Document:

Exhibit 10.5

Exhibit 10.5

MEMBERSHIP INTEREST PLEDGE AGREEMENT

THIS MEMBERSHIP INTEREST PLEDGE AGREEMENT (this “Agreement”), dated as of August 31,
2010, is by and between GT ACQUISITION SUB, INC., a Minnesota corporation (“Pledgor”) and
TCI BUSINESS CAPITAL, INC., a Minnesota corporation (“Lender”).

RECITALS:

A. Pledgor’s affiliate, DESTRON FEARING CORPORATION, a Delaware corporation
(“Borrower”), and Lender are parties to a certain Credit and Security Agreement dated on or
about the date hereof (as the same maybe amended, restated, renewed, supplemented or otherwise
modified from time to time, the “Credit Agreement”), pursuant to which Lender has made, or
will make, certain loans and other financial accommodations available to Borrower.

B. It is a condition precedent to the agreement of Lender to extend such loans and provide
such other financial accommodations that Pledgor shall have executed and delivered this Agreement
in favor of Lender.

AGREEMENTS:

NOW, THEREFORE, in consideration of the Recitals and in order to induce Lender to extend
credit under the Credit Agreement, Pledgor hereby agrees with Lender as follows:

1. Collateral. In consideration of credit or other financial accommodations now
existing or hereafter made by Lender to or for the account or benefit of Borrower, including but
not limited to the financial accommodations described in Paragraph 2 hereof, and as an
inducement therefor, Pledgor hereby grants to Lender a security interest in all of Pledgor’s now
owned or hereafter acquired right, title and interest in the following described property
(hereinafter called “Collateral”):

a. All of Pledgor’s now owned and hereafter acquired membership interest in C-SCAN,
LLC, a Minnesota limited liability company (“Issuer”), including but not limited to
all of Pledgor’s financial and governance rights and its right to share in all profits and
distributions (collectively, the “Pledged Membership Interest”);

b. All certificates, options, rights, membership distributions (cash or otherwise),
splits, warrants and other distributions issued as an addition to, in substitution or in
exchange for or on account of the Pledged Membership Interest; and

c. All property received upon the sale, exchange, collection or other disposition of
Collateral or proceeds therefrom, whether cash or non-cash proceeds, and all products of the
foregoing.

 

 

 

2. Secured Obligations. The security interest granted hereby secures payment and
performance to Lender of all of Borrower’s indebtedness, liabilities and obligations to Lender,
whether now existing or hereafter arising, whether otherwise secured or unsecured and howsoever
evidenced, arising or created, including but not limited to all of Borrower’s obligations arising
under the following:

a. the Credit Agreement, whether for principal, interest, fees, expenses,
indemnification or otherwise; and

b. any and all other agreements, documents and instruments evidencing, securing or
relating to the Credit Agreement, including any extensions, modifications, substitutions,
amendments and renewals thereof, whether for fees, expenses, indemnification or otherwise.

Herein the indebtedness, liabilities and obligations secured by the Collateral will be referred to
collectively as the “Secured Obligations”.

3. Definitions. Unless the context otherwise requires, all terms used herein which
are defined in Articles 1, 8 and 9 of the Minnesota UCC (defined below) have the meanings therein
stated.

4. Covenants, Representations and Warranties. Pledgor hereby covenants, represents
and warrants that:

a. The names of all members of Issuer, and their respective percentage membership
interests, are as set forth on Exhibit A attached hereto and made a part hereof.

b. Pledgor has title to and is the sole legal and beneficial owner of the Collateral
free of any liens, security interests, claims or other encumbrances of any kind limiting the
transferability of the Collateral, except as granted herein.

c. The Collateral represents one hundred percent (100%) of the aggregate outstanding
membership interests in Issuer. Pledgor agrees that it will not transfer, convey, sell,
encumber, pledge, hypothecate or otherwise dispose of any of its interest in the Collateral
without the prior consent of Lender.

d. The pledge of Collateral pursuant to this Agreement is duly authorized under the
terms of all agreements limiting the transferability of the Collateral and all necessary
consents, if any, to the transfer of the Collateral pursuant to this Agreement have been
obtained. Without limiting the foregoing, Pledgor specifically represents and warrants that
the security interest granted hereby is authorized under the terms of, and fully satisfies
the requirements of, any restriction on the assignment of financial or governance rights in
Issuer arising under the laws of Minnesota (including without limitation the Minnesota
Limited Liability Company Act), the articles of organization or operating agreement of
Issuer, any resolution adopted by the members or governors of Issuer, any written action by
members or governors of Issuer, or among them and Issuer or otherwise.

e. To the extent the Pledged Membership Interest is now or at any time hereafter
certificated, Pledgor shall execute and deliver to Lender such in-blank assignments separate
from certificate covering the Pledged Membership Interest in the form attached hereto as
Exhibit B; and

f. At any time or times hereafter, Pledgor authorizes Lender to file such financing
statements and agrees to execute such other instruments and perform such acts as Lender may
request to establish and maintain in Lender a valid, perfected security interest in the
Collateral including, without limitation, delivering all additional certificates, with
appropriate endorsement or assignment in-blank to Lender. Pledgor hereby agrees that Lender
may, at Lender’s option,
hold any of the Collateral in the name of Lender or otherwise indicate on any
instrument or certificate representing the Collateral that Lender has been granted a
security interest therein.

 

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g. If, at any time while this Agreement is in effect, Pledgor shall become entitled to
receive or shall receive any certificate, option or rights, whether as an addition to, in
substitution of, or in exchange for any Collateral or otherwise, Pledgor agrees to accept
the same as Lender’s agent to hold the same in trust for Lender and to deliver the same
forthwith to Lender in the exact form received, with the appropriate endorsement of Pledgor,
to be held by Lender as additional Collateral for the Secured Obligations, subject to the
terms hereof.

h. All sums of money and property paid or distributed in respect of the Collateral,
other than distributions made pursuant to the articles of organization or operating
agreement of Issuer and permitted under the terms of the Credit Agreement (“Permitted
Distributions”), shall be paid directly to Lender for application against the Secured
Obligations in any manner Lender may determine; provided, however, unless and until
an Event of Default (as defined in the Credit Agreement) has occurred, Pledgor may receive
any Permitted Distributions on account of the Pledged Membership Interest. To the extent
such payments are paid to Lender, Pledgor agrees that the obligor thereunder shall have no
further liability to Pledgor for the same.

i. Pledgor will pay, when due, all taxes and other governmental charges levied or
assessed upon or against any Collateral. Lender at its option may pay and discharge any
taxes, governmental charges, liens, or encumbrances on the Collateral which sums so advanced
or paid by Lender shall be paid by Pledgor on demand with interest at the highest rate
permitted by applicable law and shall become part of the Secured Obligations.

j. If Pledgor receives any payment or property from the Collateral in violation of the
terms of this Agreement, Pledgor will hold such payment or property in trust for Lender and
forthwith pay over or deliver the same to Lender in the form received with appropriate
endorsement or assignment in-blank to be applied in accordance with the terms hereof.

k. Unless and until an Event of Default has occurred, Pledgor may exercise all
governance rights relating to the Pledged Membership Interest.

l. Upon the occurrence of an Event of Default, Pledgor agrees, upon Lender’s request,
to cooperate with Lender by doing all things necessary to enable Lender to liquidate the
Collateral in compliance with all applicable laws and regulations. Pledgor understands and
agrees that upon the occurrence of an Event of Default, Lender has the right to liquidate
the Collateral, either at or prior to the maturity thereof, at the sole option of Lender,
and apply the proceeds to reduce the Secured Obligations.

m. Pledgor is not required to obtain any consent, approval or authorization from, or to
file any declaration or statement with, any governmental instrumentality or other agency or
any other individual or entity in connection with or as a condition to the execution,
delivery or performance hereof.

n. Issuer has not elected to have the Pledged Membership Interest treated as securities
governed by Article 8 of the Uniform Commercial Code as presently enacted in the State of
Minnesota (the “Minnesota UCC”) in its articles of organization, operating agreement
or any other document, and the Pledged Membership Interest does not constitute “investment
property”, as defined in Article 9 of the Minnesota UCC.

 

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5. Duty of Care. Lender shall not be obligated to preserve any rights Pledgor may
have against prior parties or to realize on the Collateral at all or in any particular manner or
order. Lender shall have no liability or responsibility to Pledgor for any action taken or omitted
with respect to the Collateral or otherwise on the direction of Pledgor.

6. Events of Default. The occurrence of any of the following events shall constitute
an Event of Default under this Agreement:

a. Either (i) Borrower shall fail to pay any of the Secured Obligations as and when
due; or (ii) Pledgor shall fail to perform any of its agreements contained herein;

b. Any statement, representation or warranty of Pledgor made herein or any time
furnished to Lender shall be untrue in any material respect as of the date made;

c. An Event of Default (as defined in the Credit Agreement) shall occur under the terms
of the Credit Agreement; or

d. Any other default, however defined, shall occur under the terms of any agreement,
document or instrument evidencing, securing or relating to the Secured Obligations.

7. Remedies Upon Default.

a. Upon the occurrence of an Event of Default and any time thereafter, Lender may
exercise any one or more of the following rights and remedies:

(1) Declare unmatured Secured Obligations to be immediately due and payable and
the same shall thereupon be immediately due and payable without presentment or other
notice or demand;

(2) Exercise and enforce any or all rights and remedies available upon default
to a secured party under the Minnesota UCC, including, but not limited to, the right
to exercise all rights as a holder of the Collateral and the right to dispose of the
Collateral in any manner permitted by the Minnesota UCC and applicable securities
laws including, without limitation, the right to offer and sell the Collateral
privately to purchasers who will agree to take the Collateral for investment and not
with the view to distribution and who will agree to the imposition of restrictive
legends on the certificates representing the Collateral, and the right to arrange
for a sale of the Collateral which would otherwise qualify as exempt from
registration under the Securities Act of 1933;

(3) Exercise its right to receive all cash payments on account of the Pledged
Membership Interest (including without limitation the Permitted Distributions) for
periods that the Collateral was held by Pledgor; and

(4) Exercise all governance rights of Pledgor with respect to the Pledged
Membership Interest.

Any transferee of Lender’s interest in the Collateral shall be entitled to exercise all
rights as holder of the Collateral, including voting rights.

b. If Lender disposes of any of the Collateral, the proceeds of any such disposition
shall be applied as set forth in the applicable provisions of
Article 9 of the Minnesota UCC. Pledgor specifically grants to Lender the right to apply such proceeds to attorneys’
fees and legal expenses incurred by Lender in connection with collection of the Secured
Obligations, disposition of Collateral or protection of Lender’s position. If any
notification of intended disposition of any of the Collateral is required by law, such
notification shall be deemed commercially reasonable if mailed at least ten (10) Business
Days before such disposition, postage prepaid, addressed to Pledgor at its notice address
set forth on the signature page to this Agreement.

 

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c. Pledgor recognizes that Lender may be unable to effect a public sale of the Pledged
Membership Interests by the reason of certain prohibitions contained in the Securities Act
of 1933, as amended (the “Securities Act”) or other applicable state or federal
laws, and Lender may therefore resort to one or more private sales thereof to a restricted
group of purchasers. Pledgor agrees that any such private sales may be at prices and on
other terms less favorable to the seller than if sold at public sales and that such private
sales shall not by reason thereof be deemed not to have been made in a commercially
reasonable manner. Lender shall be under no obligation to delay a sale of any of the
Pledged Membership Interests for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the Securities Act, or such
other applicable laws, even if the issuer would agree to do so. Subject to the foregoing,
Lender agrees that any sale of the Pledged Membership Interests shall be made in a
commercially reasonable manner, and Pledgor agrees to use its best efforts to cause the
issuer or issuers of the Pledged Membership Interests contemplated to be sold, to execute
and deliver, all at Pledgor’s expense, all such instruments and documents, and to do or
cause to be done all such other acts and things as may be necessary or, in the reasonable
opinion of Lender, advisable to exempt such Pledged Membership Interests from registration
under the provisions of the Securities Act, and to make all amendments to such instruments
and documents which, in the opinion of Lender, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and regulations of the Securities
and Exchange Commission applicable thereto, and other applicable law. Pledgor further
agrees to use its best efforts to cause the Pledged Membership Interests to comply with the
provisions of the securities or “Blue Sky” laws of any jurisdiction which Lender shall
reasonably designate.

8. Obligations Not Affected by Acts of Lender. Pledgor’s obligations hereunder shall
not be affected or impaired by any of the following acts or things which Lender is expressly
authorized to do, omit or suffer from time to time, without notice or approval by Lender: (a) any
extension, renewal, modification or amendment of the Credit Agreement or any of the documents,
instruments or agreements creating, evidencing or securing the Secured Obligations or delivered
therewith; (b) any delay or lack of diligence in the enforcement of any of the Secured Obligations;
(c) any failure to institute proceedings, file a claim or give any required notices; (d) any full
or partial release of, settlement with or agreement not to sue any guarantor, indemnitor or any
other person or entity obligated under the Secured Obligations; (e) any waiver or indulgence
granted to any guarantor or any person or entity obligated under the Secured Obligations; (f) any
failure to obtain or realize upon any other Collateral obtained from any other party or to see to
the proper perfection thereof or to establish the priority of the lien thereon or (g) acquire a
security interest in any property in addition to the Collateral or release any such interests so
acquired or permit any substitution or exchange for such property or any portion thereof.

9. Continuing Security Interest. The security interest granted hereby is a continuing
security interest and no notice of the creation or existence of any Secured Obligation or of any
renewal, extension or modification thereof need be given by Lender. The security interest shall
continue in effect notwithstanding that from time to time no Secured Obligations may exist.
Pledgor hereby expressly waives demand, presentment, protest and notice of a dishonor on any and
all of the Secured Obligations.

 

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10. Additional Rights of Lender. Upon an Event of Default, Lender, in the name of
Pledgor or otherwise, shall have the authority but shall not be obligated to demand, collect,
receive and receipt for, compromise, compound, settle and give acquittance for and prosecute and
discontinue any suits and proceedings in respect of any or all of the Collateral and to take any
action which Lender may deem necessary or desirable in order to realize on the Collateral,
including, without limitation, the power (a) to perform any contract, to endorse in the name of
Pledgor any checks, drafts, notes or other documents which are Collateral or are received in
payment or on account of the Collateral, (b) to transfer any of the Collateral into his name or
that of its nominee and to notify the obligor on or issuer of any Collateral, to remit to Lender
any amounts due or distributable thereon, and (c) to apply any proceeds of any Collateral against
the Secured Obligations as Lender, in its sole discretion, may determine whether the same shall
then be due or not due. Pledgor, and not Lender, shall have full responsibility for complying with
all call dates, conversion dates or other deadlines for action by the owner of any securities
pledged hereby.

11. Attorneys’ Fees. Pledgor agrees, upon the occurrence of an Event of Default, to
pay all costs of Lender including attorneys’ fees in the collection of the Collateral and the
enforcement of any of Lender’s rights against Pledgor hereunder.

12. Waiver or Amendment. No delay or failure by Lender in the exercise of any right
or remedy shall constitute a waiver thereof, and no single or partial exercise by Lender of any
right or remedy shall preclude other or further exercise thereof or the exercise of any other right
or remedy. This Agreement shall be binding upon and inure to the benefit of Lender and its
replacements, successors and assigns and shall take effect when signed by Pledgor and delivered to
Lender, and Pledgor waives notice of Lender’s acceptance thereof. This Agreement shall not be
amended except in writing signed by Pledgor and Lender.

13. GOVERNING LAW/JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF MINNESOTA. PLEDGOR HEREBY CONSENTS TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL
COURTS LOCATED IN THE STATE OF MINNESOTA IN CONNECTION WITH ANY CONTROVERSY RELATED TO THIS
AGREEMENT, WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORMS IS NOT CONVENIENT AND AGREES THAT ANY
LITIGATION INSTIGATED BY PLEDGOR AGAINST LENDER IN CONNECTION WITH THIS AGREEMENT SHALL BE VENUED
IN EITHER THE DISTRICT COURTS OF HENNEPIN COUNTY, MINNESOTA OR THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF MINNESOTA, FOURTH DIVISION.

14. Severability. If any provision or application of this Agreement is held unlawful
or unenforceable in any respect, such illegality or unenforceability shall not affect other
provisions or applications which can be given effect, and this Agreement shall be construed as if
the unlawful or unenforceable provision or application had never been contained or prescribed
hereby.

15. Admissibility of Pledge Agreement. Pledgor agrees that a copy of this Agreement
signed by Pledgor and transmitted by telecopier or other electronic means for delivery to Lender
shall be admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence.

16. Construction. The headings of the various sections of this Agreement have been
inserted for reference only and should not be construed as defining or limiting in any way the
scope or intent of the provisions hereof. Whenever the context requires or permits, the singular
shall include the
plural, the plural shall include the singular and the masculine, feminine and neuter shall be
freely interchangeable.

[Remainder of page intentionally left blank;

signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
date first above.

	 	 	 	 	 	 	 	 	 
	PLEDGOR:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	GT ACQUISITION SUB, INC.,	 	 
	 	 	a Minnesota corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	Address for notices:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	490 Villaume Avenue	 	 
	 	 	 	 	South St. Paul, MN 55075	 	 
	 
	 	 	 	 	 	 	 	 
	LENDER:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	TCI BUSINESS CAPITAL, INC.,	 	 
	 	 	a Minnesota corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Catherine Sedacca	 	 
	 

	 	 	 	Title:
	 	Chief Risk Officer	 	 

 

 

 

EXHIBIT A

Members of C-SCAN, LLC

	 	 	 	 	 
	Name	 	Percentage Interest	 
	 
	 	 	 	 
	GT ACQUISITION SUB, INC., a Minnesota corporation
	 	 	100	%

 

 

 

EXHIBIT B

IRREVOCABLE ASSIGNMENT IN BLANK

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
                                         the following membership units of C-SCAN, LLC, a Minnesota limited
liability company:

	 	 	 	 	 
	No. of Membership Units	 	 	Certificate No.	 

and irrevocably appoints                                          its agent and attorney-in-fact to transfer all or
any part of such membership units and to take all necessary and appropriate action to effect any
such transfer. The agent and attorney-in-fact may substitute and appoint one or more persons to
act for him. The effectiveness of a transfer pursuant to this assignment shall be subject to any
and all transfer restrictions referenced on the face of the certificates evidencing such interest
or in the articles of organization or limited liability company of the subject company, to the
extent they may from time to time exist.

	 	 	 	 	 
	 	GT ACQUISITION SUB, INC.,

a Minnesota corporation

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

 

ISSUER ACKNOWLEDGEMENT

The undersigned hereby (a) acknowledges receipt of a copy of that certain Membership Interest
Pledge Agreement (the “Pledge Agreement”) executed by GT ACQUISITION SUB, INC., a Minnesota
corporation (“Pledgor”) in favor of TCI BUSINESS CAPITAL, INC., a Minnesota corporation
(“Lender”), (b) agrees promptly to note on its books the security interests granted to
Lender, (c) agrees that it will comply with the instructions of Lender with respect to the Pledged
Membership Interest (as defined in the Pledge Agreement) without further consent by Pledgor, (d)
agrees to notify Lender upon obtaining knowledge of any interest in favor of any Person in the
Pledged Membership Interest that is adverse to the interest of Lender therein and (e) waives any
right or requirement at any time hereafter to receive a copy of the Pledge Agreement in connection
with the registration of any Pledged Membership Interest thereunder in the name of Lender or its
nominee or the exercise of voting rights by Lender or its nominee.

	 	 	 	 	 
	 	GT ACQUISITION SUB, INC.,

a Minnesota corporation

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:Exhibit 10.6

Exhibit 10.6

GUARANTY

THIS GUARANTY (this “Guaranty”) is made as of August 31, 2010 by DIGITAL ANGEL
TECHNOLOGY CORPORATION, a Minnesota corporation (the “Guarantor”), to and for the benefit
of TCI BUSINESS CAPITAL, INC., a Minnesota corporation (“Lender”).

ARTICLE 1.

GUARANTY.

Section 1.1 Guaranty. For value received and in consideration of any loan, advance or
financial accommodation of any kind whatsoever heretofore, now or hereafter made, given or granted
to DESTRON FEARING CORPORATION, a Delaware corporation (“Borrower”) by Lender
(collectively, the “Loans”), including without limitation pursuant to the Credit and
Security Agreement of even date herewith (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”) by and between Borrower and
Lender or otherwise, Guarantor hereby absolutely and unconditionally guarantees to Lender: (a) the
full and prompt payment when due of the principal of, all interest on, and all fees in respect of,
all of the Loans, and (b) the full and prompt payment and performance of any and all other
Indebtedness (as defined in the Credit Agreement), whether all or any portion of such Loans and
other Indebtedness are now or hereafter existing, direct or indirect, related or unrelated, joint
or several, or absolute or contingent, whether or not for the payment of money, and whether arising
by reason of an extension of credit, opening of a letter of credit, loan or guarantee or in any
other manner (all of the indebtedness, liabilities and obligations described in the foregoing
clauses (a) and (b) of this Section 1.1 which are outstanding from time to time being
hereinafter collectively referred to as the “Guaranteed Obligations”). Guarantor hereby
absolutely and unconditionally guarantees to Lender the full and prompt payment and performance of
the Guaranteed Obligations when the Guaranteed Obligations are due under the terms of the Credit
Agreement or the other Loan Documents (as defined in the Credit Agreement)], including, without
limitation, on the occurrence of an Event of Default (as defined in the Credit Agreement), by
reason of the maturity or acceleration of any of the Guaranteed Obligations, on the occurrence and
continuance of a default under the terms of this Guaranty, or otherwise, and at any times after the
date when due.

Section 1.2 Continuing Guaranty. Guarantor will not be entitled to any credit against
Guarantor’s obligations under this Guaranty by reason of any amounts (a) recovered by Lender by
reason of the enforcement by Lender after an Event of Default of any of its remedies under the Loan
Documents or (b) paid by any other Person to Lender under this Guaranty.

Section 1.3 Capitalized Terms. Capitalized terms used, but not defined, in this
Guaranty, have the meanings attributed to them in the Credit Agreement.

 

 

 

ARTICLE 2.

NATURE OF THE GUARANTY.

Section 2.1 Absolute Obligations. The obligations of Guarantor under this Guaranty
are absolute, unconditional, and will be continuing and remain in full force and effect subject to
Sections 2.2 and 2.6 below. This is a continuing guaranty of payment and not of
collection. Guarantor’s obligations under this Guaranty will not be released, discharged,
affected, modified or impaired by any event, including, without limitation, any of the following
events:

(a) the compromise, settlement, release, discharge or termination of any or all of the
obligations of Borrower to Lender by operation of law or otherwise, except as may result
from the full and prompt performance and payment of the Guaranteed Obligations;

(b) the extension of the time for payment of any obligation under the Credit Agreement
or any of the other Loan Documents, or the waiver, modification or amendment (whether
material or otherwise) of any obligation under the Credit Agreement or any of the other Loan
Documents or the acceptance of partial payments of the Guaranteed Obligations;

(c) the taking or failure to take any action under the Credit Agreement, any of the
other Loan Documents or this Guaranty;

(d) the invalidity or unenforceability of any provision of the Credit Agreement, any of
the other Loan Documents, or this Guaranty or any other defense Borrower may assert to the
payment or performance of any portion of the Indebtedness other than payment and
satisfaction in full of all of the Guaranteed Obligations;

(e) any (i) failure by Lender to take any steps to perfect, maintain, or enforce its
Liens on the Collateral (as defined in the Credit Agreement), (ii) subordination of any of
the Guaranteed Obligations and any security therefor to any other Debt of Borrower to any
Person, or (iii) loss, release, substitution of, or other dealings with, any collateral or
other security given to Lender with respect to the Guaranteed Obligations;

(f) the voluntary or involuntary liquidation, dissolution, sale or other disposition of
all or substantially all of the assets, marshaling of assets and liabilities, receivership,
insolvency, bankruptcy, assignment, composition with creditors or readjustment of, or other
similar proceedings affecting Borrower, Guarantor or any other guarantor of any or all of
the Indebtedness;

(g) any allegation of invalidity or contest of the validity of this Guaranty in any of
the proceedings described in Section 2.1(f);

(h) any act, election or remedy, or other election, occurrence or circumstance of any
nature, whether or not under Lender’s control, that may affect or impair any subrogation
right of Guarantor or the effectiveness or value thereof;

(i) the default or failure of Guarantor to perform fully any of Guarantor’s obligations
set forth in this Guaranty;

(j) Lender’s election, in any proceeding instituted under Chapter 11 of Title 11 of the
United States Code (the “Bankruptcy Code”), of the application of Section 1111
(b)(2) of the Bankruptcy Code;

(k) any borrowing or grant of a security interest by Borrower, as debtor-in-possession,
under Section 364 of the Bankruptcy Code;

(l) the disallowance of all or any portion of Lender’s claim(s) for repayment of the
Guaranteed Obligations under Section 502 of the Bankruptcy Code; or

(m) any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor other than payment and satisfaction in full of all of
the Guaranteed Obligations.

 

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Section 2.2 Revival of Guaranty. If (a) any demand is made at any time on Lender for
the repayment of any amount received by it or as proceeds of any collateral or security which have
been applied in payment of any of the Guaranteed Obligations, and (b) Lender makes any repayment by
reason of any judgment, decree or order of any court or administrative body or by reason of any
settlement or compromise of such demand, Guarantor will be liable under this Guaranty for all
amounts so repaid to the same extent as if such amounts had never been received originally by
Lender. Except as provided in the preceding sentence, Guarantor’s obligations under this Guaranty
will terminate when the Guaranteed Obligations have been fully paid, performed and satisfied.

Section 2.3 Waivers By Guarantor. Guarantor hereby covenants that this Guaranty will
not be discharged except by complete performance of the obligations contained in this Guaranty. To
the fullest extent permitted by law, Guarantor waives all setoffs and counterclaims and all
presentments, demands for performance, notices of nonperformance, protests, notices of protest,
notices of dishonor, and notices of acceptance of, and reliance on, this Guaranty. Guarantor
further waives all (a) notices of the existence, creation or incurring of new or additional
Indebtedness arising either from additional loans extended to Borrower or otherwise, (b) notices
that the principal amount, or any portion thereof (and any interest thereon), of the Loans or any
of the other Guaranteed Obligations is due, (c) notices of any and all proceedings to collect from
Borrower, any indorser or any other guarantor of all or any part of the Guaranteed Obligations, or
from anyone else, (d), to the extent permitted by law, notices of exchange, sale, surrender or
other handling of any security or collateral given to Lender to secure payment of all or any part
of the Guaranteed Obligations, and (e) defenses based on suretyship or impairment of collateral.

Section 2.4 Application of Proceeds by Lender. Lender will have the exclusive right
to determine, in its sole discretion, the order and method of the application of payments from and
credits to, if any, from Guarantor, Borrower or from any other Person on account of the Guaranteed
Obligations or of any other liability of Guarantor to Lender.

Section 2.5 Responsibility of Guarantor. Guarantor hereby assumes responsibility for
keeping informed of the financial condition of Borrower, and any and all indorsers and other
guarantors of any instrument or document evidencing all or any part of the Guaranteed Obligations
and of all other circumstances bearing on the risk of nonpayment of the Guaranteed Obligations or
any part thereof that diligent inquiry would reveal. Lender will have no duty to advise Guarantor
of information known to Lender regarding such condition or any such circumstances.

Section 2.6 Duration of Guaranty. This is a continuing Guaranty and shall not be
revoked by death, dissolution, merger, bankruptcy, incompetency or insolvency of the Guarantor.
This Guaranty shall remain in full force and effect with respect to the Guarantor until the Lender
receives written notice from the Guarantor revoking this Guaranty as to the Guarantor. In the
event that this Guaranty is revoked by the Guarantor, said revocation shall have no effect on the
continuing liability of the Guarantor to guarantee unconditionally the prompt payment of all
Guaranteed Obligations which are contracted or incurred before the revocation becomes effective,
including such prior Guaranteed Obligations which are subsequently renewed, modified or extended
after the revocation becomes effective, as well as all extensions of credit made after revocation
pursuant to commitments made prior to such revocation. Revocation of this Guaranty by any
Guarantor shall not relieve any other Guarantor of any liability. Except as provided in
Section 2.2, Guarantor’s obligations under this Guaranty for the Guaranteed Obligations
will terminate upon the payment and performance in full of the Guaranteed Obligations.

 

3

 

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES.

To induce Lender to extend the Guaranteed Obligations, and for other good and valuable
consideration, Guarantor hereby represents and warrants to Lender that: (a) this Guaranty is the
legal, valid and binding obligation of Guarantor, enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, and other similar laws of general application limiting the
enforcement of creditors’ rights generally and the fact that equitable remedies, including specific
performance are discretionary and may not be ordered in respect to certain defaults (b) the
execution, delivery, and performance of this Guaranty does not and will not, by the lapse of time,
by the giving of notice, or the satisfaction of any other condition: (i) violate, or constitute a
default under, any rule or provision of Guarantor’s Articles of Incorporation (or Articles of
Organization, as applicable), Bylaws (or Operating Agreement, as applicable), any resolution of
its shareholders or directors (or managers or members, as applicable), or any committee thereof, or
any agreement or other instrument to which Guarantor is a party or by which Guarantor or any of its
properties is or may be bound, (ii) violate, or constitute a default under, any law, requirement,
rule, regulation, ordinance or restriction of any governmental authority applicable to Guarantor or
by which its properties are bound or affected, (iii) result in the creation or imposition of any
Lien on any of the properties of Guarantor, or (iv) require any consent or approval of any Person;
(c) there is no action or proceeding pending before any court or Governmental Authority (as defined
in the Credit Agreement) which materially, adversely affects the condition (financial or otherwise)
of Guarantor or any of its properties; and (d) Guarantor has not guaranteed any Debt of Borrower
other than the Guaranteed Obligations.

ARTICLE 4.

COVENANTS.

From the date of the execution of this Guaranty until all Guaranteed Obligations have been
fully paid, performed and satisfied:

Section 4.1 Financial Statements. For so long as this Guaranty remains in effect,
upon Lender’s reasonable request, Guarantor will furnish Lender with Guarantor’s financial
statements (on a form reasonably acceptable to Lender) and tax returns (including applicable
schedules) for the immediately preceding financial period, certified by Guarantor to be accurate
and complete and acknowledged. Such financial statements will be in detail satisfactory to Lender
and will be prepared on a basis consistent with any preceding financial statements furnished to
Lender, or consistent with GAAP (but without footnotes).

Section 4.1 No Disposition of Assets; Debt. Guarantor will not (a) sell, transfer or
otherwise dispose of all or any portion of Guarantor’s properties (exclusive of Borrower Stock, the
disposition of which is the subject of Section 4.2) either (i) in violation of any
applicable law, or (ii) if such sale, transfer or disposition would have a material adverse affect
on Guarantor’s financial condition or on Guarantor’s ability to perform Guarantor’s obligations
under this Guaranty; or (b) incur, create or become obligated for any Debt which has a material
adverse affect on Guarantor’s financial condition or on Guarantor’s ability to perform Guarantor’s
obligations under this Guaranty; or (c) guarantee any Debt or obligations of Borrower other than
the Guaranteed Obligations.

Section 4.2 No Transfer of or Lien on Borrower Stock. Guarantor will not (a) sell,
assign, pledge, hypothecate or otherwise encumber or transfer, or dispose of any rights or
interests in any voting securities issued by Borrower (“Borrower Stock”) which are owned
legally or beneficially by Guarantor, or (b) allow any lien, interest, or adverse claim to attach
to any Borrower Stock owned or held by Guarantor.

 

4

 

Section 4.3 Payments. Guarantor will pay all of the reasonable costs, expenses and
fees, including, without limitation, all reasonable attorneys’ fees, incurred by Lender in
enforcing or attempting to enforce this Guaranty following any default on the part of Guarantor,
whether the same is enforced by suit or otherwise, and all amounts recoverable by law, including,
without limitation, interest on any unpaid amounts due under this Guaranty.

Section 4.4 Conducting Business. Guarantor specifically agrees and covenants that it
will not conduct any business other than owning and holding 100% of all classes of capital stock of
Fearing Manufacturing Co., Inc., all activities required under this Guaranty or other Loan
Documents and all activities reasonably incidental thereto. For purposes of the preceding
sentence, “conduct any business” shall include owning or holding any asset and/or incurring any
liability or obligation, except for liabilities or obligations arising under this Guaranty or other
Loan Documents.

ARTICLE 5.

DEFAULT; SUBORDINATION.

Section 5.1 Payment of Guaranteed Obligations. At any time after all or any portion
of the Guaranteed Obligations are due and payable, whether on maturity, after the acceleration of
any of the Guaranteed Obligations, on the occurrence of an Event of Default, on the occurrence of
any default under this Guaranty, or otherwise: (a) Lender will have the right: (i) to proceed
directly against Guarantor under this Guaranty without first exhausting any other remedy it may
have and without resorting to any security or guaranty held by Lender, and (ii) to compromise,
settle, release, discharge or terminate any of the obligations of any other guarantor(s) of the
Guaranteed Obligations as Lender, in its discretion, determines without thereby in any way
affecting, limiting or diminishing its rights thereafter to enforce the obligations of Guarantor
under this Guaranty; (b) Guarantor will, on the demand of Lender, immediately deposit with Lender
in U.S. dollars the total amount of the Guaranteed Obligations; (c) Lender will have the right to
sell, collect, or otherwise dispose of and to apply the proceeds of any collateral or other
security given to Lender with respect to the Guaranteed Obligations in satisfaction of the
Guaranteed Obligations; and (d) Lender will have the right to exercise all of Lender’s other
powers, rights and remedies under this Guaranty, the Loan Documents and under applicable law.
Lender will not have any obligation to marshal any assets in favor of Guarantor or against or in
payment of any or all of the Guaranteed Obligations.

Section 5.2 Subordination. Until the Guaranteed Obligations have been fully paid,
performed and satisfied, (a) any and all claims of Guarantor against Borrower, any indorser or any
other guarantor of all or any part of the Guaranteed Obligations, or against any of their
respective properties are, by signing this Guaranty, made subordinate and subject in right of
payment to the prior payment to Lender in full of all the Guaranteed Obligations; and (b) Guarantor
may not exercise any right to enforce any remedy which Guarantor now has or may in the future have
against Borrower, any indorser or any other guarantor of all or any part of the Guaranteed
Obligations.

ARTICLE 6.

GENERAL.

Section 6.1 Cumulative Remedies. The remedies provided in this Guaranty and the other
Loan Documents are cumulative and not exclusive of any remedies provided by law. Exercise of one
or more remedy(ies) by Lender does not require that all or any other remedy(ies) be exercised and
does not preclude later exercise of the same remedy. If there is any conflict, ambiguity, or
inconsistency, in Lender’s judgment, between the terms of this Guaranty and any of the Loan
Documents, then the applicable terms and provisions, in Lender’s judgment, providing Lender with
the greater rights, remedies, powers, privileges, or benefits will control.

 

5

 

Section 6.2 Waivers and Amendments in Writing. Failure by Lender to exercise any
right, remedy or option under this Guaranty or in any Loan Documents or delay by Lender in
exercising the same shall not operate as a waiver by Lender of its right to exercise any such
right, remedy or option. No waiver by Lender shall be effective unless it is in writing and then
only to the extent specifically stated. This Guaranty cannot be amended, modified, changed or
terminated orally.

Section 6.3 Entire Agreement; Counterparts; Fax Signatures. This Guaranty constitutes
the entire agreement between the parties with respect to the subject matter of this Guaranty, and
supersedes all prior written and oral agreements and understandings. Any request from time to time
by the Guarantor for Lender’s consent under any provision in this Guaranty must be in writing, and
any consent to be provided by Lender under this Guaranty from time to time must be in writing in
order to be binding on Lender; provided, however, Lender will have no obligation to provide
any consent requested by Guarantor, and Lender may, for any reason in its discretion exercised in
good faith, elect to withhold the requested consent. Two or more duplicate originals of this
Guaranty may be signed by the parties, each of which shall be an original but all of which together
shall constitute one and the same instrument. Any documents delivered by, or on behalf of,
Guarantor by fax transmission (a) may be relied on by Lender as if the document were a manually
signed original, and (b) will be binding on Guarantor for all purposes of the Loan Documents.

Section 6.4 Headings; Construction. Section headings in this Guaranty are included
for convenience of reference only and shall not relate to the interpretation or construction of
this Guaranty. Any and all references in this Guaranty to any other document or documents will be
references to that other document or documents as they may, from time to time, be modified,
amended, renewed, consolidated, extended or replaced.

Section 6.5 Separate Instrument. This Guaranty constitutes a separate instrument,
enforceable in accordance with its terms, and neither this Guaranty nor the obligations of
Guarantor under this Guaranty will, under any circumstance or in any legal proceeding, be deemed to
have merged into any other agreement or obligation of Guarantor.

Section 6.6 Severability. If any term of this Guaranty is found invalid under
Minnesota law or laws of mandatory application by a court of competent jurisdiction, that invalid
term will be considered excluded from this Guaranty and will not invalidate the remaining terms of
this Guaranty.

Section 6.7 CHOICE OF LAW. THIS GUARANTY HAS BEEN DELIVERED AT AND ACCEPTED AT AND
SHALL BE DEEMED TO HAVE BEEN MADE AT MINNEAPOLIS, MINNESOTA. THIS GUARANTY SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA (WITHOUT REFERENCE
TO MINNESOTA CONFLICTS OF LAW PRINCIPLES).

Section 6.8 CHOICE OF FORUM. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR LENDER TO
ACCEPT THIS GUARANTY AND TO EXTEND CREDIT TO BORROWER, GUARANTOR AND LENDER AGREE THAT ANY ACTION,
SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS GUARANTY, ITS VALIDITY OR PERFORMANCE,
WITHOUT LIMITATION ON THE ABILITY OF LENDER, ITS SUCCESSORS AND ASSIGNS, TO INITIATE AND PROSECUTE
IN ANY APPLICABLE JURISDICTION ACTIONS RELATED TO THE REPAYMENT AND COLLECTION OF THE GUARANTEED
OBLIGATIONS AND THE EXERCISE OF ALL OF LENDER’S RIGHTS AGAINST GUARANTOR WITH RESPECT THERETO AND
ANY SECURITY OR PROPERTY OF GUARANTOR, INCLUDING ANY DISPOSITIONS OF ANY OF THE COLLATERAL, SHALL
BE INITIATED AND PROSECUTED AS TO ALL PARTIES AND THEIR HEIRS, SUCCESSORS AND ASSIGNS AT
MINNEAPOLIS, MINNESOTA. LENDER AND GUARANTOR EACH CONSENT TO AND SUBMITS TO THE EXERCISE OF
JURISDICTION OVER
THEIR PERSON BY ANY COURT SITUATED AT MINNEAPOLIS, MINNESOTA HAVING JURISDICTION OVER THE
SUBJECT MATTER AND EACH CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY CERTIFIED MAIL DIRECTED TO
GUARANTOR AND LENDER AT THEIR RESPECTIVE ADDRESSES AS SET FORTH BELOW (OR SUCH OTHER ADDRESS AS A
PARTY MAY FROM TIME TO TIME DESIGNATE BY NOTICE TO THE OTHER PARTY) OR AS OTHERWISE PROVIDED UNDER
THE LAWS OF THE STATE OF MINNESOTA. GUARANTOR WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED UNDER THIS GUARANTY, AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

 

6

 

Section 6.9 Successors and Assigns. This Guaranty will inure to the benefit of
Lender, its successors and assigns and be binding on the heirs, executors, legal representatives,
successors and assigns of Guarantor.

Section 6.10 Notices. Any notice required, permitted or contemplated hereunder shall
be in writing and addressed to the party to be notified at the address set forth below or at such
other address as each party may designate from time to time by notice hereunder, and shall be
deemed validly given (a) three days following deposit in the U.S. certified mails (return receipt
requested), with proper postage prepaid, or (b) the next Business Day after such notice was
delivered to a regularly scheduled overnight delivery carrier with delivery fees either prepaid or
an arrangement satisfactory with such carrier made for the payment thereof, or (c) upon receipt of
notice given by telecopy (fax), mailgram, telegram, telex or personal delivery:

	 	 	 
	To Guarantor:

	 	Digital Angel Technology Corporation
	 

	 	490 Villaume Avenue
	 

	 	South St. Paul, MN 55075
	 

	 	Telecopier No.                     
	 
	 	 
	To Lender:

	 	12270 Nicollet Avenue South
	 

	 	Burnsville, MN 55337
	 

	 	Attention:                     
	 

	 	Telecopier No.                     

Section 6.11 Separate Action. Each default in payment of any amount due under this
Guaranty will, at Lender’s sole option, give rise to a separate cause of action under this
Guaranty, and separate suits, at Lender’s sole option, may be brought under this Guaranty as each
cause of action arises.

Section 6.12 Survival and Continuation of Representations and Warranties. All of
Guarantor’s representations and warranties contained in this Guaranty shall (a) survive the
execution, delivery and acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto, (b) be deemed to be made as of each and every day of the term
of this Guaranty, and (c) remain true until the Guaranteed Obligations are fully performed, paid
and satisfied, subject to such changes as may not be prohibited hereby, do not constitute defaults
hereunder, and have been consented to by Lender in writing.

 

7

 

Section 6.13 Equitable Relief. Guarantor recognizes that, in the event that Guarantor
fails to perform, observe or discharge any of Guarantor’s obligations or liabilities under this
Guaranty, any remedy at law may prove to be inadequate relief to Lender; therefore, Guarantor
agrees that Lender, if Lender so requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.

Section 6.14 Recourse to Directors or Officers. The obligations of Lender under this
Guaranty are solely the corporate obligations of Lender. No recourse shall be had for any
obligation or claim arising out of or based upon this Guaranty against any stockholder, employee,
officer, or director of Lender.

Section 6.15 WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR LENDER
TO ENTER INTO THIS GUARANTY AND EXTEND CREDIT TO BORROWER, GUARANTOR AND LENDER EACH WAIVES TRIAL
BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS
GUARANTY.

[Remainder of page left blank;

signature page follows]

 

8

 

IN WITNESS WHEREOF, Guarantor has made and executed this Guaranty as of the date first above
written.

	 	 	 	 	 
	 	DIGITAL ANGEL TECHNOLOGY CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	Jason Prescott 	 
	 	 	Title:  	Chief Financial Officer 	 

Accepted this 31st day of August, 2010.

TCI BUSINESS CAPITAL, INC.,

a Minnesota corporation

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name: Catherine Sedacca
	 	 
	 

	 	Title:   Chief Risk Officer	 	 

 

9

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