AMENDMENT NO. 5 TO SECOND AMENDED AND RESTATED
TERM AND REVOLVING CREDIT AGREEMENT

        This Amendment No. 5 (this “Amendment”) to Second Amended and Restated
Term and Revolving Credit Agreement is dated as of February 27, 2002 by and
among IBM Credit Corporation, a Delaware corporation (“IBM Credit” or “Lender”)
and Applied Digital Solutions, Inc. (the “Customer”).

WITNESSETH

        WHEREAS, Customer and Lender have entered into that certain Second
Amended and Restated Term and Revolving Credit Agreement, dated as of October
17, 2000 (as amended, supplemented or otherwise modified from time to time, the
“Credit Agreement”);

        WHEREAS, Customer and Lender have entered into the Acknowledgment,
Waiver and Amendment No. 1 to Second Amended and Restated Term and Revolving
Credit Agreement, dated as of March 30, 2001 (as amended, supplemented or
otherwise modified from time to time, “Amendment No. 1”);

        WHEREAS, under Amendment No. 1, Customer and Lender have agreed that (i)
Customer would not be obligated to pay the principal amount due under Term Loan
A on July 1, 2001 until October 1, 2001 (the “July Principal Amount”) and (ii)
Customer would pay the July Principal Amount together with the next principal
amount payment due thereafter under Term Loan A on October 1, 2001 (the “October
Cumulative Amount”);

        WHEREAS, Customer failed to pay to IBM Credit the October Cumulative
Amount;

        WHEREAS, Customer and Lender have entered into Amendment No. 2 to Second
Amended and Restated Term and Revolving Credit Agreement, dated as of September
15, 2001 (as amended, supplemented or otherwise modified from time to time,
“Amendment No. 2”) to provide, inter alia, that the October Cumulative Amount
not be due and payable until January 4, 2002, along with the principal payment
currently due on that date (the “January Cumulative Amount”);

        WHEREAS, Customer failed to pay to IBM Credit the January Cumulative
Amount on January 4, 2002;

        WHEREAS, based on the Financial Statements provided by Customer for the
months of September and October 2001, certain Events of Default have occurred
and are continuing as a result of Customer’s non-compliance with certain
financial covenants set forth in Section 7.16 of the Credit Agreement.

        WHEREAS, Customer and Lender have entered into Amendment No. 3 to Second
Amended and Restated Term and Revolving Credit Agreement, dated as of December
31, 2001 (as amended, supplemented or otherwise modified from time to time,
“Amendment No. 3”) to provide, inter alia, that the January Cumulative Amount
not be due and payable until January 31, 2002, along with the principal payment
currently due on that date;

        WHEREAS, Customer failed to pay to IBM Credit the January Cumulative
Amount on January 31, 2002;

        WHEREAS, Customer and Lender have entered into Amendment No. 4 to Second
Amended and Restated Term and Revolving Credit Agreement, dated as of January
31, 2002 (as amended, supplemented or otherwise modified from time to time.
“Amendment No. 4” to provide, inter alia, that the January Cumulative Amount not
be due and payable until March 1, 2002, along with the principal payment
currently due on that date (the “March Cumulative Amount”);

        WHEREAS, Customer does not expect to repay the March Cumulative Amount
on March 1, 2002, and all other amounts due and payable on such date;

        WHEREAS, Customer has requested that the Lender consent to an amendment
to the Credit Agreement so as to postpone the payment date of the March
Cumulative Amount to April 2, 2002; and

        WHEREAS, Lender is willing to agree to the requested amendment, but only
upon the terms and conditions set forth herein and in consideration of current
negotiations to restructure the credit facilities under the Credit Agreement.

        NOW THEREFORE, in consideration of the premises contained herein, any
financial accommodation heretofore, now or hereafter made by Lender and for
other good and valuable consideration, the parties hereto agree as follows:

I.    Defined Terms. Capitalized terms used herein without definition shall have
the meaning ascribed to such terms in the Credit Agreement. Unless otherwise
specified, references to an article, a section, a subsection, a schedule, an
attachment or an exhibit are to the Credit Agreement.

II.    Conditions Precedent. This Amendment shall become effective upon the
receipt by IBM Credit from Customer of this Amendment executed by Customer and
Lender.

III.    Acknowledgment.

IV.    Customer acknowledges that the March Cumulative Amount together with the
next principal amount shall be due and payable on April 2, 2002.

V.    Amendment.

VI.    The Exhibits to the Credit Agreement are hereby amended by deleting
Exhibit 2.3.1 in Amendment No. 4 in its entirety and substituting in lieu
thereof Exhibit 2.3.1 attached hereto.

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VII.    General Provisions.

VIII.    Representations and Warranties. On and as of the date hereof and after
giving effect to this Amendment, Customer hereby confirms, reaffirms and
restates the representations and warranties set forth in Section 6 of the Credit
Agreement mutuals mutandis except to the extent that such representations and
warranties expressly relate to a specific earlier date in which case Customer
hereby confirms, reaffirms and restates such representations and warranties as
of such earlier date, provided that the references to the Credit Agreement in
such representations and warranties shall be deemed to refer to the Credit
Agreement as amended prior to the date hereof and pursuant to this Amendment.

IX.    Continuing Effect; No Other Amendments. Except as expressly amended
hereby, all of the terms and provisions of the Credit Agreement are and shall
remain in full force and effect. The amendments provided for herein are limited
to the specific subsections of the Credit Agreement specified herein and shall
not constitute an amendment or waiver of, or an indication of the Lender’s
willingness to amend or waive, any other provisions of the Credit Agreement or
the same subsections for any other date or time period (whether or not such
other provisions or compliance with such subsections for another date or time
period are affected by the circumstances addressed in this Amendment).

X.    Expenses. Customer agrees to pay and reimburse IBM Credit for all its
reasonable costs and expenses incurred in connection with the preparation and
delivery of this Amendment, including, without limitation, the reasonable fees
and disbursements of counsel in IBM Credit.

XI.    Indemnification. Customer hereby agrees to indemnify and hold harmless
Lender and each of its respective officers, directors, consultants, advisors,
agents and assigns (collectively, the “Indemnified Persons”) against all losses,
claims, damages, liabilities or other expenses (including reasonable attorneys’
fees and court costs now or hereinafter arising from the enforcement of this
Amendment, the “Losses”) to which any of them may become subject insofar as such
Losses arise out of or are based upon any event, circumstance or condition (a)
occurring or existing on or before the date of this Amendment relating to any
financing arrangements Lender may from time to time have with (i) the Customer,
(ii) any Person that shall be acquired by the Customer or (iii) any Person that
the Customer may acquire all or substantially all of the assets of, or (b)
directly or indirectly, relating to the execution, delivery or performance of
this Amendment or the consummation of the transactions contemplated hereby or
thereby or to any of the Collateral or to any act or omission of the Customer in
connection therewith. Notwithstanding the foregoing, the Customer shall not be
obligated to indemnify Lender for any Losses incurred by Lender which are a
result of Lender’s gross negligence or willful misconduct. The indemnity
provided herein shall survive the termination of this Amendment.

XII.    Notices. Except as otherwise expressly provided in the Credit Agreement,
any notice required or desired to be served, given or delivered hereunder or
under any other Loan Documents shall be in writing, and shall be served, given
or delivered in accordance with Section 10.12 of the Credit Agreement to the
following addresses or number as indicated below.

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  (a) If to IBM Credit at:

IBM Credit Corporation
1500 Riveredge Parkway
Atlanta, Georgia 30328
Attention: Regional Manager
Facsimile: (770) 644-4826

IBM Global Financing
Special Handling Group
North Castle Drive
Armonk, New York 10504
Attention: Bruce Gordon
Facsimile: (914) 765-6268

  (b) if to Customer at:

Applied Digital Solutions, Inc.
400 Royal Palm Way, Suite 410
Palm Beach, Florida 33480
Attention: Jerome C. Artigilere
Facsimile: (561) 805-8004   With a copy to:

Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Corinne Ball, Esq.
Facsimile: (212) 755-7306   With a copy to:

Reimer & Braunstein
3 Center Plaza
6th Floor
Boston, MA 02108
Attention: Robert Paul, Esq.
Facsimile: (617) 880-3456

XIII.    Counterparts. This Amendment may be executed by one or more of the
parties to this Amendment on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Amendment
signed by the parties hereto shall be delivered to Customer and Lender.

XIV.    GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK INCLUDING WITHOUT
LIMITATION SECTION 5.1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

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        IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.

  IBM CREDIT CORPORATION

  By: /s/ Susan Brubaker for Steven A. Flanagan

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    Name:   Steven A. Flanagan     Title:     Manager, Global Special Handling

  APPLIED DIGITAL SOLUTIONS, INC.

  By: /s/ Jerome C. Artigliere

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    Name:   Jerome C. Artigliere     Title:     Senior Vice President and CFO

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EXHIBIT 2.3.1
Term Loan A

Term Loan A Commitment: Twenty Five Million United States Dollars (U.S.
$25,000,000)

Term Loan A Finance Charge: as set forth in Attachment A.

Term Loan A Stated Maturity Date: May 25, 2002.

Term Loan A Repayment Schedule. The principal amount of Term Loan A shall be
amortized over six (6) years and shall be payable by Customer at the end of each
calendar quarter, provided that all unpaid principal of such Term Loan A shall
be paid in full on the Term Loan A Stated Maturity Date. Notwithstanding the
foregoing, Customer shall have no obligation to pay the March Cumulative Amount
until April 2, 2002. Customer shall pay the March Cumulative Amount together
with the next principal payment due on April 2, 2002.

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