Document:

Filed by Bowne Pure Compliance

 

Exhibit
10.12

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of August
31, 2007, by and between VeriChip Corporation, a Delaware corporation (the “Company”), and Kallina
Corporation, a Delaware corporation (the “Purchaser”).

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date
hereof, by and among the Purchaser, Applied Digital Solutions, Inc. (“ADSX”), as acknowledged by
Digital Angel Corporation and the Company (as amended, modified or supplemented from time to time,
the “Purchase Agreement”).

The Company and the Purchaser hereby agree as follows:

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

“Commission” means the Securities and Exchange Commission.

“Common Stock” means shares of the Company’s common stock, par value $0.01 per share.

“Effectiveness Date” means, with respect to the Registration Statement required to be filed in
connection with the Grant Shares, a date no later than sixty (60) days following the Filing Date;
provided, however, if the Registration Statement is subject to a full review by the Commission, a
date no later than one hundred twenty (120) days following the Filing Date.

“Effectiveness Period” has the meaning set forth in Section 2(a).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor
statute.

“Filing Date” means, with respect to the Registration Statement required to be filed in
connection with the Grant Shares, the earlier of (i) the closing of the transaction contemplated by
that Agreement and Plan of Reorganization dated August 8, 2007, between ADSX, Digital Angel
Corporation, and Digital Angel Acquisition Corp., or (ii) December 31, 2007.

“Grant Shares” means the 200,000 shares of Common Stock transferred by ADSX to the Purchaser.

“Holder” or “Holders” means the Purchaser or any of its affiliates or transferees to the
extent any of them hold Registrable Securities, other then those purchasing Registrable Securities
in a market transaction.

“Indemnified Party” has the meaning set forth in Section 6(c).

 

 

 

“Indemnifying Party” has the meaning set forth in Section 6(c).

“Note” shall mean the Secured Term Note.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition), whether commenced or to
the Company’s knowledge, threatened.

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

“Purchase Agreement” has the meaning given to such term in the Preamble hereto.

“Registrable Securities” means the Grant Shares.

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

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

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

“Securities Act” means the Securities Act of 1933, as amended, and any successor statute.

“Trading Market” means any of the NASD Over The Counter Bulletin Board, NASDAQ Capital Market,
NASDAQ Global Market, the NASDAQ National Markets System, the American Stock Exchange or the New
York Stock Exchange

 

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2. Registration.

(a) On or prior to the Filing Date, the Company shall prepare and file with the Commission a
Registration Statement covering the Registrable Securities for a selling stockholder resale
offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-1 or Form S-3, if the Company is eligible to use
Form S-3. The Company shall cause the Registration Statement to become effective and remain
effective as provided herein. The Company shall use its reasonable commercial efforts to cause the
Registration Statement to be declared effective under the Securities Act as promptly as possible
after the filing thereof, but in any event no later than the Effectiveness Date. The Company shall
use its reasonable commercial efforts to keep the Registration Statement continuously effective
under the Securities Act until the date which is the earlier date of when (i) all Registrable
Securities covered by such Registration Statement have been sold or (ii) all Registrable Securities
covered by such Registration Statement may be sold immediately without registration under the
Securities Act and without volume restrictions pursuant to Rule 144(k), as determined by the
counsel to the Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness Period”).

(b) In no event will the Company be required (i) to pay a penalty for failure to cause the
Registration Statement to be declared effective or for failure to cause the Registration Statement
to remain effective; and (ii) to pay liquidating damages in connection with the Grant Shares.

(c) Within three business days of the Effectiveness Date, the Company shall cause its counsel
to issue a blanket opinion in the form attached hereto as Exhibit A, to the transfer agent stating
that the shares are subject to an effective registration statement and can be reissued free of
restrictive legend upon notice of a sale by the Purchaser and confirmation by the Purchaser that it
has complied with the prospectus delivery requirements, provided that the Company has not advised
the transfer agent orally or in writing that the opinion has been withdrawn. Copies of the blanket
opinion required by this Section 2(c) shall be delivered to the Purchaser within the time frame set
forth above.

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

(a) prepare and file with the Commission a Registration Statement with respect to such
Registrable Securities, respond as promptly as possible to any comments received from the
Commission, and use its reasonable commercial efforts to cause such Registration Statement to
become and remain effective for the Effectiveness Period with respect thereto, and promptly provide
to the Purchaser copies of all filings and Commission letters of comment relating thereto;

(b) prepare and file with the Commission such amendments and supplements to such Registration
Statement and the Prospectus used in connection therewith as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all Registrable Securities
covered by such Registration Statement and to keep such Registration Statement effective until the
expiration of the Effectiveness Period applicable to such Registration Statement;

 

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(c) furnish to the Purchaser such number of copies of the Registration Statement and the
Prospectus included therein (including the preliminary Prospectus) as the Purchaser reasonably may
request to facilitate the public sale or disposition of the Registrable Securities covered by such
Registration Statement;

(d) use its reasonable commercial efforts to register or qualify the Purchaser’s Registrable
Securities covered by such Registration Statement under the securities or “blue sky” laws of such
jurisdictions within the United States as the Purchaser may reasonably request, provided, however,
that the Company shall not for any such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;

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

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

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

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

5. Obligations Of Each Holder.

In connection with the registration of Registrable Securities pursuant to a Registration
Statement, each Holder shall:

(a) timely furnish to the Company in writing such information regarding itself and the
intended method of disposition of such Registrable Securities as the Company shall reasonably
request in order to effect the registration thereof;

 

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(b) in the event of an underwritten offering of such Registrable Securities in which such
Holder participates pursuant to Section 8(e) hereof, enter into a customary and reasonable
underwriting agreement and execute such other documents (including without limitation “lock-up” and
indemnity agreements) as the Company and the managing underwriter for such offering may reasonably
request so long as such requirements are also imposed upon directors and officers of the Company,
as well as other selling shareholders under the Registration Statement;

(c) notify the Company promptly in the event that any information supplied by such Holder in
writing for inclusion in such Registration Statement or related prospectus is untrue or omits to
state a material fact required to be stated therein or necessary to make such information not
misleading in light of the circumstances then existing; immediately discontinue any sale or other
disposition of such Registrable Securities pursuant to such Registration Statement until the filing
of an amendment or supplement to such prospectus as may be necessary so that such prospectus does
not contain an untrue statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in light of the
circumstances then existing; and provide the Company with updates on such information as may be
appropriate to make such amendment or supplement effective for such purpose; (d) comply with the
requirements in Section 8(d) of this Agreement.

6. Indemnification.

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

 

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

(c) Promptly after receipt by a party entitled to claim indemnification hereunder (an
“Indemnified Party”) of notice of the commencement of any action, such Indemnified Party shall, if
a claim for indemnification in respect thereof is to be made against a party hereto obligated to
indemnify such Indemnified Party (an “Indemnifying Party”), notify the Indemnifying Party in
writing thereof, but the omission so to notify the Indemnifying Party shall not relieve it from any
liability which it may have to such Indemnified Party other than under this Section 6(c) and shall
only relieve it from any liability which it may have to such Indemnified Party under this Section
6(c) if and to the extent the Indemnifying Party is prejudiced by such omission. In case any such
action shall be brought against any Indemnified Party and it shall notify the Indemnifying Party of
the commencement thereof, the Indemnifying Party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such
Indemnified Party, and, after notice from the Indemnifying Party to such Indemnified Party of its
election so to assume and undertake the defense thereof, the Indemnifying Party shall not be liable
to such Indemnified Party under this Section 6(c) for any legal expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof; if the Indemnified Party retains its
own counsel, then the Indemnified Party shall pay all fees, costs and expenses of such counsel,
provided, however, that, if the defendants in any such action include both the
Indemnified Party and the Indemnifying Party and the Indemnified Party shall have reasonably
concluded that there may be reasonable defenses available to it which are different from or
additional to those available to the Indemnifying Party or if the interests of the Indemnified
Party reasonably may be deemed to conflict with the interests of the Indemnifying Party, the
Indemnified Party shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the
defense of such action, with the reasonable expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the Indemnifying Party as
incurred.

 

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(d) In order to provide for just and equitable contribution in the event of joint liability
under the Securities Act in any case in which either (i) the Purchaser, or any officer, director or
controlling person of the Purchaser, makes a claim for indemnification pursuant to this Section 6
but it is judicially determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact that this Section 6
provides for indemnification in such case, or (ii) contribution under the Securities Act may be
required on the part of the Purchaser or such officer, director or controlling person of the
Purchaser in circumstances for which indemnification is provided under this Section 6; then, and in
each such case, the Company and the Purchaser will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from others) in such
proportion so that the Purchaser is responsible only for the portion represented by the percentage
that the public offering price of its securities offered by the Registration Statement bears to the
public offering price of all securities offered by such Registration Statement, provided,
however, that, in any such case, (A) the Purchaser will not be required to contribute any
amount in excess of the public offering price of all such securities offered by it pursuant to such
Registration Statement; and (B) no person or entity guilty of fraudulent misrepresentation (within
the meaning of Section 10(f) of the Act) will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.

7. Representations and Warranties.

(a) The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and
the Company has timely filed all proxy statements, reports, schedules, forms, statements and other
documents required to be filed by it under the Exchange Act. The Company has filed (i) its Annual
Report on Form 10-K for its fiscal year ended December 31, 2006 and (ii) its Quarterly Report on
Form 10-Q for the fiscal quarters ended March 31, 2007, and June 30, 2007 (collectively, the “SEC
Reports”). Each SEC Report was, at the time of its filing, in substantial compliance with the
requirements of its respective form and none of the SEC Reports, nor the financial statements (and
the notes thereto) included in the SEC Reports, as of their respective filing dates, contained any
untrue statement of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in the SEC Reports
comply as to form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with generally
accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii)
in the case of unaudited interim statements, to the extent they may not include footnotes or may be
condensed) and fairly present in all material respects the financial condition, the results of
operations and the cash flows of the Company and its subsidiaries, on a consolidated basis, as of,
and for, the periods presented in each such SEC Report.

 

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(b) The Common Stock is listed or quoted, as applicable, for trading on the NASDAQ National
Markets System and satisfies all requirements for the continuation of such listing or quotation, as
applicable, and the Company shall do all things necessary for the continuation of such listing or
quotation, as applicable. The Company has not received any notice that its Common Stock will be
delisted from or no longer be quoted on, as applicable, the NASDAQ National Market (except for
prior notices which have been fully remedied) or that the Common Stock does not meet all
requirements for the continuation of such listing or quotation, as applicable.

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

(d) The Company shall provide written notice to each Holder of (i) the occurrence of each
Discontinuation Event (as defined below) and (ii) the declaration of effectiveness by the SEC of
each Registration Statement required to be filed hereunder, in each case within three (3) business
days of the date of each such occurrence and/or declaration.

8. Miscellaneous.

(a) Remedies. In the event of a breach by the Company or by a Holder, of any of their
respective obligations under this Agreement, each Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under this Agreement will be
entitled to specific performance of its rights under this Agreement. The failure of the Company to
cause the Registration Statement to become effective and to remain effective as provided herein
shall not convey to the Holder(s) any rights to the recovery of monetary and or liquidated damages.

(b) [Intentionally Deleted.]

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

 

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(d) Discontinued Disposition. Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of a Discontinuation
Event (as defined below), such Holder will forthwith discontinue disposition of such Registrable
Securities under the applicable Registration Statement until such Holder’s receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement or until it is advised in writing
(the “Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus or Registration Statement. The Company
may provide appropriate stop orders to enforce the provisions of this paragraph. For purposes of
this Agreement, a “Discontinuation
Event” shall mean (i) when the Commission notifies the Company whether there will be a
“review” of such Registration Statement and whenever the Commission comments in writing on such
Registration Statement (the Company shall provide true and complete copies thereof and all written
responses thereto to each of the Holders); (ii) any request by the Commission or any other Federal
or state governmental authority for amendments or supplements to such Registration Statement or
Prospectus or for additional information; (iii) the issuance by the Commission of any stop order
suspending the effectiveness of such Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) the receipt by the Company
of any notification with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation
or threatening of any Proceeding for such purpose; and/or (v) the occurrence of any event or
passage of time that makes the financial statements included in such Registration Statement
ineligible for inclusion therein or any statement made in such Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to such Registration Statement, Prospectus or other
documents so that, in the case of such Registration Statement or Prospectus, as the case may be, it
will not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

(e) Piggy-Back Registrations. If at any time after the date hereof there is not an effective
Registration Statement covering all of the Registrable Securities required to be covered hereunder
and the Company shall determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the Securities Act of
any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company shall send to each
Holder written notice of such determination and, if within ten (10) days after receipt of such
notice, any such Holder shall so request in writing, the Company shall use commercially reasonable
efforts to include in such registration statement all or any part of such Registrable Securities
such Holder requests to be registered, to the extent the Company may do so without violating
registration rights of others which exist as of the date of this Agreement, subject to customary
underwriter cutbacks applicable to all holders of registration rights and subject to obtaining any
required consent of any selling stockholder(s) to such inclusion under such registration statement.

 

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If, in connection with any underwritten public offering for the account of the Company or for
stockholders of the Company that have contractual rights to require the Company to register shares
of Common Stock, the managing underwriter(s) thereof shall impose a limitation on the number of
shares of Common Stock which may be included in a registration statement because, in the judgment
of such underwriter(s), marketing or other factors dictate such limitation is necessary to
facilitate such offering, then the Company shall be obligated to include in the registration
statement only such limited portion of the Registrable Securities with respect to which each Holder
has requested inclusion hereunder as such underwriter(s) shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Holders seeking to include
Registrable Securities in a registration statement, in proportion to the number of Registrable
Securities sought to be included by such Holders; provided, however, that the Company shall not
exclude any Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such securities in the
registration statement or are not entitled to pro rata inclusion with the Registrable Securities;
and provided, further, that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of other securities having
the right to include such securities in the registration statement.

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

(g) Notices. Any notice or request hereunder may be given to the Company or the Purchaser at
the respective addresses set forth below or as may hereafter be specified in a notice designated as
a change of address under this Section 8(g). Any notice or request hereunder shall be given by
registered or certified mail, return receipt requested, hand delivery, overnight mail, Federal
Express or other national overnight next day carrier (collectively, “Courier”) or telecopy
(confirmed by mail). Notices and requests shall be, in the case of those by hand delivery, deemed
to have been given when delivered to any party to whom it is addressed, in the case of those by
mail or overnight mail, deemed to have been given three (3) business days after the date when
deposited in the mail or with the overnight mail carrier, in the case of a Courier, the next
business day following timely delivery of the package with the Courier, and, in the case of a
telecopy, when confirmed. The address for such notices and communications shall be as follows:

	 	 	 
	If to the Company:

	 	VeriChip Corporation
	 

	 	1690 South Congress Avenue, Suite 200
	 

	 	Delray Beach, Florida 33445
	 

	 	Attention: Chief Financial Officer
	 

	 	Facsimile: 561-805-8001
	 
	 	 
	 

	 	with a copy to:
	 
	 	 
	 

	 	Holland & Knight LLP
	 

	 	701 Brickell Avenue, Suite 3000
	 

	 	Miami, Florida 33131
	 

	 	Attention: Harvey Goldman, Esq.
	 

	 	Facsimile: 305-789-7799

 

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	If to a Purchaser:

	 	To the address set forth under such Purchaser
name on the signature pages hereto.
	 
	 	 
	If to any other Person who is
	 	 
	then the registered Holder:

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

or such other address as may be designated in writing hereafter in accordance with this Section
8(g) by such Person.

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

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

(j) Governing Law, Jurisdiction and Waiver of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. The
Company hereby consents and agrees that the state or federal courts located in the County of New
York, State of New York shall have exclusion jurisdiction to hear and determine any Proceeding
between the Company, on the one hand, and the Purchaser, on the other hand, pertaining to this
Agreement or to any matter arising out of or related to this Agreement; provided, that the
Purchaser and the Company acknowledge that any appeals from those courts may have to be heard by a
court located outside of the County of New York, State of New York, and further
provided, that nothing in this Agreement shall be deemed or operate to preclude the
Purchaser from bringing a Proceeding in any other jurisdiction to collect the obligations, to
realize on the Collateral or any other security for the obligations, or to enforce a judgment or
other court order in favor of the Purchaser. The Company expressly submits and consents in advance
to such jurisdiction in any Proceeding commenced in any such court, and the Company hereby waives
any objection which it may have based upon lack of personal jurisdiction, improper venue or
forum non conveniens. The Company hereby waives personal service of the summons, complaint
and other process issued in any such Proceeding and agrees that service of such summons, complaint
and other process may be made by registered or certified mail addressed to the Company at the
address set forth in Section 8(g) and that service so made shall be deemed completed upon the
earlier of the Company’s actual receipt thereof or three (3) days after deposit in the U.S. mails,
proper postage prepaid. The parties hereto desire that their disputes be resolved by a judge
applying such applicable laws. Therefore, to achieve
the best combination of the benefits of the judicial system and of arbitration, the parties
hereto waive all rights to trial by jury in any Proceeding brought to resolve any dispute, whether
arising in contract, tort, or otherwise between the Purchaser and/or the Company arising out of,
connected with, related or incidental to the relationship established between then in connection
with this Agreement. If either party hereto shall commence a Proceeding to enforce any provisions
of this Agreement, the Purchase Agreement or any other Related Agreement, then the prevailing party
in such Proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and
other costs and expenses incurred with the investigation, preparation and prosecution of such
Proceeding.

 

11

 

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

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

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

[Balance of page intentionally left blank; signature page follows]

 

12

 

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

	 	 	 	 	 
	 	 	VERICHIP CORPORATION
	 
	 	 	 	 
	 
	 	By:	 	/s/ W J Caragol
	 
	 	 	 	 
	 
	 	Name:	 	W J Caragol
	 
	 	 	 	 
	 
	 	Title:	 	President
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	KALLINA CORPORATION
	 
	 	 	 	 
	 
	 	By:	 	/s/ David Grin
	 
	 	 	 	 
	 
	 	Name:	 	David Grin
	 
	 	 	 	 
	 
	 	Title:	 	Director
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	Address for Notices:
	 	 	
Kallina Corporation
	 	 	874 Walker Road
	 	 	Suite C
	 	 	Dover, DE 19904
	 	 	Facsimile: 914-949-9618
	 
	 	 	 	 
	 	 	with copy to:
	 	 	
Laurus Capital Management, LLC
	 	 	335 Madison Avenue, 10th Floor
	 	 	New York, NY 10017
	 	 	Attention: Portfolio Services
	 	 	Facsimile: 212-581-5037

 

13Filed by Bowne Pure Compliance

 

Exhibit 10.13

SECURED TERM NOTE

FOR VALUE RECEIVED, DIGITAL ANGEL CORPORATION, a Delaware corporation (“Digital Angel”) and
the other companies listed on Exhibit A attached hereto (such other companies together with
the Digital Angel, each a “Company” and collectively, the “Companies”), jointly and severally,
promises to pay to APPLIED DIGITAL SOLUTIONS, INC., 1690 South Congress Avenue, Suite 200, Delray
Beach, Florida 33445, Fax: 561-805-8001 (the “Holder”) or its registered assigns or successors in
interest, the sum of Seven Million Dollars ($7,000,000), together with any accrued and unpaid
interest hereon, on August 31, 2009 (the “Maturity Date”) if not sooner indefeasibly paid in full.

The following terms shall apply to this Secured Term Note (this “Note”). For purposes herein,
the Note, the Security Agreement between Holder and the Companies dated as of the date hereof (the
"Security Agreement”), and any the other agreements relating hereto or thereto shall be referred to
as the “Loan Documents.”

ARTICLE I

CONTRACT RATE AND AMORTIZATION

1.1 Contract Rate. Subject to Sections 3.2 and 4.10, interest payable on the
outstanding principal amount of this Note (the “Principal Amount”) shall accrue at a rate per annum
equal to the “prime rate” published in The Wall Street Journal from time to time (the
“Prime Rate”), plus three percent (3.0%) (the “Contract Rate”). The Contract Rate shall be
increased or decreased as the case may be for each increase or decrease in the Prime Rate in an
amount equal to such increase or decrease in the Prime Rate; each change to be effective as of the
day of the change in the Prime Rate. The Contract Rate shall not at any time be less than eleven
percent (11.0%). Interest shall be (i) calculated on the basis of a 360 day year, and (ii) payable
monthly, in arrears, commencing on September 1, 2007, on the first business day of each consecutive
calendar month thereafter through and including the Maturity Date, and on the Maturity Date,
whether by acceleration or otherwise.

1.2 Contract Rate Payments. The Contract Rate shall be calculated on the last
business day of each calendar month hereafter (other than for increases or decreases in the Prime
Rate which shall be calculated and become effective in accordance with the terms of Section 1.1)
until the Maturity Date and shall be subject to adjustment as set forth herein.

1.3 Principal Payments. Amortizing payments of the Principal Amount shall be made by
the Companies on March 1, 2008 and on the first business day of each succeeding month thereafter
through and including the Maturity Date (each, an “Amortization Date”). Commencing on the first
Amortization Date, the Companies shall make monthly payments to the Holder on each Amortization
Date, each such payment in the amount of $166,666.67 of outstanding Principal Amount, together with
any accrued and unpaid interest on such portion of the Principal Amount plus any and all other
unpaid amounts which are then owing under this Note, the Security Agreement, and/or any other Loan
Documents (collectively, the “Monthly Amount”). Any outstanding Principal Amount together with any accrued and unpaid interest and
any and all other unpaid amounts which are then owing by the Companies to the Holder under this
Note, the Security agreement and/or any other Loan Documents shall be due and payable on the
Maturity Date. Notwithstanding the foregoing, in the event the Companies make the required
payments of interest and principal hereunder to Holder and Holder fails to pay such
amount to Kallina Corporation (“Kallina”) pursuant to the terms of that certain Secured Term Note
by Holder in favor of Kallina dated as of the date hereof, then the Companies shall have the right
to pay future payments of interest and principal to Kallina until Holder resumes payments
of such amounts.

Term Note

 

 

 

ARTICLE II

REDEMPTION AND FEES

2.1 Optional Redemption in Cash. The Companies may prepay this Note at any time
(“Optional Redemption”) by paying to the Holder a sum of money equal to one hundred three percent
(103%) of the Principal Amount outstanding at such time together with accrued but unpaid interest
thereon and any and all other sums due, accrued or payable to the Holder arising under this Note or
any other Loan Documents (the “Redemption Amount”) outstanding on the Redemption Payment Date (as
defined below). The Companies shall deliver to the Holder a written notice of redemption (the
“Notice of Redemption”) specifying the date for such Optional Redemption (the “Redemption Payment
Date”), which date shall be no later than seven (7) business days after the date of the Notice of
Redemption (the “Redemption Period”). On the Redemption Payment Date, the Redemption Amount must
be paid in immediately available funds to the Holder. In the event the Companies fail to pay the
Redemption Amount on the Redemption Payment Date as set forth herein, then such Redemption Notice
will be null and void.

2.2 Fees. In connection with the Note, Digital Angel must pay the Holder the
following:

(a) a structuring fee of $100,000;

(b) $1,170,000 in costs incurred by the Holder resulting from the transfer of 200,000
shares of common stock of VeriChip Corporation, a Delaware corporation and subsidiary of
Holder;

(c) $158,173 in costs incurred by Holder resulting from the reduction in the exercise
price on existing warrants to purchase Holder’s common stock held by Kallina’s parent from
$1.88 to $1.35; and

(d) any other out-of-pocket fees required to be paid by Holder in connection with the
Applied Digital Financing Transaction, which shall be payable in cash.

In connection with its receipt of the $7.0 million and its payment of the fees described in
this Section 2.2, Digital Angel will issue to the Holder this Note and 921,402 shares of Digital
Angel’s common stock.

Term Note

 

2

 

ARTICLE III

EVENTS OF DEFAULT

3.1 Events of Default. The occurrence of any of the following events set forth in
this Section 3.1 shall constitute an event of default (“Event of Default”) hereunder:

(a) The Companies fail to pay when due any installment of principal, interest or other
invoiced fees hereon in accordance herewith and such failure shall continue for a period of five
(5) business days following the date upon which such payment was due. For purposes herein,
“invoiced fees” shall mean fees set forth on those regularly scheduled monthly invoices received by
the Companies from the Holder;

(b) Any Company breaches any covenant or any other term or condition of this Note in any
material respect and such breach, if subject to cure, continues for a period of twenty (20) days
following the occurrence thereof;

(c) Any material representation or warranty made by any Company in this Note or any other Loan
Documents shall at any time be false or misleading in any material respect on the date as of which
made or deemed made;

(d) The occurrence of any material default (or similar term) in the observance or performance
of any other agreement relating to any indebtedness or contingent obligation of any Company or any
of its domestic subsidiaries beyond the period of grace (if any) or that is not waived, the effect
of which default is to cause, or permit the holder or holders of such indebtedness or beneficiary
or beneficiaries of such contingent obligation to cause, such indebtedness to become due prior to
its stated maturity or such contingent obligation to become payable;

(e) Any Company breaches any of their material agreements (other than this Note and the
agreements described in clause (d) of this definition), and such breach could reasonably be
expected to have a Material Adverse Effect;

(f) Digital Angel or any of its domestic subsidiaries shall (i) apply for, consent to or
suffer to exist the appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of creditors, (iii) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v)
file a petition seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, without challenge within ten (10) days of the filing thereof, or failure to have
dismissed, within thirty (30) days, any petition filed against it in any involuntary case under
such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing;

(g) (i) Attachments or levies in excess of $500,000 in the aggregate are made upon Digital
Angel or any of its domestic subsidiary’s assets or (ii) a judgment is rendered against the
Companies property involving a liability of more than $500,000 which shall not have been paid,
vacated, discharged, stayed or bonded within thirty (30) days from the entry thereof;

Term Note

 

3

 

(h) Any Company shall admit in writing its inability, or be generally unable, to pay its debts
as they become due or cease operations of its present business;

(i) A Change of Control (as defined below) shall occur with respect to Digital Angel, unless
Holder shall have expressly consented to such Change of Control in writing. A “Change of Control”
shall mean any event or circumstance as a result of which (i) any “Person” or “group” (as such
terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date
hereof), other than the Holder, is or becomes the “beneficial owner” (as defined in Rules 13(d)-3
and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 50% on a fully diluted
basis of the then outstanding voting equity interest of Digital Angel, or (ii) the consolidation,
merger or other business combination of Digital Angel with or into any other entity, immediately
following which the prior stockholders of Digital Angel fail to own, directly or indirectly, at
least fifty one percent (51%) of the surviving entity, provided, however, that the merger of
Digital Angel into a wholly-owned subsidiary of Holder as contemplated by the Agreement and Plan of
Reorganization, dated as of August 8, 2007, by and among Digital Angel, Holder and Digital Angel
Acquisition Corp. shall not constitute a Change in Control;

(j) (i) The indictment of Digital Angel or any of its domestic subsidiaries or any executive
officer of the Companies for a felony under any criminal statute, or (ii) the commencement of a
criminal or civil proceeding against Digital Angel or any of its domestic subsidiaries or any
executive officer of Digital Angel or any of its domestic subsidiaries pursuant to which statute or
proceeding penalties or remedies reasonably available include forfeiture of a material portion of
the property of Digital Angel or any of its domestic subsidiaries;

(k) any proceeding shall be brought by any Company to challenge the validity, binding effect
of the Security Agreement or any Loan Documents; and

(l) An Event of Default shall occur under and as defined in the that certain Security
Agreement, dated as of the date hereof, by and among Digital Angel, certain direct and indirect
subsidiaries of Digital Angel and Kallina Corporation and/or any ancillary agreement referred to
therein, and such Event of Default, if capable of cure, continues unremedied for a period of five
(5) days after the occurrence thereof.

3.2 Default Interest. Following the occurrence and during the continuance of an Event
of Default, the Companies shall pay additional interest on the outstanding principal balance of
this Note in an amount equal to one percent (1%) per month, and all outstanding obligations under
this Note, the Security Agreement, and each other Loan Document, including unpaid interest, shall
continue to accrue interest at such additional interest rate from the date of such Event of Default
until the date such Event of Default is cured or waived.

ARTICLE IV

MISCELLANEOUS

4.1 Issuance of New Note. Upon any partial redemption of this Note, a new Note
containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Companies to the Holder for the principal balance of this Note and interest
which shall not have been paid as of such date.

Term Note

 

4

 

4.2 Cumulative Remedies. The remedies under this Note shall be cumulative.

4.3 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder
hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

4.4 Notices. Any notice herein required or permitted to be given shall be in writing
and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when
sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not,
then on the next business day, (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written verification of receipt.
All communications shall be sent on behalf of the Companies to Digital Angel at 690 South Congress
Avenue, Suite 201, Delray Beach, Florida 33445 Attn: Patricia M. Petersen, facsimile number (561)
276-0977, and to the Holder at 1690 South Congress Avenue, Suite 200, Delray Beach, Florida 33445,
Attn: Lorraine M. Breece, facsimile number 561-805-8001, or at such other address as Digital Angel
or the Holder may designate by ten (10) days advance written notice to the other parties hereto.

4.5 Amendment Provision. The term “Note” and all references thereto, as used
throughout this instrument, shall mean this instrument as originally executed, or if later amended
or supplemented, then as so amended or supplemented, and any successor instrument as such successor
instrument may be amended or supplemented.

4.6 Assignability. This Note shall be binding upon each Company and its successors
and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may
be assigned by the Holder. Holder shall provide notice of any assignment to Digital Angel within 3
business days of such assignment. No Company may assign any of its obligations under this Note
without the prior written consent of the Holder, any such purported assignment without such consent
being null and void.

4.7 Cost of Collection. In case of any Event of Default under this Note, each Company
shall pay the Holder the Holder’s reasonable costs of collection, including reasonable attorneys’
fees.

4.8 Governing Law, Jurisdiction and Waiver of Jury Trial.

(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF FLORIDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

Term Note

 

5

 

(b) EACH COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE
COUNTY OF PALM BEACH, STATE OF FLORIDA SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN EACH COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND,
PERTAINING TO THIS NOTE OR ANY OF THE OTHER LOAN DOCUMENT OR TO ANY MATTER ARISING OUT OF OR
RELATED TO THIS NOTE OR ANY OF THE LOAN DOCUMENTS; PROVIDED, THAT EACH COMPANY ACKNOWLEDGES
THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF
PALM BEACH, STATE OF FLORIDA; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL
BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY
FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. EACH
COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH COMPANY
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO DIGITAL ANGEL AT THE ADDRESS SET FORTH HEREIN AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON DIGITAL ANGEL’S ACTUAL RECEIPT THEREOF.

(c) EACH COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, EACH COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
THE HOLDER AND/OR EACH COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY OTHER LOAN DOCUMENTS, OR
THE TRANSACTIONS RELATED HERETO OR THERETO.

4.9 Severability. In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other provision of this Note.

4.10 Maximum Payments. Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest required to be paid or other
charges hereunder exceed the maximum rate permitted by such law, any payments in excess of
such maximum rate shall be credited against amounts owed by each Company to the Holder and thus
refunded to the Companies.

Term Note

 

6

 

4.11 Registered Obligation. This Note is intended to be a registered obligation
within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i) and the Companies (or its
agent) shall register this Note (and thereafter shall maintain such registration) as to both
principal and any stated interest. Notwithstanding any document, instrument or agreement relating
to this Note to the contrary, transfer of this Note (or the right to any payments of principal or
stated interest thereunder) may only be effected by (i) surrender of this Note and either the
reissuance by the Companies of this Note to the new holder or the issuance by the Companies of a
new instrument to the new holder, or (ii) transfer through a book entry system maintained by the
Companies (or its agent), within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).

4.12 Subordination. The Companies and Holder acknowledge and agree that the
indebtedness created hereby and the security interest granted in the Security Agreement will be
subordinate to the indebtedness in favor of and the security interest granted to Kallina in
connection with the Applied Digital Financing Transaction.

4.13 Holder’s Obligation. Holder agrees not to take any action solely for the purpose
of causing an Event of Default of the Companies hereunder; provided, however, that nothing in this
provision shall require Holder to waive any rights or remedies that it may have under any agreement
with the Companies or any third party. Holder further agrees that in the event Holder obtains any
consent, waiver, or amendment from Kallina (and its successors and assigns) for any actions that
would constitute an Event of Default of the Companies hereunder, the Holder shall be deemed to have
simultaneously provided the same consent, waiver, or amendment to the Companies.

[Balance of page intentionally left blank; signature page follows]

Term Note

 

7

 

IN WITNESS WHEREOF, each Company has caused this Secured Term Note to be signed in its name
effective as of this 31st day of August, 2007.

	 	 	 	 	 
	WITNESS:	 	DIGITAL ANGEL CORPORATION
	 
	 	 	 	 
	/s/ Victoria Laughlin

	 	By:
	 	/s/ Barry M. Edelstein
	 

	 	 	 	 
	 

	 	Name:
	 	Barry M. Edelstein
	 

	 	Title:
	 	President & CEO
	 
	 	 	 	 
	WITNESS:	 	DIGITAL ANGEL TECHNOLOGY CORPORATION
	 
	 	 	 	 
	/s/ Victoria Laughlin

	 	By:
	 	/s/ Barry M. Edelstein
	 

	 	 	 	 
	 

	 	Name:
	 	Barry M. Edelstein
	 

	 	Title:
	 	President & CEO
	 
	 	 	 	 
	WITNESS:	 	FEARING MANUFACTURING CO., INC.
	 
	 	 	 	 
	/s/ Victoria Laughlin

	 	By:
	 	/s/ Barry M. Edelstein
	 

	 	 	 	 
	 

	 	Name:
	 	Barry M. Edelstein
	 

	 	Title:
	 	President & CEO
	 
	 	 	 	 
	WITNESS:	 	DIGITAL ANGEL INTERNATIONAL
	 
	 	 	 	 
	/s/ Victoria Laughlin

	 	By:
	 	/s/ Barry M. Edelstein
	 

	 	 	 	 
	 

	 	Name:
	 	Barry M. Edelstein
	 

	 	Title:
	 	President & CEO
	 
	 	 	 	 
	WITNESS:
	 	 	 	 
	 
	 	 	 	 
	/s/ Victoria Laughlin
 

	 	  	 	 

Term Note

 

8

 

EXHIBIT A

OTHER COMPANIES

Digital Angel Technology Corporation,
a Minnesota corporation

Fearing Manufacturing Co., Inc., a
Minnesota corporation

Digital Angel International, a
Minnesota corporation

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