

    

    (vi)   All
      deposit accounts and all cash (whether or not deposited in such deposit
      accounts);

    

    (vii)   
        All
      investment property;

    

    (viii)  
        All
      supporting obligations;

     

    
      
        
        

      

      
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    (ix)   All
      files, records, books of account, business papers, and computer programs;
      and

    

    (x)    the
      products and proceeds of all of the foregoing Collateral set forth in
clauses
      (i)-(ix)
      above.

    

    Without
      limiting the generality of the foregoing, the term “Collateral”
shall
      include all investment property and general intangibles respecting ownership
      and/or other equity interests in each Company Subsidiary, including, without
      limitation, the shares of capital stock and the other equity interests listed
      on
Schedule
      1
      (as the
      same may be modified from time to time pursuant to the terms hereof),
      and
      any
      other shares of capital stock and/or other equity interests of any other direct
      or indirect subsidiary of any Debtor obtained in the future,
      in each
      case, all certificates representing such shares and/or equity interests and,
      in
      each case, all rights, options, warrants, stock, other securities and/or equity
      interests that may hereafter be received, receivable or distributed in respect
      of, or exchanged for, any of the foregoing (all of the foregoing being referred
      to herein as the “Pledged
      Securities”)
      and
      all rights arising under or in connection with the Pledged Securities,
      including, but not limited to, all dividends, interest and cash.

    

    Notwithstanding
      the foregoing, nothing herein shall be deemed to constitute an assignment of
      any
      asset which, in the event of an assignment, becomes void by operation of
      applicable law or the assignment of which is otherwise prohibited by applicable
      law (in each case to the extent that such applicable law is not overridden
      by
      Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
      provided,
      however,
      that to
      the extent permitted by applicable law, this Agreement shall create a valid
      security interest in such asset and, to the extent permitted by applicable
      law,
      this Agreement shall create a valid security interest in the proceeds of such
      asset.

    

    “Event
      of Default”
means
      the occurrence of either of the following: (i) an Event of Default (as defined
      in the Debentures); or (ii) any provision of this Agreement shall at any time
      for any reason be declared to be null and void, or the validity or
      enforceability thereof shall be contested by a Debtor, or a proceeding shall
      be
      commenced by a Debtor, or by any governmental authority having jurisdiction
      over
      a Debtor, seeking to establish the invalidity or unenforceability thereof,
      or a
      Debtor shall deny that such Debtor has any liability or obligation purported
      to
      be created under this Agreement.

     

    “Intellectual
      Property”
means
      the collective reference to all existing rights, priorities and privileges
      relating to intellectual property, whether arising under United States,
      multinational or foreign laws or otherwise, including, without limitation,
      (i)
      all copyrights arising under the laws of the United States, any other country
      or
      any political subdivision thereof, whether registered or unregistered and
      whether published or unpublished, all registrations and recordings thereof,
      and
      all applications in connection therewith, including, without limitation, all
      registrations, recordings and applications in the United States Copyright
      Office, (ii) all letters patent of the United States, any other country or
      any
      political subdivision thereof, all reissues and extensions thereof, and all
      applications for letters patent of the United States or any other country and
      all divisions, continuations and continuations-in-part thereof, (iii) all
      trademarks, trade names, corporate names, company names, business names,
      fictitious business names, trade dress, service marks, logos, domain names
      and
      other source or business identifiers, and all goodwill associated therewith,
      now
      existing or hereafter adopted or acquired, all
      registrations and recordings thereof, and all applications in connection
      therewith, whether in the United States Patent and Trademark Office or in any
      similar office or agency of the United States, any State thereof or any other
      country or any political subdivision thereof, or otherwise, and all common
      law
      rights related thereto, (iv) all trade secrets arising under the laws of the
      United States, any other country or any political subdivision thereof, (v)
      all
      rights to obtain any reissues, renewals or extensions of the foregoing, (vi)
      all
      licenses for any of the foregoing, and (vii) all causes of action for
      infringement of the foregoing.

     

    
      
        
        

      

      
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    “Majority
      in Interest”
shall
      mean, at any time of determination, the majority in interest (based on
      then-outstanding principal amounts of Debentures at the time of such
      determination) of the Secured Parties.

    

    “Necessary
      Endorsement”
shall
      mean undated stock powers endorsed in blank or other proper instruments of
      assignment duly executed and such other instruments or documents as the Secured
      Parties may reasonably request.

    

    “Obligations”
means
      all of the Debtors’ obligations under this Agreement, all of the Company’s
      obligations under the Debentures and the other Transaction Documents, and all
      of
      the Company Subsidiaries’ obligations under the Subsidiary Guarantee, in each
      case, whether now or hereafter existing, voluntary or involuntary, direct or
      indirect, absolute or contingent, liquidated or unliquidated, whether or not
      jointly owed with others, and whether or not from time to time decreased or
      extinguished and later increased, created or incurred, and all or any portion
      of
      such obligations or liabilities that are paid, to the extent all or any part
      of
      such payment is avoided or recovered directly or indirectly from any of the
      Secured Parties as a preference, fraudulent transfer or otherwise as such
      obligations may be amended, supplemented, converted, extended or modified from
      time to time. Without limiting the generality of the foregoing, the term
“Obligations”
shall
      include, without limitation: (i) principal of, and interest on the Debentures
      and the loans extended pursuant thereto; (ii) any and all other fees,
      indemnities, costs, obligations and liabilities of the Debtors from time to
      time
      under or in connection with this Agreement, the Debentures, the Subsidiary
      Guarantee or the other Transaction Documents; and (iii) all amounts (including
      but not limited to post-petition interest) in respect of the foregoing that
      would be payable but for the fact that the obligations to pay such amounts
      are
      unenforceable or not allowable due to the existence of a bankruptcy,
      reorganization or similar proceeding involving any Debtor.

    

    “Organizational
      Documents”
means
      with respect to an entity, the documents by which such entity
      was
      organized (such as a certificate of incorporation, certificate of limited
      partnership or articles of organization, and including, without limitation,
      any
      certificates of designation for preferred stock or other forms of preferred
      equity) and which relate to the internal governance of such entity
      (such as
      bylaws, a partnership agreement or an operating, limited liability or members
      agreement).

     

    “UCC”
means
      the Uniform Commercial Code of the State of New York and or any other applicable
      law of any state or states which has jurisdiction with respect to all, or any
      portion of, the Collateral or this Agreement, from time to time. It is the
      intent of the parties that defined terms in the UCC should be construed in
      their
      broadest sense so that the term “Collateral”
will
      be
      construed in its broadest sense. Accordingly if there are, from time to time,
      changes to defined terms in the UCC that broaden the definitions, they are
      incorporated herein and if existing definitions in the UCC are broader than
      the
      amended definitions, the existing ones shall be controlling. 

    
      
        
        

      

      
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              2.

            	
              GRANT
                OF FIRST PRIORITY SECURITY INTEREST.
                

            

    

    

    As
      an
      inducement for the Secured Parties to provide the loans as evidenced by the
      Debentures and to secure the complete and timely payment, performance and
      discharge in full, as the case may be, of all of the Obligations, each
      Debtor
      hereby unconditionally and irrevocably pledges, grants and hypothecates to
      the
Collateral
      Agent, for the benefit of each Secured Party pari
      passu with
      each
      of the other Secured
      Parties,
      a
      continuing security interest in and to, a lien upon and a right of set-off
      against all of their respective right, title and interest of whatsoever kind
      and
      nature in and to, the Collateral (the “Security
      Interest”).
      The
      Security Interest granted hereunder is a first priority lien and security
      interest except with respect to Collateral encumbered by Permitted Liens. Each
      Holder agrees, at the Debtors’ sole cost and expense, (i) to execute and deliver
      to the Debtors such instruments and documents reasonably requested by the
      Debtors and in a form and substance reasonably satisfactory to such Holder,
      and
      (ii) to take such further action as may be reasonably requested by the Debtors;
      in each case, as reasonably necessary to subordinate its Security Interest
      in
      the accounts receivable of the Company and Outerlink Corporation to a first
      priority lien on such accounts receivable securing the Bank
      Facility.

     

    
      	
              3.

            	
              DELIVERY
                OF CERTAIN COLLATERAL.
                

            

    

    

    Contemporaneously
      or prior to the execution of this Agreement, each Debtor shall deliver or cause
      to be delivered to the Collateral
      Agent, for the benefit of the Secured
      Parties (a) any and all certificates and other instruments representing or
      evidencing the Pledged Securities, and (b) any and all certificates and other
      instruments or documents representing any of the other Collateral, in each
      case,
      together with all Necessary Endorsements. The Debtors are, contemporaneously
      with the execution hereof, delivering to the Collateral
      Agent, for the benefit of the Secured
      Parties, or have previously delivered to
      the
      Secured Parties,
      a true
      and correct copy of each Organizational Document governing any of the Pledged
      Securities.

    

    
      	
              4.

            	
              REPRESENTATIONS,
                WARRANTIES, COVENANTS AND AGREEMENTS OF THE DEBTORS.
                

            

    

    

    Each
      Debtor represents and warrants to, and covenants and agrees with, the
Collateral
      Agent, for the benefit of the Secured
      Parties,
      as
      follows:

    

    4.1    Good
      Standing; Due Authorization; Enforceability.

    

    (a)    Each
      Debtor is duly organized and in good standing in the jurisdiction of its
      formation. Each Debtor shall at all times preserve and keep in full force and
      effect its valid existence and good standing and any rights and franchises
      material to its business. 

     

    
      
        
        

      

      
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    (b)    Each
      Debtor
      has the requisite corporate,
      partnership, limited liability company or other power
      and
      authority to enter into this Agreement and otherwise to carry out its
      obligations hereunder. The execution, delivery and performance by each
      Debtor
      of this Agreement and the filings contemplated therein have been duly authorized
      by all necessary action on the part of such
      Debtor
      and no further action is required by such
      Debtor.
      This Agreement has been duly executed and delivered by each
      Debtor.

    

    (c)    This
      Agreement constitutes the legal, valid and binding obligation of each
      Debtor,
      enforceable against each
      Debtor
      in accordance with its terms except as such enforceability may be limited by
      applicable bankruptcy, insolvency, reorganization and similar laws of general
      application relating to or affecting the rights and remedies of creditors and
      by
      general principles of equity.

    

    4.2    No
      Conflicts. 
      The
      execution, delivery and performance of this Agreement by the Debtors (other
      than
      any issuance by the Company of any Stock Option Shares or Warrant Shares in
      violation of Article 9 of the Company’s certificate of incorporation as in
      effect as of the date hereof) do not (i) violate any of the provisions of any
      Organizational Documents of any
      Debtor
      or any judgment, decree, order or award of any court, governmental body or
      arbitrator or any applicable law, rule or regulation applicable to any
      Debtor
      or (ii) conflict with, or constitute a default (or an event that with notice
      or
      lapse of time or both would become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation (with or without
      notice, lapse of time or both) of, any agreement, credit facility, debt or
      other
      instrument (evidencing any Debtor’s debt or otherwise) or other understanding to
      which any
      Debtor
      is a party or by which any property or asset of any
      Debtor
      is bound or affected. No consent (including, without limitation, from
      stockholders or creditors of any
      Debtor)
      is required for any
      Debtor
      to enter into and perform its obligations hereunder (other than those consents
      that have already been obtained).

     

    4.3    Debtor
      Information; Validity, Perfection and Maintenance of Security
      Interests.

    

    (a)    All
      of
      the information set forth on Schedule
      4.3(a),
      including, without limitation, each Debtor’s name, jurisdiction of organization
      and location of Collateral, are true, correct and complete in all respects.
      No
      Debtor shall change its name, type of organization, jurisdiction of
      organization, organizational identification number (if it has one), legal or
      corporate structure, or identity, or add any new fictitious name unless it
      provides at least thirty (30) days’ prior written notice to the Secured Parties
      of such change and, at the time of such written notification, such Debtor
      provides any financing statements or fixture filings necessary to perfect and
      continue perfected the perfected Security Interest granted and evidenced by
      this
      Agreement. 

    

    (b)    This
      Agreement creates in favor of the Secured Parties a valid security interest
      in
      the Collateral, securing the payment and performance of the Obligations. With
      respect to each Debtor that is organized in the United States, upon filing
      of
      UCC-1 financing statements, in the forms attached hereto as Exhibit
      A,
      with
      the secretary of state’s office of the state in which such Debtor is
      organized (collectively,
      the “Financing
      Statements”),
      and
      payment of the applicable filing fees, all security interests created hereunder
      in any Collateral which may be perfected by filing UCC financing statements
      shall have been duly perfected. No
      consent of any third parties and no authorization, approval or other action
      by,
      and no notice to or filing with, any governmental authority or regulatory body
      is required for (i) the execution, delivery and performance of this Agreement,
      (ii) the creation or perfection of the Security Interests created hereunder
      in
      the Collateral, or (iii) the enforcement of the rights of the Secured Parties
      hereunder.

    
      
        
        

      

      
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    (c)    Each
      Debtor
      hereby authorizes the Collateral Agent, on behalf of the Secured Parties, to
      file the Financing Statements and any other financing statements or other
      documents under the UCC or under any other applicable law with respect to the
      Security Interest with the proper filing and recording agencies in any U.S.
      or
      foreign jurisdiction deemed proper by them. The Debtors shall, at the Debtors’
sole cost and expense, promptly execute and/or deliver to the Collateral Agent,
      on behalf of the Secured Parties, such further deeds, mortgages, assignments,
      security agreements, financing statements or other instruments, documents,
      certificates and assurances and take such further action as the Secured Parties
      may from time to time request and may in their reasonable discretion deem
      necessary to perfect, protect or enforce its security interest in the Collateral
      including, without limitation, if applicable, (i) the execution and delivery
      of
      a separate security agreement with respect to the Debtors’ Intellectual Property
      in which the Secured Parties have been granted a security interest hereunder,
      and (ii) amending the organizational documents of the Debtors’ to the extent
      necessary to permit a pledge and/or transfer of the Pledged Securities
      hereunder; in each case, in a form reasonably acceptable to the Secured
      Parties.

    

    (d)    The
      Debtors shall at all times maintain the liens and Security Interest provided
      for
      hereunder as valid and perfected first priority liens and security interests
      in
      the Collateral in favor of the Secured Parties until this Agreement and the
      Security Interest hereunder shall be terminated pursuant to Section
      13;
      provided,
      however,
      that
      notwithstanding the foregoing, it shall not be a breach of this Agreement if
      the
      Security Interest granted hereunder is not a first priority lien with respect
      to
      Collateral encumbered by Permitted Liens. The Debtors hereby agree to defend
      the
      same against the claims of any and all persons and entities. The Debtors shall
      obtain and furnish to the Collateral Agent, on behalf of the Secured Parties,
      from time to time, upon demand, such releases and/or subordinations of claims
      and liens which may be required to maintain the priority of the Security
      Interest hereunder.

    

    4.4    Collateral.

    

    (a)    Except
      as
      set forth on Schedule 3.22 of the Purchase Agreement, the Debtors are the sole
      owner of the Collateral (except for non-exclusive licenses granted by any Debtor
      in the ordinary course of business), free and clear of any Liens (other than
      Permitted Liens), security interests, encumbrances, rights or claims, and are
      fully authorized to grant the Security Interest. There has been no adverse
      decision that would have a Material Adverse Effect on any
      Debtor’s
      claim of ownership rights in or exclusive rights to use the Collateral in any
      jurisdiction or to any
      Debtor’s
      right to keep and maintain such Collateral in full force and effect, and there
      is no proceeding involving said rights pending or, to the best knowledge of
      any
      Debtor,
      threatened before any court, judicial body, administrative or regulatory agency,
      arbitrator or other governmental authority in which an adverse decision would
      have a Material Adverse Effect.

    

    (b)    The
      Debtors shall keep and preserve their equipment, inventory and other tangible
      Collateral in good condition, repair and order, ordinary wear and tear excepted.
      Each Debtor shall take all steps reasonably necessary to diligently pursue
      and
      seek to preserve, enforce and collect any rights, claims, causes of action
      and
      accounts receivable in respect of the Collateral.

     

    
      
        
        

      

      
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    (c)    Except
      with respect to the contemplated relocations described on Schedule
      4.4(c), each
      Debtor
      shall at all times maintain its tangible Collateral at the locations set forth
      under its name on Schedule
      4.3(a)
      and may
      not relocate such Collateral unless it delivers to the Secured Parties at least
      30 days prior to such relocation (i) written notice of such relocation and
      the
      new location thereof (which must be within the United States) and (ii) evidence
      that appropriate financing statements under the UCC and other necessary
      documents have been filed and recorded and other steps have been taken to
      perfect the Security Interest to create in favor of the Secured Parties a valid,
      perfected and continuing perfected first priority lien in the Collateral. The
      Debtors shall not transfer, pledge, hypothecate, encumber, license, sell or
      otherwise dispose of any of the Collateral (except for non-exclusive licenses
      granted by a Debtor in its ordinary course of business and sales of inventory
      or
      assets by such Debtor in its ordinary course of business that do not exceed
      $50,000 per annum) without the prior written consent of a Majority in Interest.
      The Debtors shall not operate or locate any such Collateral (or cause to be
      operated or located) in any area excluded from insurance coverage. 

    

    (d)    Except
      with respect to the Permitted Liens, there is not on file in any U.S. or foreign
      governmental or regulatory authority, agency or recording office an effective
      financing statement, security agreement, license or transfer or any notice
      of
      any of the foregoing (other than those that will be filed in favor of the
      Secured Parties pursuant to this Agreement) covering or affecting any of the
      Collateral. So long as this Agreement shall be in effect, the Debtors shall
      not
      execute and shall not knowingly permit to be on file in any such office or
      agency any such financing statement or other document or instrument (except
      to
      the extent filed or recorded in favor of the Secured Parties pursuant to the
      terms of this Agreement).

    

    (e)    The
      capital stock and other equity interests listed on Schedule
      1
      represent all of the capital stock and other equity interests (including stock
      options and warrants) owned, directly or indirectly, by the Debtors. All of
      the
      Pledged Securities are validly issued, fully paid and nonassessable, and the
      Debtors are the legal and beneficial owner of the Pledged Securities, free
      and
      clear of any lien, security interest or other encumbrance except for the
      security interests created by this Agreement. The
      ownership and other equity interests in partnerships and limited liability
      companies (if any)
      included
      in the Pledged Securities
      (the
“Pledged
      Interests”)
      by
      their express terms do not provide that they are securities governed by Article
      8 of the UCC and are not held in a securities account or by any financial
      intermediary. Each Debtor shall vote the Pledged Securities to comply with
      the
      covenants and agreements set forth herein and the other Transaction
      Documents.

    

    (f)    Each
      Debtor shall, within ten (10) days of obtaining knowledge thereof, advise
      Collateral Agent, on behalf of the Secured Parties, promptly, in sufficient
      detail, of any substantial change in the Collateral, and of the occurrence
      of
      any event which would have a Material Adverse Effect on the value of the
      Collateral or on the Secured Parties’ security interest therein. Each Debtor
      shall permit the Secured Parties and their representatives and agents to inspect
      the Collateral at any time during normal business hours, upon reasonable prior
      notice, and to make copies of records pertaining to the Collateral as may be
      requested by a Secured Party from time to time.

    
      
        
        

      

      
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    (g)    All
      information heretofore, herein or hereafter supplied to the Secured Parties
      by
      or on behalf of the Debtors with respect to the Collateral is accurate and
      complete in all material respects as of the date furnished.

     

    4.5    Insurance.
      Each
      Debtor shall maintain with financially sound and reputable insurers, insurance
      with respect to the Collateral against loss or damage of the kinds and in the
      amounts customarily insured against by entities of established reputation having
      similar properties similarly situated and in such amounts as are customarily
      carried under similar circumstances by other such entities and otherwise as
      is
      prudent for entities engaged in similar businesses but in any event sufficient
      to cover the full replacement cost thereof. Each Debtor shall cause each
      insurance policy issued in connection herewith to provide, and the insurer
      issuing such policy to certify to the Collateral Agent, on behalf of the Secured
      Parties, that (a) the Collateral Agent, on behalf of the Secured Parties, will
      be named as lender loss payee and additional insured under each such insurance
      policy; (b) if such insurance be proposed to be cancelled or materially changed
      for any reason whatsoever, such insurer will promptly notify the Collateral
      Agent, on behalf of the Secured Parties, and such cancellation or change shall
      not be effective as to the Secured Parties for at least thirty (30) days after
      receipt by the Collateral Agent, on behalf of the Secured Parties, of such
      notice, unless the effect of such change is to extend or increase coverage
      under
      the policy; and (c) the Secured Parties will have the right (but no obligation)
      at its election to remedy any default in the payment of premiums within thirty
      (30) days of notice from the insurer of such default. If no Event of Default
      (as
      defined in the Debentures) exists and if the proceeds arising out of any claim
      or series of related claims do not exceed $50,000, loss payments in each
      instance will be applied by the applicable Debtor
      to
      the repair and/or replacement of property with respect to which the loss was
      incurred to the extent reasonably feasible, and any loss payments or the balance
      thereof remaining, to the extent not so applied, shall be payable to the
      applicable Debtor; provided,
      however,
      that
      payments received by any Debtor after an Event of Default occurs and is
      continuing or in excess of $50,000 for any occurrence or series of related
      occurrences shall be paid to the Secured Parties, on a pari
      passu
      basis
      with each of the other Secured Parties, and, if received by such Debtor, shall
      be held in trust for and immediately paid over to the Secured Parties unless
      otherwise directed in writing by the Collateral Agent, on behalf of the Secured
      Parties. Copies of such policies or the related certificates, in each case,
      naming the Collateral Agent, on behalf of the Secured Parties, as lender loss
      payee and additional insured shall be delivered to the Collateral Agent, on
      behalf of the Secured Parties, at least annually and at the time any new policy
      of insurance is issued.

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    4.6    Solvency.
      Based
      on the financial condition of each Debtor as of the date hereof, each Debtor’s
      fair saleable value of its assets exceeds the amount that will be required
      to be
      paid on or in respect of such Debtor’s existing debts and other liabilities
      (including contingent liabilities) as they mature. Based on the financial
      condition of each Debtor as of the date hereof, each Debtor’s assets do not
      constitute unreasonably small capital to carry out its business as now conducted
      and as proposed to be conducted including such Debtor’s capital needs taking
      into account the particular capital requirements of the business conducted
      by
      such Debtor, and projected capital requirements and capital availability
      thereof. No
      Debtor
      intends
      to incur
      debts beyond its ability to pay such debts as they mature (taking into account
      the timing and amounts of cash to be payable on or in respect of its debt).
      Based on the financial condition of each Debtor as of the date hereof, the
      Debtors believe that the current cash flow of such Debtor, were it to liquidate
      all of its assets, would be sufficient to pay all amounts on or in respect
      of
      its debt when such amounts are required to be paid. No Debtor intends, or
      believes, that final judgments against it in actions for money damages will
      be
      rendered at a time when, or in an amount such that, it will be unable to satisfy
      any such judgments promptly in accordance with their terms (taking into account
      the maximum reasonable amount of such judgments in any such actions and the
      earliest reasonable time at which such judgments might be rendered). Each Debtor
      believes that such Debtor’s cash flow will
      at
      all times be sufficient to pay all such judgments promptly in accordance with
      their terms. As of the date hereof, no Debtor is subject to any bankruptcy,
      insolvency or similar proceeding. Each
      Debtor acknowledges that it shall receive fair and reasonably equivalent value
      from the Holders in exchange for the grant to them of the Security Interest
      hereunder.

    

    
      	
              5.

            	
              EFFECT
                OF PLEDGE ON CERTAIN RIGHTS.
                

            

    

    

    If
      any of
      the Collateral subject to this Agreement consists of nonvoting equity or
      ownership interests (regardless of class, designation, preference or rights)
      that may be converted into voting equity or ownership interests upon the
      occurrence of certain events (including, without limitation, upon the transfer
      of all or any of the other stock or assets of the issuer), it is agreed that
      the
      pledge of such equity or ownership interests pursuant to this Agreement or
      the
      enforcement of any of the Secured Parties’ rights hereunder shall not be deemed
      to be the type of event which would trigger such conversion rights
      notwithstanding any provisions in the Organizational Documents or agreements
      to
      which the Debtors or any of the Collateral is subject or to which the Debtors
      are party.

    

    
      	
              6.

            	
              DUTY
                TO HOLD IN TRUST.
                

            

    

    

    6.1    Cash
      and Payment Obligations.
      Upon
      the occurrence of an Event of Default and the acceleration of the Debentures
      in
      accordance with the terms thereof, and at any time thereafter, each Debtor
      shall, upon receipt of any revenue, income, dividend, interest or other sums
      subject to the Security Interest, whether payable pursuant to the Debentures
      or
      otherwise, or of any check, draft, note, trade acceptance or other instrument
      evidencing an obligation to pay any such sum, hold the same in trust for and
      on
      behalf of and for the benefit of the Secured Parties, and shall forthwith
      endorse and transfer any such sums or instruments, or both (to the extent
      permitted by law), to the Collateral Agent for distribution to the Secured
      Parties, pro-rata in proportion to their initial purchases of Debentures for
      application to the satisfaction of the Obligations (and if any Debenture is
      not
      outstanding, pro
      rata
      in
      proportion to the initial purchases of the remaining
      Debentures).

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    6.2    Securities
      and Other Assets.
      If a
      Debtor shall become entitled to receive or shall receive any securities or
      other
      property (including, without limitation, shares of Pledged Securities or
      instruments representing Pledged Securities acquired after the date hereof,
      or
      any options, warrants, rights or other similar property or certificates
      representing a dividend, or any distribution in connection with any
      recapitalization, reclassification or increase or reduction of capital, or
      issued in connection with any reorganization of any of its direct or indirect
      subsidiaries) in respect of the Pledged Securities (whether as an addition
      to,
      in substitution of, or in exchange for, such Pledged Securities or otherwise),
      such Debtor agrees to (i) accept the same as the agent of the Secured Parties;
      (ii) hold the same in trust on behalf of and for the benefit of the Secured
      Parties; and (iii) to deliver any and all certificates or instruments evidencing
      the same to the Collateral Agent, for the benefit of the Secured Parties, on
      or
      before the close of business on the fifth business day following the receipt
      thereof by such Debtor, in the exact form received together with the Necessary
      Endorsements, to be held by the Collateral Agent subject to the terms of this
      Agreement as Collateral.

    

    7.    
RIGHTS
      AND REMEDIES UPON DEFAULT.
      

    

    7.1    Scope
      of Rights and Remedies.
      Upon
      the occurrence of any Event of Default and the acceleration of the Debentures
      in
      accordance with the terms thereof, and at any time thereafter, the Collateral
      Agent, for the benefit of the Secured Parties, acting through any agent
      appointed by it for such purpose, shall have the right to exercise all of the
      remedies conferred hereunder and under the Debentures, and the Collateral Agent,
      for the benefit of the Secured Parties, shall have all the rights and remedies
      of a secured party under the UCC. Without limitation, the Collateral Agent
      shall
      have the following rights and powers:

    

    (a)    The
      Collateral Agent shall have the right to take possession of the Collateral
      and,
      for that purpose, enter, with the aid and assistance of any person, any premises
      where the Collateral, or any part thereof, is or may be placed and remove the
      same, and the Debtors shall assemble the Collateral and make it available to
      the
      Collateral Agent at places which the Collateral Agent shall reasonably select,
      whether at the Debtors’ premises or elsewhere, and make available to the
      Collateral Agent, without rent, all of the Debtors’ premises and facilities for
      the purpose of the Collateral Agent taking possession of, removing or putting
      the Collateral in saleable or disposable form.

    

    (b)    Upon
      notice to the Debtors by the Collateral Agent, all rights of the Debtors to
      exercise the voting and other consensual rights which it would otherwise be
      entitled to exercise and all rights of the Debtors to receive the dividends
      and
      interest which it would otherwise be authorized to receive and retain, shall
      cease. Upon such notice, the Collateral Agent shall have the right to receive
      any interest, cash dividends or other payments on the Collateral and, at the
      option of the Collateral Agent, to exercise in the Collateral Agent’s discretion
      all voting rights pertaining thereto. Without limiting the generality of the
      foregoing, the Collateral Agent shall have the right (but not the obligation)
      to
      exercise all rights with respect to the Collateral as if it were the sole and
      absolute owner thereof, including, without limitation, to vote and/or to
      exchange, at its sole discretion, any or all of the Collateral in connection
      with a merger, reorganization, consolidation, recapitalization or other
      readjustment concerning or involving the Collateral or a Debtor or any of its
      direct or indirect subsidiaries.

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (c)    The
      Collateral Agent shall have the right to assign, sell, lease or otherwise
      dispose of and deliver all or any part of the Collateral, at public or private
      sale or otherwise, either with or without special conditions or stipulations,
      for cash or on credit or for future delivery, in such parcel or parcels and
      at
      such time or times and at such place or places, and upon such terms and
      conditions as the Collateral Agent may deem commercially reasonable, all without
      (except as shall be required by applicable statute and cannot be waived)
      advertisement or demand upon or notice to the Debtors or right of redemption
      of
      the Debtors, which are hereby expressly waived. Upon each such sale, lease,
      assignment or other transfer of Collateral, the Collateral
      Agent
      may,
      unless prohibited by applicable law which cannot be waived, purchase all or
      any
      part of the Collateral being sold, free from and discharged of all trusts,
      claims, right of redemption and equities of any
      Debtor,
      which are hereby waived and released, subject to the application of proceeds
      in
      accordance with Section
      8.

    

    (d)    The
      Collateral
      Agent
      shall
      have the right (but not the obligation) to notify any account debtors and any
      obligors under instruments or accounts to make payments directly to the
Collateral
      Agent
      and to
      enforce the Debtors’ rights against such account debtors and
      obligors.

    

    (e)    The
      Collateral
      Agent
      may (but
      is not obligated to) direct any financial intermediary or any other person
      or
      entity holding any investment property to transfer the same to the Collateral
      Agent
      or its
      designee.

    

    (f)    The
      Collateral
      Agent
      may (but
      is not obligated to) transfer any or all Intellectual Property registered in
      the
      name of any
      Debtor
      at the United States Patent and Trademark Office and/or Copyright Office or
      and/or any similar foreign office into the name of the Collateral
      Agent
      or any
      designee or any purchaser of any Collateral.

    

    7.2    Disposition
      of Collateral.
      The
Collateral
      Agent
      shall
      comply with any applicable law in connection with each disposition of Collateral
      and such compliance will not be considered adversely to affect the commercial
      reasonableness of any sale of the Collateral. The Collateral
      Agent
      may sell
      the Collateral without giving any warranties and may specifically disclaim
      such
      warranties. If the Collateral
      Agent
      sells
      any of the Collateral on credit, the Debtors will only be credited with payments
      actually made by the purchaser. In addition, each Debtor waives any and all
      rights that it may have to a judicial hearing in advance of the enforcement
      of
      any of the Collateral
      Agent’s rights and remedies hereunder, including, without limitation, its right
      following an Event of Default to take immediate possession of the Collateral
      and
      to exercise its rights and remedies with respect thereto.

    

    7.3    License
      to Use Intellectual Property.
      For the
      sole purpose of enabling the
      Collateral
      Agent to further exercise rights and remedies under this Section
      7
      or
      elsewhere provided by agreement or applicable law, each Debtor hereby grants
      to
      the Collateral
      Agent
      an
      irrevocable, nonexclusive license (exercisable without payment of royalty or
      other compensation to such Debtor) to use, license or sublicense following
      an
      Event of Default and the acceleration of the Debentures in accordance with
      the
      terms thereof, any Intellectual Property now owned or hereafter acquired by
      such
      Debtor, and wherever the same may be located, and including in such license
      access to all media in which any of the licensed items may be recorded or stored
      and to all computer software and programs used for the compilation or printout
      thereof.

     

    
      	
              8.

            	
              APPLICATIONS
                OF PROCEEDS.
                

            

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    The
      proceeds of any such sale, lease or other disposition of the Collateral
      hereunder shall be applied first, to the expenses of retaking, holding, storing,
      processing and preparing for sale, selling, and the like (including, without
      limitation, any taxes, fees and other costs incurred in connection therewith)
      of
      the Collateral, to the reasonable attorneys’ fees and expenses incurred by the
      Collateral Agent and Secured Parties in enforcing their rights hereunder and
      in
      connection with collecting, storing and disposing of the Collateral, and then
      to
      satisfaction of the Obligations pro
      rata
      among
      the Secured Parties (based on then-outstanding principal amounts of Debentures
      at the time of any such determination), and to the payment of any other amounts
      required by applicable law, after which the Secured Parties shall pay to the
      Debtors any surplus proceeds. If, upon the sale, license or other disposition
      of
      the Collateral, the proceeds thereof are insufficient to pay all amounts to
      which the Secured Parties are legally entitled, the Debtors will be liable
      for
      the deficiency, together with interest thereon, at an interest rate equal to
      the
      lower of eighteen percent (18%) and the maximum rate permitted by applicable
      law
      (the “Default
      Rate”),
      and
      the reasonable fees of any attorneys employed by the Collateral Agent and the
      Secured Parties to collect such deficiency. To the extent permitted by
      applicable law, each Debtor waives all claims, damages and demands against
      the
      Collateral Agent and the Secured Parties arising out of the repossession,
      removal, retention or sale of the Collateral, except to the extent due to the
      gross negligence or willful misconduct of the Collateral Agent or the Secured
      Parties as determined by a final judgment (not subject to further appeal) of
      a
      court of competent jurisdiction.

    

    
      	
              9.

            	
              SECURITIES
                LAW PROVISION.
                

            

    

    

    Each
      Debtor recognizes that the Collateral
      Agent
      may be
      limited in its ability to effect a sale to the public of all or part of the
      Pledged Securities by reason of certain prohibitions in the Securities Act
      of
      1933, as amended, or other federal or state securities laws (collectively,
      the
“Securities
      Laws”),
      and
      may be compelled to resort to one or more sales to a restricted group of
      purchasers who may be required to agree to acquire the Pledged Securities for
      their own account, for investment and not with a view to the distribution or
      resale thereof. Each Debtor agrees that sales so made may be at prices and
      on
      terms less favorable than if the Pledged Securities were sold to the public,
      and
      that the Secured Parties has no obligation to delay the sale of any Pledged
      Securities for the period of time necessary to register the Pledged Securities
      for sale to the public under the Securities Laws. Each Debtor shall cooperate
      with the Collateral
      Agent
      in its
      attempt to satisfy any requirements under the Securities Laws (including,
      without limitation, registration thereunder if requested by the Collateral
      Agent) applicable to the sale of the Pledged Securities by the Collateral
      Agent.

     

    
      	
              10.

            	
              COSTS
                AND EXPENSES.
                

            

    

    

    Each
      Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
      incurred in connection with any filing required hereunder, including, without
      limitation, any financing statements pursuant to the UCC, continuation
      statements, partial releases and/or termination statements related thereto
      or
      any expenses of any searches reasonably required by the Secured Parties. The
      Debtors shall also pay all other claims and charges which in the reasonable
      opinion of the Secured Parties are reasonably likely to prejudice, imperil
      or
      otherwise affect the Collateral or the Security Interest therein. The Debtors
      will also, upon demand, pay to the Collateral
      Agent, for the benefit of the Secured
      Parties,
      the
      amount of any and all reasonable expenses, including the reasonable fees and
      expenses of its counsel and of any experts and agents, which the Secured Parties
      may incur in connection with (i) the enforcement of this Agreement, (ii) the
      custody or preservation of, or the sale of, collection from, or other
      realization upon, any of the Collateral, or (iii) the exercise or enforcement
      of
      any of the rights of the Secured Parties under the Debentures or this Agreement.
      Until so paid, any fees payable hereunder shall be added to the principal amount
      of the Debentures and shall bear interest at the Default Rate.

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    
      	
              11.

            	
              RESPONSIBILITY
                FOR COLLATERAL.

            

    

    

    The
      Debtors assume all liabilities and responsibility in connection with all
      Collateral, and the Obligations shall in no way be affected or diminished by
      reason of the loss, destruction, damage or theft of any of the Collateral or
      its
      unavailability for any reason. The Collateral
      Agent
      agrees
      to act in accordance with commercially reasonable standards and the UCC. Without
      limiting the generality of the foregoing, (a) no Secured Party (i) has any
      duty
      (either before or after an Event of Default) to collect any amounts in respect
      of the Collateral or to preserve any rights relating to the Collateral, or
      (ii)
      has any obligation to clean-up or otherwise prepare the Collateral for sale,
      and
      (b) each Debtor shall remain obligated and liable under each contract or
      agreement included in the Collateral to be observed or performed by such Debtor
      thereunder. No Secured Party shall have any obligation or liability under any
      such contract or agreement by reason of or arising out of this Agreement or
      the
      receipt by any Secured Party of any payment relating to any of the Collateral,
      nor shall the any Secured Party be obligated in any manner to perform any of
      the
      obligations of any Debtor under or pursuant to any such contract or agreement,
      to make inquiry as to the nature or sufficiency of any payment received by
      any
      Secured Party in respect of the Collateral or as to the sufficiency of any
      performance by any party under any such contract or agreement, to present or
      file any claim, to take any action to enforce any performance or to collect
      the
      payment of any amounts which may have been assigned to any Secured Party or
      to
      which it may be entitled at any time or times.

    

    
      	
              12.

            	
              SECURITY
                INTEREST ABSOLUTE.

            

    

    

    All
      rights of the Collateral
      Agent and the Secured
      Parties and all obligations of the Debtors hereunder, shall be absolute and
      unconditional, irrespective of: (a) any lack of validity or enforceability
      of
      this Agreement, the Debentures or any agreement entered into in connection
      with
      the foregoing, or any portion hereof or thereof; (b) any change in the time,
      manner or place of payment or performance of, or in any other term of, all
      or
      any of the Obligations, or any other amendment or waiver of or any consent
      to
      any departure from the Debentures or any other agreement entered into in
      connection with the foregoing; (c) any exchange, release or nonperfection of
      any
      of the Collateral, or any release or amendment or waiver of or consent to
      departure from any other collateral for, or any guaranty, or any other security,
      for all or any of the Obligations; (d) any action by
      any
      of
      the
      Secured Parties to obtain, adjust, settle and cancel in its sole discretion
      any
      insurance claims or matters made or arising in connection with the Collateral;
      or (e) any other circumstance which might otherwise constitute any legal or
      equitable defense available to a
      Debtor,
      or a discharge of all or any part of the Security Interest granted hereby.
      Until
      the Obligations shall have been paid and performed in full, the rights of the
      Secured Parties shall continue even if the Obligations are barred for any
      reason, including, without limitation, the running of the statute of limitations
      or bankruptcy. Each Debtor expressly waives presentment, protest, notice of
      protest, demand, notice of nonpayment and demand for performance. In the event
      that at any time any transfer of any Collateral or any payment received by
      the
Collateral
      Agent for the benefit of any Secured
      Party
      hereunder shall be deemed by final order of a court of competent jurisdiction
      to
      have been a voidable preference or fraudulent conveyance under the bankruptcy
      or
      insolvency laws of the United States, or shall be deemed to be otherwise due
      to
      any party other than the Secured Parties, then, in any such event, each Debtor’s
      obligations hereunder shall survive cancellation of this Agreement, and shall
      not be discharged or satisfied by any prior payment thereof and/or cancellation
      of this Agreement, but shall remain a valid and binding obligation enforceable
      in accordance with the terms and provisions hereof. Each Debtor waives all
      right
      to require any
      Secured
Party
      to
      proceed against any other person or entity
      or
to
      apply
      any Collateral which the
      Collateral Agent or any
      Secured
      Parties may hold at any time, or to marshal assets, or to pursue any other
      remedy. Each Debtor waives any defense arising by reason of the application
      of
      the statute of limitations to any obligation secured hereby.

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    
      	
              13.

            	
              TERM
                OF AGREEMENT.
                

            

    

    

    This
      Agreement and the Security Interest and any and all other rights granted hereby
      including the right to use any Intellectual Property or licenses shall terminate
      on the date on which all payments under the Debentures have been indefeasibly
      paid in full and all other Obligations have been paid or discharged;
provided,
      however,
      that
      all indemnities of the Debtors contained in this Agreement shall survive and
      remain operative and in full force and effect regardless of the termination
      of
      this Agreement.

    

    
      	
              14.

            	
              POWER
                OF ATTORNEY.

            

    

    

    Each
      Debtor
      authorizes the Collateral
      Agent,
      and
      does hereby make, constitute and appoint the Collateral
      Agent
      and
its
      officers, agents, successors or assigns with full power of substitution, as
      such
      Debtor’s
      true and lawful attorney-in-fact, with power, in the name of the various Secured
      Parties or such
      Debtor,
      to, after the occurrence and during the continuance of an Event of Default,
      (i)
      endorse any note, checks, drafts, money orders or other instruments of payment
      (including payments payable under or in respect of any policy of insurance)
      in
      respect of the Collateral that may come into possession of the Secured Parties;
      (ii) to sign and endorse any financing statement pursuant to the UCC or any
      invoice, freight or express bill, bill of lading, storage or warehouse receipts,
      drafts against debtors, assignments, verifications and notices in connection
      with accounts, and other documents relating to the Collateral; (iii) to pay
      or
      discharge taxes, liens, security interests or other encumbrances at any time
      levied or placed on or threatened against the Collateral; (iv) to demand,
      collect, receipt for, compromise, settle and sue for monies due in respect
      of
      the Collateral; (v) to transfer any Intellectual Property or provide licenses
      respecting any Intellectual Property; and (vi) generally, at the option of
      the
Collateral
      Agent,
      and at
      the expense of the Debtors, at any time, or from time to time, to execute and
      deliver any and all documents and instruments and to do all acts and things
      which the Collateral
      Agent deems
      necessary to protect, preserve and realize upon the Collateral and the Security
      Interest granted therein in order to effect the intent of this Agreement and
      the
      Debentures all as fully and effectually as the Debtors might or could do; and
      each Debtor hereby ratifies all that said attorney shall lawfully do or cause
      to
      be done by virtue hereof. This power of attorney is coupled with an interest
      and
      shall be irrevocable for the term of this Agreement and thereafter as long
      as
      any of the Obligations shall be outstanding. The
      designation set forth herein shall be deemed to amend and supersede any
      inconsistent provision in the Organizational Documents or other documents or
      agreements to which any
      Debtor
      or any of the Pledged Securities is subject or to which any
      Debtor
      is a party. Without
      limiting the generality of the foregoing, after the occurrence and during the
      continuance of an Event of Default, the
      Collateral Agent
      is
      specifically authorized to execute and file any applications for or instruments
      of transfer and assignment of any patents, trademarks, copyrights or other
      Intellectual Property with the United States Patent and Trademark Office and/or
      the United States Copyright Office and/or any similar foreign office. This
      power
      of attorney is coupled with an interest and shall be irrevocable for the term
      of
      this Agreement and thereafter as long as any of the Obligations shall be
      outstanding.

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    
      	
              15.

            	
              OTHER
                SECURITY.
                

            

    

    

    To
      the
      extent that the Obligations are now or hereafter secured by property other
      than
      the Collateral or by the guarantee, endorsement or property of any other person,
      firm, corporation or other entity, then the Collateral
      Agent
      shall
      have the right, in its sole discretion, to pursue, relinquish, subordinate,
      modify or take any other action with respect thereto, without in any way
      modifying or affecting any of the Secured Parties’ rights and remedies
      hereunder.

    

    
      	
              16.

            	
              COLLATERAL
                AGENT.
                

            

    

    

    16.1    Appointment,
      Resignation and Removal.
      The
      Secured Parties hereby appoint Imperium Advisers, LLC, to act as the Collateral
      Agent for purposes of exercising any and all rights and remedies of the Secured
      Parties hereunder. Any
      person or entity serving as the Collateral Agent may resign as Collateral Agent
      hereunder at any time by giving written notice thereof to each Secured Party,
      and such resignation shall become effective upon the effectiveness of the
      appointment of a successor agent in accordance with Section
      16.2.
      Any
      person or entity serving as Collateral Agent may be removed at any time or
      from
      time to time by the affirmative vote of a Majority in Interest.

     

    16.2    Successor
      Agent.
      Upon
      the
      resignation or removal of a Collateral Agent, a successor agent may be appointed
      by the Secured Parties by a Majority in Interest, and such appointment shall
      become effective upon such successor agent accepting such appointment in
      writing. If no successor agent shall have been so appointed by the Secured
      Parties within thirty (30) days after receipt of a resignation notice from
      the
      Collateral Agent, then the Collateral Agent shall have the right to appoint
      a
      successor agent in its sole and absolute discretion, and such successor agent
      shall commence serving as the Collateral Agent hereunder upon such successor
      agent’s acceptance of such appointment in writing. 

    

    16.3    Possession
      of Collateral Documents.
      Upon
      receipt of the certificates and other instruments representing or evidencing
      the
      Pledged Securities and other Collateral, together with the Necessary
      Endorsements (collectively, the "Collateral
      Documents"),
      the
      Collateral Agent shall hold the Collateral Documents in trust on behalf of
      the
      Secured Parties and shall enforce its rights under the Collateral Documents
      solely in accordance with the terms of this Agreement. Upon the termination
      of
      this Agreement pursuant to Section 13, the Collateral Agent shall promptly
      return all Collateral Documents, to the extent the rights to the Pledged
      Securities and other Collateral were not exercised under this Agreement, to
      the
      Debtors.

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    16.4    Exculpation;
      Limitation and Delegation of Duties.
      Neither
      the Collateral Agent nor any of its directors, officers, partners, agents,
      representatives, advisors or employees (collectively, the “Collateral
      Agent Parties”)
      shall
      be liable to any Secured Party for any action taken or omitted to be taken
      by
      any of them hereunder, except for their own gross negligence or willful
      misconduct.
      None of
      Collateral Agent Parties shall be responsible for, or have any duty to ascertain
      the veracity, performance or satisfaction of, any representation, warranty,
      covenant, agreement or condition made or contained in this Agreement or any
      other Transaction Document. The
      Collateral Agent may undertake any of its duties as Collateral Agent hereunder
      by or through employees, agents, and attorneys-in-fact and shall not be liable
      to any Secured Party for the negligence or misconduct of any such agents or
      attorneys-in-fact selected in good faith by the Collateral Agent. 

    

    16.5    Indemnification
      by Secured Parties.
      The
      Secured Parties hereby indemnify each of the Collateral Agent Parties for
      any losses, obligations, damages, penalties, actions, judgments, suits, costs,
      expenses, disbursements and other liabilities of any kind and nature whatsoever
      which may be imposed on, incurred by or asserted against the Collateral Agent
      in
      any way relating to or arising out of Collateral Agent’s performance of its
      obligations under this Agreement, except for (i) those costs that are actually
      reimbursed by the Debtors under this Agreement, and (ii) liabilities directly
      attributable to the gross negligence or willful misconduct of any Collateral
      Agent Party.
      The
      payment of any indemnification obligation hereunder
      shall be
      made by each Secured Party on a pro
      rata
      basis, based on the principal amount of the Debentures then owned by such
      Secured Party as compared to the aggregate principal amount of the Debentures
      then outstanding. 

     

    
      	
              17.

            	
              INDEMNIFICATION.

            

    

    

    The
      Debtors shall jointly and severally indemnify, reimburse and hold harmless
      the
      Collateral Agent and each of the Secured Parties and their respective partners,
      members, shareholders, officers, directors, employees and agents (each, an
      “Indemnitee”)
      from
      and against any and all losses, claims, liabilities, damages, penalties, suits,
      costs and expenses, of any kind or nature, (including fees relating to the
      cost
      of investigating and defending any of the foregoing) imposed on, incurred by
      or
      asserted against such Indemnitee in any way related to or arising from or
      alleged to arise from this Agreement or the Collateral, except any such losses,
      claims, liabilities, damages, penalties, suits, costs and expenses which result
      from the gross negligence or willful misconduct of the Indemnitee as determined
      by a final, nonappealable decision of a court of competent jurisdiction. This
      indemnification provision is in addition to, and not in limitation of, any
      other
      indemnification provision in the Debentures, the Purchase Agreement or any
      other
      Transaction Document.

    

    
      	
              18.

            	
              MISCELLANEOUS.

            

    

    

    18.1    Severability.
      In the
      event that any provision of this Agreement becomes or is declared by a court
      of
      competent jurisdiction to be illegal, unenforceable or void, this Agreement
      shall continue in full force and effect without said provision; provided
      that in
      such case the parties shall negotiate in good faith to replace such provision
      with a new provision which is not illegal, unenforceable or void, as long as
      such new provision does not materially change the economic benefits of this
      Agreement to the parties.

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    18.2    Successors
      and Assigns.
      The
      terms and conditions of this Agreement shall inure to the benefit of and be
      binding upon the respective successors and permitted assigns of the parties.
      Nothing in this Agreement, express or implied, is intended to confer upon any
      party other than the parties hereto or their respective successors and permitted
      assigns any rights, remedies, obligations or liabilities under or by reason
      of
      this Agreement, except as expressly provided in this Agreement. A Secured Party
      may assign its rights hereunder in connection with any private sale or transfer
      of its Debentures, in which case the term “Secured Party” shall be deemed to
      refer to such transferee as though such transferee were an original signatory
      hereto. No Debtor may assign its rights or obligations under this
      Agreement.

    

    18.3    Injunctive
      Relief.
      Each
      Debtor acknowledges and agrees that a breach by it of its obligations hereunder
      will cause irreparable harm to each Secured Party and that the remedy or
      remedies at law for any such breach will be inadequate and agrees, in the event
      of any such breach, in addition to all other available remedies, such Secured
      Party shall be entitled to an injunction restraining any breach and requiring
      immediate and specific performance of such obligations without the necessity
      of
      showing economic loss or the posting of any bond.

    

    18.4    Governing
      Law; Jurisdiction.
      This
      Agreement shall be governed by and construed under the laws of the State of
      New
      York applicable to contracts made and to be performed entirely within the State
      of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of the state and federal courts sitting in the City and County of New York
      for
      the adjudication of any dispute hereunder or in connection herewith or with
      any
      transaction contemplated hereby and hereby irrevocably waives, and agrees not
      to
      assert in any suit, action or proceeding, any claim that it is not personally
      subject to the jurisdiction of any such court, that such suit, action or
      proceeding is brought in an inconvenient forum or that the venue of such suit,
      action or proceeding is improper. Each party hereby irrevocably waives personal
      service of process and consents to process being served in any such suit, action
      or proceeding by mailing a copy thereof 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.

    

    18.5    Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, and all of which together shall constitute one and the
      same
      instrument. This Agreement may be executed and delivered by facsimile
      transmission.

    

    18.6    Headings.
      The
      headings used in this Agreement are used for convenience only and are not to
      be
      considered in construing or interpreting this Agreement. 

    

    18.7    Notices.
      Any
      notice, demand or request required or permitted to be given by the Debtor,
      Collateral Agent or a Secured Party pursuant to the terms of this Agreement
      shall be in writing and shall be deemed delivered (i) when delivered personally,
      against written receipt therefor, 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 a nationally recognized
      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:

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    If
      to
      any Debtor:

    

    c/o
      Digital Angel Corporation

    Suite
      201

    1690
      South Congress

    Delray
      Beach, Florida 33483

    
      	 	
              Attn:

            	
              Kevin
                McGrath

            

    

    
      	 	
              Tel:

            	
              (561) 276-0477

            

    

    
      	 	
              Fax:
                

            	
              (561)
                805-8001

            

    

    

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

    

    Winthrop
      & Weinstine, P.A.

    Suite
      3500

    225
      South
      6th
      Street

    Minneapolis,
      Minnesota 55402

    
      	 	
              Attn:

            	
              Philip
                T. Colton

            

    

    
      	 	
              Tel:

            	
              (612)
                604-6729

            

    

    
      	 	
              Fax:

            	
              (612)
                604-6929

            

    

    

    If
      to
      the Collateral Agent:

    

    Imperium
      Advisers, LLC

    153
      East
      53rd Street

    29th
      Floor

    New
      York,
      NY 10022

    
      	 	
              Attn:

            	
              Maurice
                Hryshko, Esq.

            

    

    
      	 	
              Tel:
                

            	
              (212)
                433-1360

            

    

    
      	 	
              Fax:

            	
              (212)
                433-1361

            

    

    

    and
      if to
      any Secured Party, to such address for such party as shall appear on Exhibit
      A
      to the Purchase Agreement executed by such party (or, in the case of a successor
      to a Secured Party in connection with a valid transfer of a Debenture, the
      address of such successor designated in a notice given to the Company and signed
      by the original secured party and such successor), or as shall be designated
      by
      such party (or successor) in writing to the other parties hereto in accordance
      with this Section
      18.7.
      Written
      confirmation of receipt generated by the sender’s facsimile machine containing
      the time, date, recipient facsimile number and an image of the first page of
      such transmission shall be rebuttable evidence of receipt by facsimile in
      accordance with clause
      (i)
      above.

    

    18.8    Entire
      Agreement; Amendments.
      This
      Agreement and the other Transaction Documents constitute the entire agreement
      between the parties with regard to the subject matter hereof and thereof,
      superseding all prior agreements or understandings, whether written or oral,
      between or among the parties. No (i) amendment to this Agreement or (ii) waiver
      of any agreement or other obligation of a Debtor under this Agreement may be
      made or given except pursuant to a written instrument executed by the Debtors,
      the Collateral Agent and the holders of a majority of the aggregate principal
      of
      the Debentures then outstanding.
      Any
      waiver given pursuant hereto shall be effective only in the specific instance
      and for the specific purpose for which given.

    

    

    [SIGNATURE
      PAGES FOLLOW] 

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Security
      Agreement to be duly executed on the day and year first above
      written.

     

    
      	 	
              DIGITAL
                ANGEL CORPORATION, AS DEBTOR

            
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Kevin N. McGrath

            	 
	 	 	
              Name:
                Kevin N. McGrath

            
	 	 	
              Title:  
                President and Chief Executive Officer

            
	 	 	 
	 	 	 
	 	
              DIGITAL
                ANGEL TECHNOLOGY CORPORATION, AS DEBTOR

            
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Patricia Petersen

            	 
	 	 	
              Name:
                Patricia Petersen

            
	 	 	
              Title:  
                Assistant Secretary

            
	 	 	 	 
	 	 	 	 
	 	
              OUTERLINK
                CORPORATION, AS DEBTOR

            
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Patricia Petersen

            	 
	 	 	
              Name:
                Patricia Petersen

            
	 	 	
              Title:  
                Assistant Secretary

            
	 	 	 	 
	 	 	 	 
	 	
              DSD
                HOLDING A/S, AS DEBTOR

            
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Patricia Petersen

            	 
	 	 	
              Name:
                Patricia Petersen

            
	 	 	
              Title:  
                Assistant Secretary

            
	 	 	 	 
	 	 	 	 
	 	
              SIGNATURE
                INDUSTRIES LIMITED, AS DEBTOR

            
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Patricia Petersen

            	 
	 	 	
              Name:
                Patricia Petersen

            
	 	 	
              Title:  
                Assistant Secretary

            

    

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
      be
      duly executed on the day and year first above written.

    

    
      	 	
              DIGITAL
                ANGEL INTERNATIONAL, INC., AS DEBTOR

            
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Patricia Petersen

            	 
	 	 	
              Name:
                Patricia Petersen

            
	 	 	
              Title:  
                Assistant Secretary

            
	 	 	 	 
	 	 	 	 
	 	
              DIGITAL
                ANGEL HOLDINGS, LLC, AS DEBTOR

            
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Patricia Petersen

            	 
	 	 	
              Name:
                Patricia Petersen

            
	 	 	
              Title:  
                Assistant Secretary

            

    

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
      be
      duly executed on the day and year first above written.

    

    
      	 	
              IMPERIUM
                ADVISERS, LLC, AS COLLATERAL AGENT

            
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Maurice Hryshko

            	 
	 	 	
              Name:
                Maurice Hryshko

            
	 	 	
              Title:  
                Counsel

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
              IMPERIUM
                MASTER FUND, LTD., AS SECURED PARTY

            
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Maurice Hryshko

            	 
	 	 	
              Name:
                Maurice Hryshko

            
	 	 	
              Title:  
                Counsel

            

    

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    Exhibit
      A to the

    Security
      Agreement

    

    [UCC-1
      Financing Statements]

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    SCHEDULE
      1

    

    PLEDGED
      SECURITIES

    

    
      	
              Issuer

            	
              Shares/Interests
                Pledged

            
	 	 
	
              DIGITAL
                ANGEL TECHNOLOGY CORPORATION

            	
              100%
                outstanding capital stock

            
	 	 
	
              OUTER
                LINK CORPORATION

            	
              100%
                outstanding capital stock

            
	 	 
	
              DSD
                HOLDING A/S

            	
              100%
                outstanding capital stock

            
	 	 
	
              SIGNATURE
                INDUSTRIES LIMITED

            	
              90.9%
                outstanding capital stock

            
	 	 
	
              DIGITAL
                ANGEL INTERNATIONAL, INC.

            	
              100%
                outstanding capital stock

            
	 	 
	
              DIGITAL
                ANGEL HOLDINGS, LLC

            	
              100%
                outstanding capital stock

            

    

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    SCHEDULE
      4.3(a)

    

    DEBTOR
      INFORMATION

    Digital
      Angel Corporation

    

    

    
      	
              Name
                of the Debtor:

            	
              Digital
                Angel Corporation

            

    

    

    
      	
              Jurisdiction
                of Organization:

            	
              Delaware

            

    

    

    
      	
              Organizational
                Identification Number:

            	
              0927269

            

    

    

    Trade
      names and other names used by the

    
      	
              Debtor
                during the past five years:

            	
              Medical
                Advisory Systems, Inc.

            

    

    

    Each
      location where Collateral or the Debtor’s

    
      	
              books
                of account and records are located:

            	
              South
                St. Paul, Minnesota

            

    

    

    Name
      and
      location of each consignee, bailee,

    warehouseman,
      agent or processor in possession

    
      	
              of
                any Collateral owned by the Debtor:

            	
              None

            

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    SCHEDULE
      4.3(a)

    (continued)

    

    Digital
      Angel Holdings, LLC

    

    

    
      	
              Name
                of the Debtor:

            	
              Digital
                Angel Holdings, LLC

            

    

    

    
      	
              Jurisdiction
                of Organization:

            	
              Minnesota

            

    

    

    
      	
              Organizational
                Identification Number:

            	
              19043-LLC

            

    

    

    Trade
      names and other names used by the

    
      	
              Debtor
                during the past five years:

            	
              None

            

    

    

    Each
      location where Collateral or the Debtor’s

    
      	
              books
                of account and records are located:

            	
              South
                St. Paul, Minnesota

            

    

    

    Name
      and
      location of each consignee, bailee,

    warehouseman,
      agent or processor in possession

    
      	
              of
                any Collateral owned by the Debtor:

            	
              None

            

    

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    SCHEDULE
      4.3(a)

    (continued)

    

    Digital
      Angel International, Inc.

    

    

    
      	
              Name
                of the Debtor:

            	
              Digital
                Angel International, Inc.

            

    

    

    
      	
              Jurisdiction
                of Organization:

            	
              Minnesota

            

    

    

    
      	
              Organizational
                Identification Number:

            	
              1091284-2

            

    

    

    Trade
      names and other names used by the

    
      	
              Debtor
                during the past five years:

            	
              None

            

    

    

    
      	
              Each
                location where Collateral or the Debtor’s

            	
              South
                St. Paul, Minnesota

            

    

    
      	
              books
                of account and records are located:

            	
              Sao
                Paulo, Brazil

            

    

    Buenos
      Aires, Argentina

    

    Name
      and
      location of each consignee, bailee,

    
      	
              warehouseman,
                agent or processor in possession

            	
              Laser
                and hot stamping machines

            

    

    
      	
              of
                any Collateral owned by the Debtor:

            	
              located
                at distributors.

            

    

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    SCHEDULE
      4.3(a)

    (continued)

    

    Digital
      Angel Technology Corporation

    

    

    
      	
              Name
                of the Debtor: 

            	
              Digital
                Angel Technology Corporation

            

    

    

    
      	
              Jurisdiction
                of Organization:

            	
              Minnesota

            

    

    

    
      	
              Organizational
                Identification Number:

            	
              1890567-2

            

    

    

    Trade
      names and other names used by the

    
      	
              Debtor
                during the past five years:

            	
              Destron
                Fearing

            

    

    

    Each
      location where Collateral or the Debtor’s

    
      	
              books
                of account and records are located:

            	
              South
                St. Paul, Minnesota

            

    

    

    Name
      and
      location of each consignee, bailee,

    
      	
              warehouseman,
                agent or processor in possession

            	
              Equipment
                located at Elcan/

            

    

    
      	
              of
                any Collateral owned by the Debtor:

            	
              Raytheon
                in Malaga, Spain

            

    

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    SCHEDULE
      4.3(a)

    (continued)

    

    DSD
      Holding A/S

    

    

    
      	
              Name
                of the Debtor:

            	
              DSD
                Holding A/S

            

    

    

    
      	
              Jurisdiction
                of Organization:

            	
              Denmark

            

    

    

    
      	
              Organizational
                Identification Number:

            	
              CVR-NR.26096537

            

    

    

    
      	
              Trade
                names and other names used by the

            	
              Daploma
                

            

    

    
      	
              Debtor
                during the past five years:

            	
              Digitag

            

    

    

    
      	
              Each
                location where Collateral or the Debtor’s

            	
              Warsaw,
                Poland

            

    

    
      	
              books
                of account and records are located:

            	
              Copenhagen,
                Denmark

            

    

    

    Name
      and
      location of each consignee, bailee,

    warehouseman,
      agent or processor in possession

    
      	
              of
                any Collateral owned by the Debtor:

            	
              None

            

    

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    SCHEDULE
      4.3(a)

    (continued)

    

    Outerlink
      Corporation

    

    

    
      	
              Name
                of the Debtor:

            	
              Outerlink
                Corporation

            

    

    

    
      	
              Jurisdiction
                of Organization:

            	
              Delaware

            

    

    

    
      	
              Organizational
                Identification Number:

            	
              2507754

            

    

    

    Trade
      names and other names used by the

    
      	
              Debtor
                during the past five years:

            	
              Newcomb
                Communications, LLC

            

    

    

    
      	
              Each
                location where Collateral or the Debtor’s

            	
              Lowell,
                Massachusetts

            

    

    
      	
              books
                of account and records are located:

            	
              Reston,
                Virginia

            

    

    Billerica,
      Massachusetts

    

    Name
      and
      location of each consignee, bailee,

    warehouseman,
      agent or processor in possession

    
      	
              of
                any Collateral owned by the Debtor:

            	
              None

            

    

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    SCHEDULE
      4.3(a)

    (continued)

    

    

    Signature
      Industries Limited

    

    

    
      	
              Name
                of the Debtor:

            	
              Signature
                Industries Limited

            

    

    

    
      	
              Jurisdiction
                of Organization:

            	
              United
                Kingdom

            

    

    

    
      	
              Organizational
                Identification Number:

            	
              2800561

            

    

    

    
      	
              Trade
                names and other names used by the

            	
              SARBE

            

    

    
      	
              Debtor
                during the past five years:

            	
              Clifford
                & Snell

            

    

    

    
      	
              Each
                location where Collateral or the Debtor’s

            	
              Glasgow,
                Scotland

            

    

    
      	
              books
                of account and records are located:

            	
              Thamesmead,
                United Kingdom

            

    

    

    Name
      and
      location of each consignee, bailee,

    warehouseman,
      agent or processor in possession

    
      	
              of
                any Collateral owned by the Debtor:

            	
              None

            

    

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    SCHEDULE
      4.4(c)

    

    CONTEMPLATED
      REOLOCATION OF COLLATERAL

     

    As
      previously disclosed, Signature Industries Limited (“Signature”) intends to
      relocate assets of McMurdo, LTD to Signature’s Thamesmead, United Kingdom
      location.

     

     

    32Exhibit 10.5

    
      

    

    Exhibit
      10.5

    

    SUBSIDIARY
      GUARANTEE

    

    THIS
      SUBSIDIARY GUARANTEE (this “Guarantee”),
      dated
      as of February 6, 2007, made by each of the undersigned guarantors (together
      with any other entity that may become an additional guarantor hereunder, the
      “Guarantors”),
      in
      favor of the purchasers (the “Purchasers”)
      of
      Senior Secured Debentures, dated as of the date hereof (the “Debentures”),
      issued by Digital Angel Corporation, a Delaware corporation (the “Company”),
      and
      Imperium Advisers, LLC, as the Collateral Agent (the “Collateral
      Agent”).
      Capitalized terms used herein and not otherwise defined shall have the
      respective meanings specified in the Purchase Agreement (as defined below).
      

     

    W
      I T N E
      S S E T H:

    

    WHEREAS,
      pursuant to that certain Securities Purchase Agreement, dated as of the date
      hereof, by and between the Company and the Purchasers (the “Purchase
      Agreement”),
      the
      Company has agreed to sell and issue to the Purchasers, and each of the
      Purchasers has agreed to purchase from the Company the Debentures;
      and

     

    WHEREAS,
      each Guarantor, as a subsidiary of the Company, will directly or indirectly
      benefit from the extension of credit to the Company represented by the issuance
      of the Debentures. 

     

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

     

    
      	
              1.

            	
              GUARANTEE.

            

    

    

    
      	 	
              1.1

            	
              Guarantee
                of Obligations.

            

    

    

    (a)    Each
      Guarantor hereby, jointly and severally, unconditionally and irrevocably,
      guarantees to each Purchaser and its lawful successors, endorsees, transferees
      and assigns, the prompt and complete payment and performance by the Company
      when
      due (whether at the stated maturity, by acceleration or otherwise) of all
      obligations and undertakings of the Company of whatever nature, monetary or
      otherwise, under the Debentures, the Purchase Agreement, the Warrants, the
      Registration Rights Agreement, the Security Agreement and the other Transaction
      Documents, together with all reasonable attorneys’ fees, disbursements and all
      other costs and expenses of collection incurred by Purchasers in enforcing
      any
      of such Obligations and/or this Guarantee (collectively, the “Obligations”).
      This
      Guarantee shall remain in full force and effect until all the Obligations and
      the obligations of each Guarantor under this Guarantee shall have been satisfied
      by payment and performance in full. Each Guarantor shall be regarded, and shall
      be in the same position, as principal debtor with respect to the Obligations.
      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)    Anything
      herein or in any other Transaction Document to the contrary notwithstanding,
      the
      maximum liability of each Guarantor hereunder and under the other Transaction
      Documents shall in no event exceed the amount which can be guaranteed by such
      Guarantor under applicable federal and state laws, including laws relating
      to
      the insolvency of debtors, fraudulent conveyance or transfer or laws affecting
      the rights of creditors generally (after giving effect to the right of
      contribution established in Section
      1.3
      of this
      Guarantee).

    

    1.2    Guarantee
      Absolute and Unconditional.
      Each
      Guarantor understands and agrees that this Guarantee shall be construed as
      a
      continuing, absolute and unconditional guarantee of payment and performance
      without regard to (a) the validity or enforceability of the Purchase Agreement
      or any other Transaction Document, any of the Obligations or any other
      collateral security therefor or guarantee or right of offset with respect
      thereto at any time or from time to time held by the Purchasers, (b) any
      defense, set-off or counterclaim (other than a defense of payment or performance
      or fraud or misconduct by Purchasers) which may at any time be available to
      or
      be asserted by the Company or any other Person against the Purchasers, or (c)
      any other circumstance whatsoever (with or without notice to or knowledge of
      the
      Company or such Guarantor) which constitutes, or might be construed to
      constitute, an equitable or legal discharge of the Company for the Obligations,
      or of such Guarantor under this Guarantee, in bankruptcy or in any other
      instance. 

    

    1.3    Right
      of Contribution.
      Each
      Guarantor hereby agrees that to the extent that a Guarantor shall have paid
      more
      than its proportionate share of any payment made hereunder, such Guarantor
      shall
      be entitled to seek and receive contribution from and against any other
      Guarantor hereunder which has not paid its proportionate share of such payment.
      Each Guarantor’s right of contribution shall be subject to the terms and
      conditions of Section
      1.4
      of this
      Guarantee. The provisions of this Section
      1.3
      shall in
      no respect limit the obligations and liabilities of any Guarantor to the
      Purchasers, and each Guarantor shall remain liable to the Purchasers for the
      full amount guaranteed by such Guarantor hereunder.

     

    1.4    No
      Subrogation.
      Notwithstanding any payment made by any Guarantor hereunder or any set-off
      or
      application of funds of any Guarantor by the Purchasers, no Guarantor shall
      be
      entitled to be subrogated to any of the rights of the Purchasers against the
      Company or any other Guarantor or any collateral security or guarantee or right
      of offset held by the Purchasers for the payment of the Obligations, nor shall
      any Guarantor seek or be entitled to seek any contribution or reimbursement
      from
      the Company or any other Guarantor in respect of payments made by such Guarantor
      hereunder, until all amounts owing to the Purchasers by the Company on account
      of the Obligations are paid in full. If any amount shall be paid to any
      Guarantor on account of such subrogation rights at any time when all of the
      Obligations shall not have been paid in full, such amount shall be held by
      such
      Guarantor in trust for the benefit of the Purchasers, segregated from other
      funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor,
      be
      turned over to the Purchasers in the exact form received by such Guarantor
      (duly
      indorsed by such Guarantor to the Purchasers, if required), to be applied
      against the Obligations, whether matured or unmatured, in such order as the
      Purchasers may determine.

     

    1.5    Modification
      of Guaranteed Obligations.
      Each
      Guarantor shall remain obligated hereunder notwithstanding that, without any
      reservation of rights against any Guarantor and without notice to or further
      assent by any Guarantor, any demand for payment of any of the Obligations made
      by the Purchasers may be rescinded by the Purchasers and any of the Obligations
      continued, and the Obligations, or the liability of any other Person upon or
      for
      any part thereof, or any collateral security or guarantee therefor or right
      of
      offset with respect thereto, may, from time to time, in whole or in part, be
      renewed, extended, amended, modified, accelerated, compromised, waived,
      surrendered or released by the Purchasers, and the Purchase Agreement and the
      other Transaction Documents and any other documents executed and delivered
      in
      connection therewith may be amended, modified, supplemented or terminated,
      in
      whole or in part, as the Purchasers may deem advisable from time to time, and
      any collateral security, guarantee or right of offset at any time held by the
      Purchasers for the payment of the Obligations may be sold, exchanged, waived,
      surrendered or released. The Purchasers shall have no obligation to protect,
      secure, perfect or insure any Lien at any time held by them as security for
      the
      Obligations or for this Guarantee or any property subject thereto.

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    1.6    Waiver.
      Each
      Guarantor waives any and all notice of the creation, renewal, extension or
      accrual of any of the Obligations and notice of or proof of reliance by the
      Purchasers upon the guarantees contained in this Section
      1
      or
      acceptance of the guarantees contained in this Section
      1.
      The
      Obligations shall conclusively be deemed to have been created, contracted or
      incurred, or renewed, extended, amended or waived, in reliance upon the
      guarantees contained in this Section
      1.
      All
      dealings between the Company and any of the Guarantors, on the one hand, and
      the
      Purchasers, on the other hand, shall be conclusively presumed to have been
      had
      or consummated in reliance upon the guarantees contained in this Section
      1.
      Each
      Guarantor waives to the extent permitted by law diligence, presentment, protest,
      demand for payment and notice of default or nonpayment to or upon the Company
      or
      any of the Guarantors with respect to the Obligations.

    

    1.7    Enforcement
      of Guarantee.
      

    

    (a)    When
      making any demand hereunder or otherwise pursuing its rights and remedies
      hereunder against any Guarantor, the Collateral Agent, acting on behalf of
      each
      Purchaser, may, but shall be under no obligation to, make a similar demand
      on or
      otherwise pursue such rights and remedies as the Collateral Agent, acting on
      behalf of the Purchasers, may have against the Company, any other Guarantor
      or
      any other Person or against any collateral security or guarantee for the
      Obligations or any right of offset with respect thereto, and any failure by
      the
      Collateral Agent, acting on behalf of the Purchasers, to make any such demand,
      to pursue such other rights or remedies or to collect any payments from the
      Company, any other Guarantor or any other Person or to realize upon any such
      collateral security or guarantee or to exercise any such right of offset, or
      any
      release of the Company, any other Guarantor or any other Person or any such
      collateral security, guarantee or right of offset, shall not relieve any
      Guarantor of any obligation or liability hereunder, and shall not impair or
      affect the rights and remedies, whether express, implied or available as a
      matter of law, of the Purchasers against any Guarantor. For the purposes hereof,
      “demand”
shall
      include the commencement and continuance of any legal proceedings.

     

    (b)    Expenses;
      Indemnification.

    

    (i)    Each
      Guarantor agrees to pay, or reimburse the Collateral Agent, acting on behalf
      of
      the Purchasers, all of the Collateral Agent’s costs and expenses incurred in
      collecting against such Guarantor under this Guarantee or otherwise enforcing
      or
      preserving any rights under this Guarantee and the other Transaction Documents
      to which such Guarantor is a party, including, without limitation, the
      reasonable fees and disbursements of counsel to the Collateral
      Agent.

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    (ii)    Each
      Guarantor agrees to pay, and to save the Purchasers harmless from, any and
      all
      liabilities with respect to, or resulting from any delay in paying, any and
      all
      stamp, excise, sales or other taxes which may be payable or determined to be
      payable in connection with any of the transactions contemplated by this
      Guarantee.

    

    (iii)   Each
      Guarantor agrees to pay, and to save the Purchasers harmless from, any and
      all
      liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
      costs, expenses or disbursements of any kind or nature whatsoever with respect
      to the execution, delivery, enforcement, performance and administration of
      this
      Guarantee to the extent the Company would be required to do so pursuant to
      the
      Purchase Agreement.

    

    (iv)   [Reserved]

    

    (v)    Notwithstanding
      anything to the contrary in this Agreement, with respect to any defaulted
      non-monetary Obligations the specific performance of which by the Guarantors
      is
      not reasonably possible (e.g., the issuance of the Company’s Common Stock), the
      Guarantors shall only be liable for making the Purchasers whole on a monetary
      basis for the Company’s failure to perform such Obligations in accordance with
      the Transaction Documents. 

    

    1.8    Right
      to Set-Off.
      Each
      Guarantor hereby irrevocably authorizes the Collateral Agent, acting on behalf
      of the Purchasers, at any time and from time to time while an Event of Default
      (as defined in the Debentures) under any of the Transaction Documents shall
      have
      occurred and be continuing, without notice to such Guarantor or any other
      Guarantor, any such notice being expressly waived by each Guarantor, to set-off
      and appropriate and apply any and all deposits, credits, indebtedness or claims,
      in any currency, in each case whether direct or indirect, absolute or
      contingent, matured or unmatured, at any time held or owing by a Purchaser
      to or
      for the credit or the account of such Guarantor, or any part thereof in such
      amounts as the Collateral Agent may elect, against and on account of the
      obligations and liabilities of such Guarantor to the Purchasers hereunder in
      any
      currency arising hereunder or under the Security Agreement as the Collateral
      Agent may elect, whether or not a Purchaser has made any demand for payment
      and
      although such obligations, liabilities and claims may be contingent or
      unmatured. The Collateral Agent shall notify such Guarantor promptly of any
      such
      set-off and the application made by the Collateral Agent of the proceeds
      thereof, provided
      that the
      failure to give such notice shall not affect the validity of such set-off and
      application. The rights of each Purchaser under this Section
      1.8
      are in
      addition to other rights and remedies (including, without limitation, other
      rights of set-off) which the Collateral Agent, acting on behalf of the
      Purchasers, may have.

    

    1.9    Payments.
      In
      addition to the terms of the Guaranty set forth in Section
      1.1
      of this
      Guarantee, and in no manner imposing any limitation on such terms, it is
      expressly understood and agreed that, if, at any time, any of the Obligations
      are declared to be immediately due and payable by a Guarantor, then the
      Guarantors shall, upon ten (10) Business Days’ notice, pay to the Collateral
      Agent, acting on behalf of the Purchasers, the entire amount of such Obligations
      as has been declared due and payable to the Purchasers. Payment by the
      Guarantors shall be made to the Collateral Agent in immediately available
      Federal funds to an account designated by the Collateral Agent or at the address
      set forth herein for the giving of notice to the Collateral Agent or at any
      other address that may be specified in writing from time to time by the
      Collateral Agent, and shall be credited and applied to the
      Obligations.

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    1.10        
      Release.
      Subject
      to Section
      2
      of this
      Guarantee, each Guarantor will be released from all liability hereunder
      concurrently with the repayment and performance in full of all amounts owed
      under the Purchase Agreement, the Debentures and the other Transaction
      Documents, and all other Obligations. No payment made by the Company, any of
      the
      Guarantors, any other guarantor or any other Person or received or collected
      by
      the Purchasers or the Collateral Agent from the Company, any of the Guarantors,
      any other guarantor or any other Person by virtue of any action or proceeding
      or
      any set-off or appropriation or application at any time or from time to time
      in
      reduction of or in payment of the Obligations shall be deemed to modify, reduce,
      release or otherwise affect the liability of any Guarantor hereunder which
      shall, notwithstanding any such payment (other than any payment made by such
      Guarantor in respect of the Obligations or any payment received or collected
      from such Guarantor in respect of the Obligations), remain liable for the
      Obligations up to the maximum liability of such Guarantor hereunder until the
      Obligations are paid and performed in full.

    

    
      	
              2.

            	
              REINSTATEMENT.
                

            

    

    

    The
      guarantees contained in Section
      1
      of this
      Guarantee shall continue to be effective, or be reinstated, as the case may
      be,
      if at any time payment, or any part thereof, of any of the Obligations is
      rescinded or must otherwise be restored or returned by the Purchasers or the
      Collateral Agent upon the insolvency, bankruptcy, dissolution, liquidation
      or
      reorganization of the Company or any Guarantor, or upon or as a result of the
      appointment of a receiver, intervenor or conservator of, or trustee or similar
      officer for, the Company or any Guarantor or any substantial part of its
      property, or otherwise, all as though such payments had not been
      made.

    

    
      	
              3.
                

            	
              REPRESENTATIONS
                AND WARRANTIES.
                

            

    

    

    Each
      Guarantor hereby represents and warrants to the Collateral
      Agent and Purchasers
      as
      follows: 

     

    3.1          
      Organization
      and Qualification.
      Each
      Guarantor is duly organized, validly existing and in good standing under the
      laws of its formation, with the requisite power and authority to own and use
      its
      properties and assets and to carry on its business as currently conducted.
      Each
      Guarantor is duly qualified to do business and is in good standing as a foreign
      corporation in each jurisdiction in which the nature of the business conducted
      or property owned by it makes such qualification necessary, except where the
      failure to be so qualified or in good standing, as the case may be, could not,
      individually or in the aggregate, (x) adversely affect the legality, validity
      or
      enforceability of any of this Guarantee in any material respect, (y) have a
      material adverse effect on the results of operations, assets, prospects, or
      financial condition of the Guarantor or (z) adversely impair in any material
      respect the Guarantor’s ability to perform fully on a timely basis its
      obligations under this Guarantee (a “Material
      Adverse Effect”).

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    3.2    Authorization;
      Enforcement.
      Each
      Guarantor has the requisite corporate power and authority to enter into and
      to
      consummate the transactions contemplated by this Guarantee, and otherwise to
      carry out its obligations hereunder. The execution and delivery of this
      Guarantee by each Guarantor and the consummation by it of the transactions
      contemplated hereby have been duly authorized by all requisite corporate action
      on the part of the Guarantor, and no further consent or authorization of the
      Guarantor, its board of directors, shareholders, or to its knowledge, any
      governmental authority or organization, or any other person or entity is
      required in connection therewith. This Guarantee has been duly executed and
      delivered by each Guarantor and constitutes the valid and binding obligation
      of
      such Guarantor enforceable against such Guarantor in accordance with its terms,
      except as such enforceability may be limited by applicable bankruptcy,
      insolvency, reorganization, moratorium, liquidation or similar laws relating
      to,
      or affecting generally the enforcement of, creditors’ rights and remedies or by
      other equitable principles of general application.

    

    3.3    No
      Conflicts.
      The
      execution, delivery and performance of this Guarantee by each Guarantor and
      the
      consummation by each Guarantor of the transactions contemplated thereby do
      not
      and will not (i) conflict with or violate any provision of its certificate
      of
      incorporation, by-laws or any other governing document or (ii) conflict with,
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any agreement, indenture or
      instrument to which such Guarantor is a party or by which it or any of its
      asset
      or properties are bound or affected, or (iii) result in a violation of any
      law,
      rule, regulation, order, judgment, injunction, decree or other restriction
      of
      any court or governmental authority to which such Guarantor is subject
      (including Federal and state securities laws and regulations), or by which
      any
      of its properties or assets are bound or affected. The business of each
      Guarantor is not being conducted in violation of any law, ordinance or
      regulation of any governmental authority, except for violations which,
      individually or in the aggregate, do not have a Material Adverse
      Effect.

     

    3.4    Purchase
      Agreement.
      The
      representations and warranties of the Company set forth in the Purchase
      Agreement as they relate to each Guarantor, each of which is hereby incorporated
      herein by reference, are true and correct as of each time such representations
      are deemed to be made pursuant to such Purchase Agreement, and the Purchasers
      shall be entitled to rely on each of them as if they were fully set forth
      herein, provided,
      that
      each reference in each such representation and warranty to the Company’s
      knowledge shall, for the purposes of this Section
      3.4,
      be
      deemed to be a reference to such Guarantor’s knowledge. 

    

    3.5    Independence
      of Parties.
      The
      Purchasers have no fiduciary relationship with or duty to any Guarantor arising
      out of or in connection with this Guarantee or any of the other Transaction
      Documents; the relationship between the Guarantors, on the one hand, and the
      Purchasers, on the other hand, in connection herewith or therewith is solely
      that of debtor and creditor; and no joint venture is created hereby or by the
      other Transaction Documents or otherwise exists by virtue of the transactions
      contemplated hereby among the Guarantors and the Purchasers. 

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    3.6    Counsel.
      Each
      Guarantor has been advised by counsel in the negotiation, execution and delivery
      of this Guarantee and the other Transaction Documents to which it is a
      party.

    

    
      	
              4.
                

            	
              FURTHER
                ASSURANCES.
                

            

    

    

    Each
      Guarantor covenants and agrees with the Collateral Agent, on behalf of each
      Purchaser, that, from and after the date of this Guarantee until the Obligations
      shall have been paid in full, such Guarantor shall (i) take, and/or shall
      refrain from taking, as the case may be, such commercially reasonable action
      (including complying with all of the obligations in Section 2 of the Debentures,
      which obligations are incorporated by reference herein and shall be binding
      on
      each Guarantor) that is necessary to be taken or not taken, as the case may
      be,
      so that no Event of Default (as defined in the Debentures) is caused by the
      failure to take such action or to refrain from taking such action by such
      Guarantor and (ii) execute and deliver to the Collateral Agent, from time to
      time, any additional instruments or documents which are reasonably necessary
      to
      cause this Guarantee to be, become or remain valid and effective in accordance
      with its terms. 

    

    
      	
              5.
                

            	
              MISCELLANEOUS.

            

    

    

    5.1    Severability.
      In the
      event that any provision of this Guarantee becomes or is declared by a court
      of
      competent jurisdiction to be illegal, unenforceable or void, this Guarantee
      shall continue in full force and effect without said provision; provided
      that in
      such case the parties shall negotiate in good faith to replace such provision
      with a new provision which is not illegal, unenforceable or void, as long as
      such new provision does not materially change the economic or other benefits
      or
      burdens of this Guarantee to the parties.

    

    5.2    Successors
      and Assigns.
      The
      terms and conditions of this Guarantee
      shall
      inure to the benefit of and be binding upon the respective successors and
      permitted assigns of the parties. Nothing in this Guarantee,
      express
      or implied, is intended to confer upon any party other than the parties hereto
      or their respective successors and permitted assigns any rights, remedies,
      obligations or liabilities under or by reason of this Guarantee, except as
      expressly provided in this Guarantee.
      A
      Purchaser may assign its rights hereunder in connection with any valid private
      sale or transfer of its Debentures as permitted under the Purchase Agreement
      and/or the Debentures, in which case the term “Purchaser” shall be deemed to
      refer to such transferee as though such transferee were an original signatory
      hereto. No Guarantor may assign its rights or obligations under this
Guarantee.

    

    5.3    Injunctive
      Relief.
      Each
      Guarantor acknowledges and agrees that a breach by it of its obligations
      hereunder will cause irreparable harm to each Purchaser and that the remedy
      or
      remedies at law for any such breach will be inadequate and agrees, in the event
      of any such breach, in addition to all other available remedies, the Collateral
      Agent, acting on behalf of the Purchasers, shall be entitled to an injunction
      restraining any breach and requiring immediate and specific performance of
      such
      obligations without the necessity of showing economic loss or the posting of
      any
      bond.

    

    5.4    Governing
      Law; Jurisdiction.
      This
Guarantee
      shall
      be
      governed by and construed under the laws of the State of New York applicable
      to
      contracts made and to be performed entirely within the State of New York. Each
      party hereby irrevocably submits to the exclusive jurisdiction of the state
      and
      federal courts sitting in the City and County of New York for the adjudication
      of any dispute hereunder or in connection herewith or with any transaction
      contemplated hereby and hereby irrevocably waives, and agrees not to assert
      in
      any suit, action or proceeding, any claim that it is not personally subject
      to
      the jurisdiction of any such court, that such suit, action or proceeding is
      brought in an inconvenient forum or that the venue of such suit, action or
      proceeding is improper. Each party hereby irrevocably waives personal service
      of
      process and consents to process being served in any such suit, action or
      proceeding by mailing a copy thereof to such party at the address in effect
      for
      notices to it under this Guarantee
      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.

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    5.5    Counterparts.
      This
      Guarantee
      may
      be
      executed in any number of counterparts, each of which shall be deemed an
      original, and all of which together shall constitute one and the same
      instrument. This Guarantee
      may
      be
      executed and delivered by facsimile transmission.

    

    5.6    Headings.
      The
      headings used in this Guarantee
      are
      used
      for convenience only and are not to be considered in construing or interpreting
      this Guarantee.
      

    

    5.7    Notices.
      Any
      notice, demand or request required or permitted to be given by a Guarantor,
      the
      Collateral Agent or a Purchaser pursuant to the terms of this Guarantee shall
      be
      in writing and shall be deemed delivered (i) when delivered personally, against
      written receipt therefor, 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 a nationally recognized 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 a Guarantor:

            

    

    

    
      	 	
              c/o
                Digital Angel Corporation

            

    

    
      	 	
              Suite
                201

            

    

    
      	 	
              1690
                South Congress

            

    

    
      	 	
              Delray
                Beach, Florida 33483

            

    

    
      	 	
              Attn:

            	
              Kevin
                McGrath 

            

    

    
      	 	
              Tel:

            	
              (561) 276-0477

            

    

    
      	 	
              Fax:
                

            	
              (561)
                805-8001

            

    

    

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

            

    

    

    
      	 	
              Winthrop
                & Weinstine, P.A.

            

    

    
      	 	
              Suite
                3500

            

    

    
      	 	
              225
                South 6th
                Street

            

    

    
      	 	
              Minneapolis,
                Minnesota 55402

            

    

    
      	 	
              Attn:

            	
              Philip
                T. Colton

            

    

    
      	 	
              Tel:

            	
              (612)
                604-6729

            

    

    
      	 	
              Fax:

            	
              (612)
                604-6929

            

    

    
      	 	
              If
                to the Collateral
                Agent:

            

    

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    
      	 	
              Imperium
                Advisers, LLC

            

    

    
      	 	
              153
                East 53rd Street

            

    

    
      	 	
              29th
                Floor

            

    

    
      	 	
              New
                York, NY 10022

            

    

    
      	 	
              Attn:

            	
              Maurice
                Hryshko, Esq.

            

    

    
      	 	
              Tel:
                

            	
              (212)
                433-1360

            

    

    
      	 	
              Fax:

            	
              (212)
                433-1361

            

    

     

    and
      if to
      any Purchaser, to such address for such party as shall appear on the signature
      page of the Purchase Agreement executed by such party, or as shall be designated
      by such party in writing to the other parties hereto in accordance with this
      Section
      5.7.
      Written
      confirmation of receipt generated by the sender’s facsimile machine containing
      the time, date, recipient facsimile number and an image of the first page of
      such transmission shall be rebuttable evidence of receipt by facsimile in
      accordance with clause
      (i)
      above.

    

    5.8    Entire
      Agreement; Amendments.
      This
Guarantee
      and
      the
      other Transaction Documents constitute the entire agreement between the parties
      with regard to the subject matter hereof and thereof, superseding all prior
      agreements or understandings, whether written or oral, between or among the
      parties. No (i) amendment to this Agreement or (ii) waiver of any agreement
      or
      other obligation of the Company under this Agreement may be made or given except
      pursuant to a written instrument executed by the Company and (i) prior to the
      Termination Date, by the holders of a majority of the aggregate principal of
      the
      Debentures then outstanding and the holders of a majority of the aggregate
      number of the Warrant Shares into which the Warrants then outstanding are
      exercisable (without
      regard to any limitation on the exercise of the Warrants),
      and
      (ii) on and after the Termination Date, by the holders of a majority of the
      aggregate number of the Warrant Shares into which the Warrants then outstanding
      are exercisable (without
      regard to any limitation on the exercise of the Warrants). No waiver of any
      provision of this Agreement applicable to any Purchaser may be made
      except
      pursuant to a written instrument executed by such Purchaser and the Company.
      Any
      waiver given pursuant hereto shall be effective only in the specific instance
      and for the specific purpose for which given.

    

    5.9    Additional
      Guarantors.
      During
      the period beginning on the Execution Date and ending on the Termination Date,
      if a Guarantor creates or acquires any new Subsidiary that owns, at the time
      of
      creation or acquisition or any time thereafter, assets having a fair market
      value in excess of $50,000, then such Guarantor shall cause such new Subsidiary
      to become party to (i) this Guarantee for all purposes of this Guarantee by
      executing and delivering an Assumption Agreement in the form of Annex 1 hereto
      and (ii) the Security Agreement for all purposes of such agreement.

    

    

    [SIGNATURE
      PAGE FOLLOWS]

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly executed
      and delivered as of the date first above written.

     

    
      	 	
              DIGITAL
                ANGEL TECHNOLOGY CORPORATION, AS GUARANTOR

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Patricia Petersen

            	 
	 	 	
              Name:
                Patricia Petersen

            	 
	 	 	
              Title:  
                Assistant Secretary

            	 
	 	 	 	 
	 	 	 	 
	 	
              OUTERLINK
                CORPORATION, AS GUARANTOR

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Patricia Petersen

            	 
	 	 	
              Name:
                Patricia Petersen

            	 
	 	 	
              Title:  
                Assistant Secretary

            	 
	 	 	 	 
	 	 	 	 
	 	
              DSD
                HOLDING A/S, AS GUARANTOR

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Patricia Petersen

            	 
	 	 	
              Name:
                Patricia Petersen

            	 
	 	 	
              Title:  
                Assistant Secretary

            	 
	 	 	 	 
	 	 	 	 
	 	
              SIGNATURE
                INDUSTRIES LIMITED, AS GUARANTOR

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Patricia Petersen

            	 
	 	 	
              Name:
                Patricia Petersen

            	 
	 	 	
              Title:  
                Assistant Secretary

            	 

    

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly executed
      and delivered as of the date first above written.

    

    
      	
               

            	
              DIGITAL
                ANGEL INTERNATIONAL, INC., AS GUARANTOR

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Patricia Petersen

            	 
	 	 	
              Name:
                Patricia Petersen

            	 
	 	 	
              Title:  
                Assistant Secretary

            	 
	 	 	 	 
	 	 	 	 
	 	
              DIGITAL
                ANGEL HOLDINGS, LLC, AS GUARANTOR

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Patricia Petersen

            	 
	 	 	
              Name:
                Patricia Petersen

            	 
	 	 	
              Title:  
                Assistant Secretary

            	 

    

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly executed
      and delivered as of the date first above written.

    

    
      	 	
              IMPERIUM
                ADVISERS, LLC, AS COLLATERAL AGENT

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Maurice Hryshko

            	 
	 	 	
              Name:
                Maurice Hryshko

            	 
	 	 	
              Title:
                Counsel

            	 

    

     

    
      
        
        

      

      
        -12-

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