Exhibit 10.2


    
      

    

     

    Exhibit
      10.2 

     

    COMMERCIAL
      LOAN AGREEMENT 

     

    
      	
              BORROWER’S
                NAME AND ADDRESS:

            	
                

            	
              DESCRIPTION
                OF LOAN:

            
	 	 
	
              VeriChip
                Corporation

            	
                

            	
              x        Revolving
                Line of Credit:

               $8,500,000.00
                - Working Capital

            
	
              1690
                South Congress Avenue, Suite 200

            	
                

            	
               

            
	
              Delray
                Beach, Florida 33445

            	
                

            	
               

            


    

     

    DATE
      OF
      THIS AGREEMENT: 

     

    December 27,
      2005 

     

    REVIEW
      DATE FOR REVOLVING LINE OF CREDIT: June 27, 2007 

     

    ANNUAL
      REVIEW. 

     

    
      
        

      



    THIS
      COMMERCIAL
      LOAN AGREEMENT
      (the
“Agreement”) is made as of the date set forth above, between the above-named
      Borrower (the “Borrower”) and Applied Digital Solutions, Inc., a Missouri
      corporation located at 1690 South Congress Avenue, Suite 200, Delray Beach,
      Florida 33445 (the “Lender”). The Lender has agreed to extend to Borrower, at
      the Borrower’s request, the loan(s) described above (individually a “Loan” and
      collectively the “Loans”). All of the Loans are, together with all other
      interest, fees, or other obligations associated with the Loans now existing
      or
      hereafter arising, hereinafter sometimes referred to as the “Obligations”. Each
      Loan is or shall be evidenced by a commercial promissory note (individually
      a
“Note” and collectively the “Notes”) and each Loan and all of the other
      obligations are secured pursuant to a Security Agreement between Borrower and
      the Lender (the “Security Agreement”). In connection with the Loans, the
      Borrower may execute certain other documents, certificates and agreements,
      all
      of which are, together with this Agreement, the Notes and the Security
      Agreement, sometimes collectively referred to herein as the “Loan Documents”.
      Each Loan, whether now existing or hereafter arising, is made upon and subject
      to the terms and conditions set forth in the Note evidencing such Loan, the
      Security Agreement, the other Loan Documents and this Agreement. The terms,
      conditions, representations, warranties and covenants set forth in this
      Agreement are in addition to, and not in limitation of, the terms, conditions,
      representations, warranties and covenants set forth in all other Loan Documents.
      

     

    IN
      CONSIDERATION OF the Loans made or to be made by Lender to the Borrower, and
      of
      all other Obligations of the Borrower to the Lender, Borrower and Lender hereby
      agree as follows: 

     

    I.
      WORKING CAPITAL REVOLVING LINE OF CREDIT.
      The
      Working Capital Revolving Line of Credit Loan (the “Revolving Line”) made
      available by the Lender to the Borrower shall be upon and subject to the terms
      and conditions set forth in the Revolving Line of Credit Note evidencing such
      Loan (hereafter, the “Revolving Line of Credit Note”), the other Loan Documents
      and this Agreement. 

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Page
      2


     

    A.
      Maximum
      Available Amount.
      The
      maximum amount available to the Borrower under the Revolving Line shall be
      the
      amount set forth in the Revolving Line of Credit Note evidencing the Revolving
      Line. 

     

    B.
      Advances
      and Repayment.
      The
      Revolving Line shall be disbursed, advanced, readvanced and repaid as provided
      in the applicable Revolving Line of Credit Note and this Agreement. Borrower
      may
      make a Request for Advance (as defined below) from time to time in an amount
      such that the aggregate amounts outstanding under the Revolving Line does not
      exceed the maximum available amount as determined under Paragraph A of this
      Section I above. Lender reserves the right to determine in its sole discretion
      whether to make any particular advance or readvance requested by Borrower.
      At
      the time of each advance and readvance under the Revolving Line the Borrower
      shall immediately become indebted to the Lender for the amount thereof. Each
      such advance or readvance may be credited by the Lender to any deposit account
      of Borrower with the Lender, be paid to the Borrower or applied to any
      Obligation, as the Lender may in each instance reasonably elect. Borrower
      authorizes the Lender to charge any account that the Borrower maintains with
      the
      Lender for any payments that the Borrower may or must make, or customarily
      makes, to the Lender from time to time. 

     

    C.
      Review.
      The
      Revolving Line shall be subject to review and, at the sole option of the Lender,
      renewal on the Review Date set forth on the first page of this Agreement (the
      “Review Date”) and, if renewed, upon each subsequent anniversary of the Review
      Date. IF
      SAID REVOLVING LINE OF CREDIT LOAN IS NOT RENEWED BY THE LENDER AS AFORESAID
      ON
      ANY SUCH DATE, THE ENTIRE AMOUNT OF PRINCIPAL AND ACCRUED INTEREST OUTSTANDING
      THEREUNDER SHALL BE DUE AND PAYABLE BY BORROWER ON SUCH
      DATE.
      Any
      other revolving line of credit loan outstanding shall be subject to review
      by
      the Lender and be renewed or repaid as aforesaid on the Review Date and each
      annual anniversary thereof, unless another date is reasonably specified by
      the
      Lender. 

     

    D.
      Revolving
      Line of Credit Management.
      Set
      forth on Schedule A are additional terms and conditions relating to the
      management of the Revolving Line. 

     

    II.
      PURPOSEFULLY LEFT BLANK. 

     

    III.
      FEES. In
      addition to such other fees as are provided in this Agreement and in the other
      Loan Documents, Borrower agrees to pay the Lender the periodic fees set forth
      on
      Schedule A with respect to the maintenance of the Working Capital Revolving
      Line
      of Credit Loan. 

     

    IV.
      PAYMENTS.
      All
      payments made by the Borrower of principal and interest on the Loans, and other
      sums and charges payable under the Loan Documents, shall be made to the Lender
      in accordance with the terms of the respective Loan Documents in immediately
      available, lawful United States of America currency at its office set forth
      above or by the debiting by the Lender of the Cash Management System account
      with Citibank overseen by Lender in the name of the Borrower, or in writing
      to
      the Borrower, and in any event shall be made in immediately available funds.
      The
      Borrower authorizes the Lender to automatically debit the Borrower’s demand
      deposit account as described above. Upon payment in full by Borrower of the
      Obligations, the Loan Documents shall automatically terminate and all liens,
      pledges, charges, security interests and other encumbrances created in favor
      of
      the Lender pursuant to the Loan Documents shall automatically terminate and
      be
      released. In connection therewith, the Lender 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Page
      3


     

    hereby
      (i) agrees to cause to be assigned, transferred and delivered to the
      Borrower collateral under the Loan Documents held by the Lender under the Loan
      Documents, (ii) agrees to execute and deliver to the Borrower such
      instruments of satisfaction and other documents as shall be reasonably requested
      by the Borrower to terminate of record such liens, pledges, charges, security
      interests or other encumbrances and (iii) authorizes the Borrower to file
      any applicable UCC termination statements or release statements to terminate
      of
      record such liens, pledges, charges, security interests or other encumbrances.
      

     

    V.
      SECURITY.
      Each of
      the Loans and all other Obligations of the Borrower to the Lender, whether
      now
      existing or hereafter arising, shall, at all times, be secured by first priority
      perfected security interests, as required by this Agreement and the Security
      Agreement, in the Collateral (as hereinafter defined), which security interests
      shall continue until payment in full of all amounts outstanding under said
      Loans
      and the other Obligations. If this Agreement is executed below by a guarantor
      or
      guarantors (collectively the “Guarantors”), then the full and punctual payment
      and performance of the Loans and all other Obligations of Borrower shall be
      guaranteed by the Guarantors pursuant to one or more guaranty agreements
      (collectively the “Guaranty”). The term “Collateral” as used herein shall be
      deemed to include all property and assets of the Borrower and Guarantors
      secured, mortgaged, pledged, assigned or otherwise encumbered or covered by
      any
      of the Loan Documents, including, but not limited to, the Security Agreement.
      The Borrower and the Guarantor covenant and agree to take such further actions
      and to execute such additional documents as may be reasonably necessary from
      time to time to enable the Lender to obtain and maintain the security interests
      and liens arising under the Loan Documents. If the Collateral includes accounts
      and account receivables of Borrower, then, in addition to such other rights
      and
      remedies as are provided the Lender under the Loan Documents, the Borrower
      agrees that Lender may communicate with account debtors in order to verify
      the
      existence, amount and terms of any such accounts and account receivables. Lender
      may notify account debtors of the Lender’s security interest and require that
      payments on accounts and account receivables be made directly to Lender, and
      upon the request of Lender, Borrower shall notify account debtors and indicate
      on all billings that payments and returns are to be made directly to Lender.
      In
      furtherance of the foregoing, Borrower hereby irrevocably appoints Lender as
      attorney with full power to collect, compromise, endorse, sell or otherwise
      deal
      with the Borrower’s accounts and account receivables or proceeds thereof and to
      perform the terms of any contract in order to create accounts and account
      receivables in Lender’s name or in the name of Borrower. 

     

    VI.
      SUBORDINATION AND STANDBY OF DEBT.
      The
      Borrower and Guarantors covenant and agree that all existing debt of Borrower
      to
      Guarantors and all future debt, if permitted hereunder from Borrower to
      Guarantors, shall be and hereby is, without need for further writing, made
      subject and subordinate to the prior payment and performance of all the Loans
      and other Obligations of Borrower. The Guarantors further covenant and agree
      that any claims against the Borrower (or against each other or any other
      guarantor of the Loans), individually or jointly, to which the Guarantors may
      become entitled (including, without limitation, claims by subrogation or
      otherwise by reason of any payment or performance by the Guarantors,
      individually or jointly, in satisfaction and discharge, in whole or in part,
      of
      his or their obligations under the Guaranty) shall be and hereby are, without
      need for further writing, subject and subordinate to the payment and performance
      in full of all of the Loans and other Obligations due the Lender. In furtherance
      of the foregoing, the Borrower and Guarantors shall provide such subordinations,
      certificates and other documents and shall mark its corporate books, records,
      stock certificates and ledgers as the Lender may reasonably request from time
      to
      time, in form and substance satisfactory to Lender and Lender’s counsel,
      evidencing the subordination of all debt of Borrower to Guarantors, whether
      now
      existing or hereafter arising, in accordance with the covenants of Borrower
      and
      Guarantors hereunder. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Page
      4


     

    VII.
      CONTINUING REPRESENTATIONS AND WARRANTIES.
      The
      Borrower and the Guarantors, as the case may be, jointly and severally warrant
      and represent to the Lender that so long as any of the Obligations are
      outstanding: 

     

    A.
      Good
      Standing.
      Borrower, if other than a natural person, is duly organized, validly existing
      and in good standing under the laws of the State of Delaware. Borrower has
      the
      power to own its properties and to carry on its business as now being conducted.
      

     

    B.
      Authority.
      Borrower and Guarantors have full power and authority to enter into this
      Agreement and to borrow under the Loan Documents, to execute and deliver the
      Loan Documents and to incur the obligations provided for herein and in the
      Loan
      Documents, all of which have been duly authorized by all proper and necessary
      corporate or other action. The persons executing the Loan Documents on behalf
      of
      the Borrower and the Guarantors have been duly authorized to do so.


     

    C.
      Binding
      Agreement.
      This
      Agreement and the Loan Documents constitute the valid and legally binding
      obligations of the Borrower and Guarantors, enforceable in accordance with
      their
      terms. 

     

    D.
      Litigation.
      There
      are no suits or proceedings of any kind or nature pending or, to the knowledge
      of the Borrower and Guarantors, threatened against or affecting the Borrower
      or
      the Guarantors or their assets which, if adversely determined, would have a
      material adverse effect on the financial condition or business of the Borrower
      or the Guarantors and which have not been disclosed in writing to the Lender.
      

     

    E.
      Conflicting
      Agreements; Consents.
      There
      is no charter, bylaw or preference stock of the Borrower or the Guarantors
      and
      no provision(s) of any existing mortgage, indenture, contract or agreement
      binding on the Borrower or the Guarantors or affecting their property, which
      would conflict with, have a material adverse effect upon, or in any way prevent
      the execution, delivery or performance of the terms of this Agreement or the
      Loan Documents. Neither the Borrower nor the Guarantors is required to obtain
      any order, consent, approval, authorization of any person, entity or
      governmental authority in connection with or as a condition to the execution,
      delivery and performance of this Agreement or the Loan Documents or the granting
      of the security interests and liens in the Collateral. 

     

    F.
      Financial
      Condition.
      The
      financial statements delivered to the Lender by the Borrower and the Guarantors
      have been and shall be prepared in accordance with generally accepted accounting
      principles, consistently applied, are and will be complete and correct, and
      fairly present the financial condition and results of the Borrower and the
      Guarantors. Other than those liabilities disclosed in writing to the Lender,
      there are no liabilities, direct or indirect, fixed or contingent, of the
      Borrower or the Guarantors which are not reflected in the financial statements
      or in the notes thereto which would be required to be disclosed therein and
      there has been no material adverse change in the financial condition or
      operations of the Borrower or the Guarantors since the date of such financial
      statements. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Page
      5


     

    G.
      Taxes.
      Borrower and Guarantors have filed all federal, state and local tax returns
      required to be filed by them and have paid all taxes shown by such returns
      to be
      due and payable on or before the due dates thereof. 

     

    H.
      Solvency.
      The
      present fair saleable value of the Borrower’s assets is greater than the amount
      required to pay its total liabilities; the amount of the Borrower’s capital is
      adequate in view of the type of business in which it is engaged. 

     

    I.
      Full
      Disclosure.
      None of
      the information with respect to the Borrower or the Guarantors which has been
      furnished to the Lender in connection with the transactions contemplated hereby
      is false or misleading with respect to any material fact, or omits to state
      any
      material fact necessary in order to make the statements therein not misleading.
      

     

    J.
      Employee
      Benefit Plans.
      The
      Borrower has not incurred any material accumulated funding deficiency within
      the
      meaning of the Employee Retirement Income Security Act of 1974, as amended
      (“ERISA”), has not incurred any material liability to the Pension Benefit
      Guaranty Corporation established under ERISA (or any successor thereto) in
      connection with any profit sharing, group insurance, bonus, deferred
      compensation, percentage compensation, stock option, severance pay, insurance,
      pension or retirement plan or other oral or written agreement or commitment
      relating to employment or fringe benefits or prerequisites for employees,
      officers or directors of the Borrower (an “Employee Benefit Plan”), and no
      Employee Benefit Plan which is subject to ERISA had, as of its latest valuation
      date, accrued benefits (whether or not vested) the present value of which
      exceeded the value of the assets of such Employee Benefit Plan, based upon
      actuarial assumptions utilized for such Plan. 

     

    K.
      Location
      of Records.
      All of
      the books and records are true and complete copies thereof relating to the
      accounts and contracts of the Borrower shall be kept at Borrower’s principal
      place of business located at the address first set forth above (the “Premises”).


     

    L.
      Compliance
      with Laws.
      The
      Borrower and the Guarantors, to the best of their knowledge and belief, are
      in
      compliance in all material respects with all laws and governmental rules and
      regulations applicable to the Collateral and to their businesses, properties
      and
      assets. 

     

    M.
      Hazardous
      Waste.
      No
      Hazardous Waste (as hereinafter defined) has been generated, stored or treated
      on the Premises except in compliance with all applicable laws. To the Borrower’s
      knowledge, no Hazardous Waste has been, is being, is intended to be or is
      threatened to be spilled, released, discharged, disposed, placed or otherwise
      caused to be found in the soil or water in, under or upon the Premises. The
      Borrower and the Guarantors agree to indemnify and hold the Lender harmless
      from
      and against any claims, damages, liabilities (whether joint or several), losses
      and expenses (including, without limitation, reasonable attorneys’ fees)
      incurred by the Lender as a result of the breach of these representations.
      For
      the purpose of this Agreement, the term “Hazardous Waste” means “hazardous
      waste”, “hazardous material”, “hazardous substance” and “oil” as presently
      defined in the Resource Conservation and Recovery Act, the Comprehensive
      Environmental Response, Compensation and Liability Act, the Hazardous Material
      Transportation Act, the Federal Water Pollution Control Act and corresponding
      state and local statutes, ordinances and regulations, as such statutes,
      ordinances and regulations may be amended, or as defined in any applicable
      federal or state regulation adopted pursuant to such acts. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Page
      6


     

    N.
      Title
      to Collateral.
      Borrower and the Guarantors have and will at all times have good and marketable
      title to the Collateral, free and clear from any liens, security interests,
      mortgages, encumbrances, pledges or other right, title or interest of any other
      person or entity, except those arising under the Loan Documents or disclosed
      to
      the Lender in the Security Agreement (“Permitted Encumbrances”). 

     

    O.
      Employees.
      Borrower, to the best of its knowledge and belief, has complied with all laws
      relating to the employment of labor, including any provisions thereof relating
      to ERISA, wages, hours, the payment of social security and similar taxes, equal
      employment opportunity, employment discrimination and occupational safety and
      health and is not liable for any arrears of wages or any taxes or penalties
      for
      failure to comply with any of the foregoing. 

     

    VIII.
      AFFIRMATIVE COVENANTS.
      Until
      payment in full of all indebtedness under the Loans and the other Obligations,
      the Borrower and the Guarantors, as the case may be, jointly and severally
      agree
      that, unless the Lender shall otherwise reasonably consent in writing, they
      will: 

     

    A.
      Prompt
      Payment.
      Pay
      promptly, subject to any applicable cure or grace period, when due all amounts
      due and owing to the Lender. 

     

    B.
      Use
      of
      Proceeds.
      Use the
      proceeds of the Loans only for business purposes and will furnish the Lender
      with such evidence as it may reasonably require with respect to such use.


     

    C.
      Financial
      Statements.
      Furnish
      the Lender with such financial statements of Borrower as are described on
      Schedule A attached hereto. All such statements shall be prepared on a
      consistent basis in a format reasonably acceptable to the Lender. 

     

    D.
      Maintenance
      of Existence.
      Take
      all necessary action to maintain Borrower’s legal existence. 

     

    E.
      Maintenance
      of Business.
      Do or
      cause to be done all things necessary to maintain and preserve Borrower’s
      business. 

     

    F.
      Maintenance
      of Insurance.
      Keep
      all of Borrower’s properties (specifically including, but not limited to, the
      Collateral) adequately insured against loss or damage by fire and such other
      casualties and hazards as the Lender may specify from time to time; maintain
      adequate Worker’s Compensation Insurance under applicable laws and Comprehensive
      General Public Liability Insurance; and maintain adequate insurance covering
      such other risks as the Lender may reasonably specify from time to time
      hereafter. All insurance required hereunder shall be effected by valid and
      enforceable policies issued by insurers of recognized responsibility authorized
      to transact business within the state where the property is located and shall,
      inter
      alia,
      (1) name the Lender as an additional insured and/or loss payee,
      (2) provide that no action of the Borrower shall void any such policy as to
      the Lender, and (3) provide that the Lender shall be notified in writing of
      any proposed cancellation of such policy at least fifteen (15) days in
      advance thereof and will have the opportunity to correct any deficiencies
      justifying such proposed cancellation. For the purposes of this Paragraph,
      an
      insurance policy shall be deemed to be “adequate” if it provides coverage
      against such risks and in such amounts as is customarily carried by owners
      of
      similar businesses and properties. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Page
      7


     

    G.
      Inspection
      by the Lender.
      Upon
      prior reasonable notice (other than in emergencies when no notice shall be
      required) and during normal business hours, permit any person designated by
      the
      Lender to inspect any of its properties, including its books, records and
      accounts (and including the making of copies thereof and extracts therefrom)
      during normal business hours. 

     

    H.
      Prompt
      Payment of Taxes.
      Accrue
      its tax liability (including withholdings for employee taxes and social
      security) in accordance with usual accounting practice and pay or discharge
      (or
      cause to be paid or discharged) as they become due all taxes, assessments and
      government charges upon its property, operations, income and products (as well
      as all claims for labor, materials or supplies), which, if unpaid, might become
      a lien upon any of its property; provided that the Borrower shall, prior to
      payment thereof, have the right to contest such taxes, assessments and charges
      in good faith by appropriate proceedings so long as the Lender’s interests are
      protected by bond, letter of credit, escrowed funds or other appropriate
      security. 

     

    I.
      Notification
      of Default Under This and Other Loan or Financing Arrangements.
      Promptly notify the Lender in writing of the occurrence of any Event of Default
      under this Agreement or any other loan or financing arrangement. 

     

    J.
      Notification
      of Litigation.
      Promptly notify the Lender in writing of any litigation that has been instituted
      or is pending or threatened which might have a material adverse effect on its
      continued operations or financial condition. 

     

    K.
      Notification
      of Governmental Action.
      Promptly notify the Lender in writing of any governmental investigation or
      proceeding that has been instituted or is pending or threatened, including,
      without limitation, matters relating to the federal or state tax returns of
      the
      Borrower or the Guarantors, compliance with the Occupational Safety and Health
      Act or proceedings by the Treasury Department, Labor Department or Pension
      Benefit Guaranty Corporation with respect to matters affecting employee welfare,
      benefit or retirement programs. 

     

    L.
      Preservation
      of the Collateral.
      Take
      all reasonably necessary steps to preserve, protect and defend the Collateral
      and keep it in good operating condition and repair (reasonable wear and tear
      excepted) and free of unpermitted liens and give Lender access to and permit
      it
      to inspect the Collateral during all business hours and other reasonable times.
      

     

    M.
      Maintenance
      of Records.
      Keep
      adequate records and books of account, in which complete entries will be made
      in
      a manner reasonably acceptable to the Lender and consistently applied,
      reflecting all financial transactions of the Borrower. 

     

    N.
      Compliance
      With Laws.
      Comply
      in all material respects with all applicable laws, rules, regulations and
      orders, such compliance to include, without limitation, paying before the same
      become delinquent all taxes, assessments and governmental charges imposed upon
      it or upon its property; provided,
      however,
      that
      Borrower shall be entitled to contest the same in good faith so long as such
      action, in the Lender’s reasonable opinion, does not have an adverse effect upon
      the Lender’s rights hereunder or the Collateral. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Page
      8


     

    O.
      Accounts,
      Deposits and Balances.
      Borrower shall maintain its primary operating and deposit accounts with the
      Lender. 

     

    P.
      Notification
      of Material Adverse Changes.
      Promptly notify the Lender in writing of any conditions or circumstances which
      might have a material adverse effect on Borrower’s continued operations or
      financial condition. 

     

    Q.
      Additional
      Financial and Other Covenants.
      Comply
      with the additional financial and other covenants set forth on Schedule A
      attached hereto. 

     

    IX.
      NEGATIVE COVENANTS.
      Until
      payment in full of all indebtedness under the Loans and the other Obligations,
      the Borrower and the Guarantors jointly and severally covenant that the Borrower
      and the Guarantors will not, without the express prior written consent of the
      Lender, which consent shall not be unreasonably delayed or denied: 

     

    A.
      Nature
      and Scope of Business.
      Enter
      into any type of business other than that in which it is presently engaged
      or
      otherwise significantly change the scope or nature of its business.


     

    B.
      Liens
      and Mortgages.
      Incur,
      create, assume or suffer to exist any mortgage, pledge, lien, attachment, charge
      or other encumbrance of any nature whatsoever on any of the Collateral, now
      or
      hereafter owned, other than: (1) the security interests or liens granted to
      the Lender pursuant to the Loan Documents; (2) deposits under Worker’s
      Compensation, Unemployment Insurance and Social Security laws; (3) liens
      imposed by law, such as carriers, warehousemen’s or mechanic’s liens incurred in
      good faith in the ordinary course of business and which do not, in the
      aggregate, have a material adverse effect on the Borrower’s financial condition
      or the Collateral; and, (4) the Permitted Encumbrances. 

     

    C.
      Ownership;
      Management.
      Materially change the current management, ownership or capital structure of
      Borrower. 

     

    D.
      Places
      of Business; Location of Collateral.
      Maintain or relocate to, open or close, any other place of business or move
      any
      of the Collateral from the Premises, except upon thirty (30) days prior
      written notice to the Lender. 

     

    X.
      CONDITIONS PRECEDENT TO MAKING OF LOANS.
      The
      obligation of the Lender to make any Loan and make disbursements of the proceeds
      of the same to the Borrower is subject to the satisfaction by the Borrower
      or
      its representatives of the following conditions precedent with respect to such
      Loan: (1) the Borrower and the Guarantors have executed and delivered all
      of the Loan Documents deemed appropriate and necessary by the Lender, in form
      and substance satisfactory to the Lender; (2) the Borrower’s and
      Guarantors’ warranties and representations as contained herein and in the Loan
      Documents shall be accurate and complete and Lender has received satisfactory
      evidence of the same, including, at Lender’s option, an opinion of Borrower’s
      legal counsel to that effect; and, (3) the Borrower and Guarantors shall
      not be in default under any of the covenants, warranties, representations,
      terms
      or conditions contained in this Agreement or in the Loan Documents as of the
      date of entering into such Loan and as of the date of each disbursement
      thereunder. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Page
      9


     

    Lender’s
      obligations to extend any Loan to Borrower under this Agreement shall be subject
      to the completion of a reasonable due diligence review, satisfactory to the
      Lender in all respects, including inspection of the Borrower’s financial control
      systems and management prepared financial statements, and the subordination
      of
      all debt of Borrower. 

     

    In
      addition to the foregoing, any material adverse change in the financial
      condition, operating status or general business prospects of the Borrower shall
      void the Lender’s commitment to extend any Loan to the Borrower. 

     

    XI.
      EVENTS OF DEFAULT; ACCELERATION.
      The
      occurrence of any one or more of the following events shall constitute a default
      under this Agreement, each of the Loan Documents and the Obligations
      (collectively “Events of Default”): (1) if any statement, representation or
      warranty made by the Borrower or Guarantors in this Agreement or in any of
      the
      Loan Documents, or in connection with any of the same, or if any financial
      statement, report, schedule or certificate furnished by the Borrower or
      Guarantors or any of its officers or accountants to the Lender, shall prove
      to
      have been false or misleading when made, or subsequently becomes false or
      misleading, in any material respect (as determined in the Lender’s reasonable
      discretion); (2) default by the Borrower in payment on its due date of any
      principal or interest called for under any of the Loans or the Loan Documents,
      or of other amounts due under any other of the Obligations, or other event
      of
      default under the Loan Documents or the other Obligations, provided such default
      is not cured within any applicable grace period thereunder; (3) default by
      the Borrower in the performance or observance of any of the provisions, terms,
      conditions, warranties or covenants of this Agreement, the Loan Documents or
      any
      other of the Obligations; (4) the dissolution, termination of existence,
      merger or consolidation of the Borrower or a sale of Borrower’s business,
      capital stock, or the Collateral not in the ordinary course of business;
      (5) the Borrower or the Guarantors shall (a) apply for or consent to
      the appointment of a receiver, trustee or liquidator of it or any of its
      property, (b) make a general assignment for the benefit of creditors,
      (c) be adjudicated as bankrupt or insolvent, (d) file a voluntary
      petition in bankruptcy or a petition or an answer seeking reorganization,
      arrangement, insolvency, readjustment of debt, dissolution or liquidation under
      any law or statute or an answer admitting the material allegations of a petition
      filed against it in any proceeding under any such law or statute, or
      (e) offer or enter into any composition, extension or arrangement seeking
      relief or extension of its debts; (6) proceedings shall be commenced or an
      order, judgment or decree shall be entered, without the application, approval
      or
      consent of the Borrower, in or by any court of competent jurisdiction, relating
      to the bankruptcy, dissolution, liquidation, reorganization or the appointment
      of a receiver, trustee or liquidator of the Borrower or Guarantors, or of all
      or
      a substantial part of its assets, and such proceedings, order, judgment or
      decree shall continue undischarged or unstayed for a period of sixty
      (60) days; (7) the Borrower’s inability to pay its debts as they
      mature or other insolvency, however defined and determined by the Lender in
      its
      sole discretion; or (8) a judgment for the payment of money shall be
      rendered against the Borrower that could have a material adverse effect upon
      the
      financial condition of Borrower and the same shall remain undischarged for
      a
      period of thirty (30) days, during which period execution shall not be
      effectively stayed. Notwithstanding anything herein or in the other Loan
      Documents to the contrary, an Event of Default shall not be deemed to be
      occurring hereunder or under any Loan Documents during any period from
      (X) the date the Borrower files a registration statement on form S-1 for
      the purpose of an initial public offering until (Y) the earlier of
      (i) two business days after the date such initial public offering is
      consummated, and (ii) the date the Borrower withdraws such registration
      statement (such period, the “IPO Preparation Period”); provided that the Company
      is diligently pursuing an initial public offering during the IPO Preparation
      Period. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Page
      10


     

    Upon
      the
      occurrence of any Event of Default, the Lender’s commitment to make further
      Loans under the Loan Documents or any other agreement with the Borrower shall
      immediately cease and terminate and, at the election of the Lender, all of
      the
      Obligations of the Borrower to the Lender, either under this Agreement, the
      Loan
      Documents, or otherwise, will immediately become due and payable without further
      demand, notice or protest, all of which are hereby expressly waived. Thereafter,
      the Lender may proceed to protect and enforce its rights, at law, in equity,
      or
      otherwise, against the Borrower, the Guarantors and any other endorser or
      guarantor of the Borrower’s Obligations, either jointly or severally, and may
      proceed to liquidate and realize upon any of its Collateral in accordance with
      the rights of a secured party under the Uniform Commercial Code, under any
      Loan
      Documents, under any other agreement between the Borrower and the Lender, or
      under any agreement between any guarantor or endorser of the Borrower’s
      Obligations to the Lender, and to apply the proceeds thereof to payment of
      the
      Obligations of the Borrower to the Lender in such order and in such manner
      as
      the Lender, in its sole discretion, deems appropriate. 

     

    XII.
      MISCELLANEOUS PROVISIONS. 

     

    A.
      Entire
      Agreement; Waivers.
      This
      Agreement, the Schedules hereto, and the Loan Documents together constitute
      the
      entire agreement between the Borrower, the Guarantors and the Lender and no
      covenant, term, condition or other provision thereof nor any default in
      connection therewith may be waived except by an instrument in writing, signed
      by
      the Lender and delivered to the Borrower. The Lender’s failure to exercise or
      enforce any of its rights, powers or privileges under this Agreement or the
      Loan
      Documents shall not operate as a waiver thereof. In the event of any conflict
      between the terms, covenants, conditions and restrictions contained in the
      Loan
      Documents, the term, covenant, condition or restriction that confers the
      greatest benefit upon the Lender shall control. The determination as to which
      term, covenant, condition or restriction is more beneficial shall be reasonably
      made by the Lender in its reasonable discretion. 

     

    B.
      Remedies
      Cumulative.
      All
      remedies provided under this Agreement and the Loan Documents or afforded by
      law
      shall be cumulative and available to the Lender until all of the Borrower’s
      Obligations to the Lender have been paid in full. 

     

    C.
      Survival
      of Covenants.
      All
      covenants, agreements, representations and warranties made in this Agreement
      and
      in the Loan Documents shall be deemed to be material and to have been relied
      on
      by the Lender, notwithstanding any investigation made by the Lender or in its
      behalf, and shall survive the execution and delivery of this Agreement and
      the
      Loan Documents. All such covenants, agreements, representations and warranties
      shall bind and inure to the benefit of the Borrower’s, the Guarantor’s and the
      Lender’s successors and assigns, whether so expressed or not. 

     

    D.
      Governing
      Law; Jurisdiction.
      This
      Agreement and the Loan Documents shall be construed and their provisions
      interpreted under and in accordance with the laws of the State of New Hampshire.
      The Borrower and the Guarantors, to the extent they may legally do so, hereby
      consent to the jurisdiction of the courts of the State of New Hampshire and
      the
      United States District Court for the State of New Hampshire for the purpose
      of
      any suit, action or other proceeding arising out of any of their obligations
      hereunder or with respect to the transactions contemplated hereby, and expressly
      waive any and all objections they may have to venue in any such courts.



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Page
      11


     

    E.
      Assurance
      of Execution and Delivery of Additional Instruments.
      The
      Borrower and Guarantors agree to execute and deliver, or to cause to be executed
      and delivered, to the Lender all such further instruments, and to do or cause
      to
      be done all such further acts and things, as the Lender may reasonably request
      or as may be reasonably necessary or desirable to effect further the purposes
      of
      this Agreement and the Loan Documents. 

     

    F.
      Waivers
      and Assents.
      The
      Borrower, the Guarantors and any other guarantor or endorser of the Borrower’s
      Obligations to the Lender, hereby waive, to the fullest extent permitted by
      law,
      demand, notice, protest, notice of acceptance of this Agreement and the Loan
      Documents, notice of Loans made, credit extended, Collateral received or
      delivered or other action taken in reliance hereon and all other demands and
      notices of any description with respect both to the Loan Documents and the
      Collateral. The Borrower and Guarantors assent to any extension or postponement
      of the time of payment or any other indulgence, to any substitution, exchange
      or
      release of Collateral, to the addition or release of any party or person
      primarily or secondarily liable, to the acceptance of partial payments thereon
      and the settlement, compromising or adjusting of any thereof, all in such manner
      and at such time or times as the Lender may deem advisable. Any demand upon
      or
      notice to the Borrower or Guarantors that the Lender may be required or may
      elect to give shall be mailed by registered or certified mail, return receipt
      requested, postage prepaid and shall be effective on the date of the first
      attempted delivery thereof by the U. S. Postal Service, as shown on the
      registered or certified mail return receipt for such notice addressed to the
      Borrower at its address set forth at the beginning of this Agreement or to
      the
      Guarantors at the address set forth hereinbelow. 

     

    G.
      No
      Duty of the Lender With Respect to the Collateral.
      The
      Lender shall have no duty as to the collection or protection of Collateral
      or
      any income thereon, nor as to the preservation of rights against prior parties,
      nor as to the preservation of any rights pertaining thereto, beyond the safe
      custody thereof. 

     

    H.
      Election
      of the Lender.
      The
      Lender may exercise its rights with respect to Collateral without resorting
      or
      regard to other collateral or sources of reimbursement for the Obligations
      of
      Borrower to the Lender. 

     

    I.
      Person.
      The
      term “Person” shall mean an individual, corporation, partnership, joint venture,
      association, estate, joint stock company, trust, organization, business, or
      a
      government or an agency or political subdivision thereof. 

     

    J.
      Assignment.
      If, at
      any time, by assignment or otherwise, the Lender transfers its rights in any
      of
      the Borrower’s or Guarantors’ Obligations and its rights in Collateral therefor,
      in whole or in part, such transfer shall carry with it the powers and rights
      of
      the Lender under this Agreement, the Loan Documents and the Collateral so
      transferred and the transferee shall become vested with such powers and rights
      whether or not they are specifically referred to in the instrument evidencing
      the transfer. If, and to the extent that the Lender retains such rights and
      Collateral, the Lender shall continue to have the rights and powers herein
      set
      forth with respect thereto. This Agreement and the Loan Documents shall be
      binding upon and inure to the benefit of the Lender, the Borrower and the
      Guarantors, their successors, assigns, heirs and personal representatives;
      provided, however, the rights and obligations of the Borrower and the Guarantors
      are not assignable, delegable or transferable without the consent of the Lender.
      All of the rights of the Lender under this Agreement and the Loan Documents
      shall inure to the benefit of any participating bank or banks and its or their
      successors and assigns. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Page
      12


     

    K.
      Expenses;
      Proceeds of Collateral.
      The
      Borrower and the Guarantors covenant and agree that they shall pay to the
      Lender, on demand, any and all reasonable out-of-pocket expenses, including
      reasonable attorneys’ fees, court costs, sheriffs’ fees and other expenses
      incurred or paid by the Lender in protecting and enforcing its rights under
      this
      Agreement, the Loan Documents, and the other Obligations, including the costs
      of
      preparation of this Agreement and the Loan Documents, and any amendments,
      modifications, consents or waivers in respect thereof, and all filing, auditing,
      accounting and appraisal fees, if any are required. After deducting all of
      said
      expenses and the reasonable expenses of retaking, holding, preparing for sale,
      selling and the like, the residue of any proceeds of collections or sale of
      Collateral shall be applied to the payment of principal of or interest on
      Obligations of the Borrower to the Lender in such order or preference as the
      Lender may determine and any excess shall be returned to the Borrower (subject
      to the provisions of the Uniform Commercial Code) and the Borrower shall remain
      liable for any deficiency. 

     

    L.
      The
      Lender’s Right of Offset.
      The
      Borrower and the Guarantors hereby grant the Lender a continuing security
      interest in, and the right to set off against, any deposits or other sums at
      any
      time credited or due from the Lender to the Borrower or the Guarantors, and
      any
      securities or other property of the Borrower or Guarantors which at any time
      are
      in the possession of the Lender, for the payment of any Obligations due the
      Lender. The Lender may apply or set off such deposits or other sums against
      the
      Borrower’s Obligations whether or not the Collateral is considered by the Lender
      to be adequate. The Borrower and the Guarantors expressly grant to the Lender
      the right to set off and apply such deposits and sums without having to resort
      to recourse to any other Collateral in which the Lender has a security interest.
      

     

    M.
      Notices.
      All
      notices, requests, demands and other communications provided for hereunder
      shall
      be in writing (including telegraphic communication) and shall be either mailed
      by certified mail, return receipt requested, or delivered by overnight courier
      service, to the applicable party at the addresses set forth in this Agreement.
      

     

    N.
      Savings
      Clause.
      Any
      provision of this Agreement or any of the Loan Documents that is prohibited
      or
      unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
      to the extent of such prohibition or unenforceability without invalidating
      the
      remaining provisions hereof or thereof or affecting the validity or
      enforceability of such provision in any other jurisdiction. 

     

    O.
      Term
      of this Agreement.
      This
      Agreement shall remain in full force and effect until all of the Obligations
      have been paid in full and all of the terms, conditions and covenants under
      the
      Loan Documents have been performed. 

     

    IN
      WITNESS WHEREOF, the Lender and the Borrower have executed this Agreement as
      of
      the day and year first above written. 

     

    
      	 	 	 	 	 
	
               

            	
               

            	
              LENDER:

            
	
              WITNESS:

            	
               

            	
              APPLIED
                DIGITAL SOLUTIONS, INC.

            
	 	 	 
	
              /s/
                Brian
                Murphy                                                  
                

            	
               

            	
              By:

            	
               

            	
              /s/
                Evan
                McKeown                                                  
                

            
	
               

            	
               

            	
              Name:

            	
               

            	
              Evan
                McKeown

            
	
               

            	
               

            	
              Title:

            	
               

            	
              Senior
                Vice President and Chief Financial
                Officer

            


    

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Page
      13


     

    
      	 	 	 	 	 
	
               

            	
               

            	
              BORROWER:

            
	
              WITNESS:

            	
               

            	
              VERICHIP
                CORPORATION

            
	 	 	 
	
              /s/
                Brian
                Murphy                                                      
                

            	
               

            	
              By:

            	
               

            	
              /s/
                Kevin
                McLaughlin                                            
                

            
	
               

            	
               

            	
              Name:

            	
               

            	
              Kevin
                McLaughlin

            
	
               

            	
               

            	
              Title:

            	
               

            	
              Chief
                Executive Officer

            


    

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    Page
      14


     

    COMMERCIAL
      LOAN AGREEMENT 

     

    SCHEDULE
      A 

     

    Additional
      Terms and Conditions 

     

    
      	
              I.

            	
              Periodic
                Fees Payable by Borrower 

            


    

     

    Working
      Capital Revolving Line of Credit Loan: None 

     

    
      	
              II.

            	
              Description
                of Financial Statements to be Delivered: 

            


    

     

    A.
      Monthly management financial statements within ten (10) days after the end
      of each quarter, including accountant compiled balance sheets and statements
      of
      income in each case, prepared in accordance with generally acceptable accounting
      principles. 

     

    B.
      Monthly accounts receivable summaries and inventory reports within ten
      (10) days after the end of each quarter prepared in accordance with
      generally acceptable accounting principals. 

     

    C.
      Copies
      of Borrower’s corporate tax returns to be delivered within ninety (90) days
      of the end of each year to which they appertain. 

     

    D.
      Yearly
      accountant reviewed financial statements within sixty (60) days of the
      Borrower’s fiscal year end.