Document:

Exhibit 10.3

    
      

    

    Exhibit
      10.3 

     

    THIRD
      AMENDMENT TO SECURITY AGREEMENT 

     

    This
      Third Amendment to Security Agreement (the “Third Amendment”) is dated as of the
      8th
      day of
      February, 2007 and is entered into by and between VERICHIP CORPORATION, a
      Delaware corporation with a principal place of business at 1690 South Congress
      Avenue, Suite 200, Delray Beach, Florida 33445 (“the Debtor”), and Applied
      Digital Solutions, Inc., a Missouri corporation located at 1690 South Congress
      Avenue, Suite 200, Delray Beach, Florida 33445 (the “Secured Party”).

     

    R E C I T A L S:
      

     

    WHEREAS,
      Secured Party and Debtor have previously entered into a Security Agreement
      dated
      as of December 27, 2005, as amended by that First Amendment to Security
      Agreement, dated October 6, 2006 and that Second Amendment to Security
      Agreement dated January 19, 2007 (the “Security Agreement”) securing the
      obligations of Debtor under the Commercial Loan Agreement dated
      December 27, 2005, as amended by that First Amendment to Commercial Loan
      Agreement dated October 6, 2006 and that Second Amendment to Commercial
      Loan Agreement dated January 19, 2007, and the Second Amended and Restated
      Working Capital Revolving Line of Credit made pursuant to the Credit Agreement
      dated January 19, 2007; and 

     

    WHEREAS,
      Debtor and Lender have executed and delivered that certain Third Amendment
      to
      the Commercial Loan Agreement of even date herewith and that certain Third
      Amended and Restated Revolving Line of Credit Note—Working Capital of even date
      herewith in the principal amount of $14,500,000.00 (the “Loan”). 

     

    NOW
      THEREFORE, in consideration of the mutual covenants, for good and valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the
      parties hereby agree as follows: 

     

    W I T N E S S E T H:
      

     

    1.
      Incorporation
      and Recitals.
      The
      above recitals are true and correct and are incorporated herein by reference.
      

     

    2.
      Definitions.
      All
      capitalized terms used herein shall, except as modified herein, have the meaning
      subscribed to them in the Security Agreement. All references to the “Security
      Agreement” set forth in the Loan Documents are hereby deemed to include
      reference to the Security Agreement, as hereby amended. All references to the
      Security Agreement set forth in the Credit Agreement as amended by that First
      Amendment to Commercial Loan Agreement dated as of October 6, 2006, as
      amended by that Second Amendment to Commercial Loan Agreement dated as of
      January 19, 2007, and as amended by that Third Amendment to Commercial Loan
      Agreement dated as of even date herewith (the “Credit Agreement”) and all other
      documents executed by Debtor, and/or Lender in connection with the Loan (the
      “Loan Documents”) are hereby deemed to refer to the Security Agreement, as
      hereby amended. 

     

    3.
      Representations
      and Warranties.
      The
      terms and conditions, representations and warranties, and covenants as set
      forth
      in the Security Agreement and all other loan documents executed by Debtor in
      favor of Lender in connection with the Loan are hereby ratified and affirmed
      by
      Debtor, and Debtor hereby agrees that the said terms and conditions, and
      covenants are valid, true and correct as if made on the date hereof. The Debtor
      hereby ratifies, affirms and acknowledges the continuing and unconditional
      security interest in the Collateral as described in the Security Agreement.
      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.
      Cooperation;
      Further Assurances.
      Debtor
      agrees to cooperate with Lender so that the interests of Lender are protected
      and the intent of the Security Agreement can be effectuated. Debtor agrees
      to
      execute all documents and to provide whatever further assurances Lender may
      request or deem necessary to effectuate the terms of the Security Agreement.
      

     

    5.
      No
      Implied Modifications.
      Except
      as expressly modified hereby, all terms and provisions of the Security Agreement
      shall remain unchanged and in full force and effect. 

     

    6.
      Counterparts.
      The
      Security Agreement may be executed in any number of counterparts, and all such
      counterparts shall together constitute but one instrument. 

     

    [Signature
      Page to Follow] 

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the parties have executed this Third Amendment to Security
      Agreement as of the day and year first written above. 

     

    
      	 	
              DEBTOR:

            
	 	 
	 	
              VERICHIP
                CORPORATION

            
	 	 	 
	 	
              By:

            	
              /s/
                William J. Caragol

            
	 	
              Print Name:

            	
              William
                J. Caragol

            
	 	
              Title:

            	
              Chief
                Financial Officer

            
	 	 	 
	 	
              LENDER:

            
	 	 
	 	
              APPLIED
                DIGITAL SOLUTIONS, INC.

            
	 	 	 
	 	
              By:

            	
              /s/
                Lorraine Breece

            
	 	
              Print Name:

            	
              Lorraine
                Breece

            
	 	
              Title:

            	
              Senior
                Vice President and Chief Accounting
                OfficerExhibit 10.4

    
      

    

     

    Exhibit
      10.4

    FOURTH
      AMENDMENT TO 

    COMMERCIAL
      LOAN AGREEMENT

    AND

    SECURITY
      AGREEMENT

     

    This
      FOURTH AMENDMENT TO COMMERCIAL LOAN AGREEMENT and SECURITY AGREEMENT, dated
      as
      of February 13, 2007 (this "Fourth Amendment"), is between VERICHIP
      CORPORATION,
      a
      Delaware corporation (the "Borrower" or "Debtor"), and APPLIED
      DIGITAL SOLUTIONS, INC.,
      a
      Missouri corporation (the "Lender").

     

    Recitals:

    

    WHEREAS,
      on December 27, 2005, the Borrower and the Lender entered into a Commercial
      Loan
      Agreement (the "Agreement") pursuant to which Lender made a Loan to Borrower
      subject to the terms and conditions contained in the Agreement; 

     

    WHEREAS,
      on October 6, 2006, the Borrower and the Lender entered into a First Amendment
      to Commercial Loan Agreement pursuant to which Lender increased the principal
      amount of the Loan by Four Million Five Hundred Thousand Dollars ($4,500,000.00)
      (including a change in the applicable interest rate) in order to meet the
      Borrower's working capital needs, IPO costs, and cash needs in connection with
      Perceptis' potential election to take its final (deferred) payment in cash
      and
      to make certain other amendments to the Agreement contained herein;

     

    WHEREAS,
      on
      January 19, 2007, the Borrower and the Lender entered into a Second Amendment
      to
      Commercial Loan Agreement pursuant to which Lender increased the principal
      amount of the Loan by One Million Five Hundred Thousand Dollars ($1,500,000.00)
      in order to meet the Borrower's working capital needs and IPO
      costs;

     

    WHEREAS,
      on February 8, 2007, the Borrower and the Lender entered into a Third Amendment
      to Commercial Loan Agreement, a Third Amended and Restated Revolving Line of
      Credit Note, and a Third Amendment to Security Agreement, pursuant to which
      certain payment terms were changed and the revolving nature of the Loans would
      be deemed changed upon the occurrence of certain events; and

     

    WHEREAS,
      the Lender and the Borrower desire to clarify certain terms now existing under
      the Loan Documents; 

     

    NOW
      THEREFORE, in consideration of the mutual covenants and agreements set forth
      herein, and other good and valuable consideration, the receipt and sufficiency
      of which are hereby acknowledged, the parties agree as follows:

     

    Agreement.

     

    
      	
              1.

            	
              Recitals.
                The foregoing recitals are true and correct and are hereby incorporated
                by
                this reference.

            

    

     

    
      	
              2.

            	
              Definitions.
                All
                capitalized terms used herein, except as modified or defined in this
                Fourth Amendment, shall have the meaning given to such terms in the
                Agreement or in the Security Agreement as applicable. All references
                to
                the Agreement in all documents executed by Borrower, Guarantor and/or
                Lender in connection with the Agreement are hereby deemed to refer
                to the
                Agreement, as hereby amended. 

            

    

     

    
      
        
        

      

      
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              3.

            	
              Amendments:
                The following sections of the Agreement or the Security Agreement,
                as
                indicated, are hereby amended or clarified as
                follows:

            

    

     

    
      	 	
              a.

            	
              Credit
                Agreement.

            

    

    

    (i)
  Bank
      Accounts.
      Section
      VIII (O) of the Agreement shall be deleted and replaced by the following:
      "Borrower shall maintain its primary operating and deposit accounts at such
      locations and with such financial institutions as shall be approved by Lender
      from time to time, such approval not to be unreasonably conditioned or
      withheld."

    

    (ii)
        Capital
      Structure.
      For the
      avoidance of doubt, the Lender hereby ratifies and confirms that the Borrower's
      IPO shall not be deemed a breach of or an event of default under the Agreement,
      including without limitation, under Sections IX (C) or XI (4)
      thereof.

    

    (iii)  Permitted
      Liens.
      Section
      VII (N) of the Agreement is hereby amended by removing the parenthetical
      "("Permitted Encumbrances")" at the end of the sentence and replacing it with
      the following: "or any other liens arising in the ordinary course of the
      Borrower's business or by operation of law so long as, in any such case, either
      such lien shall not be prior in right and dignity to the lien in favor of the
      Lender or the existence of such lien shall not have a material adverse effect
      on
      the Borrower ("Permitted Encumbrances")."

    

    b.    Security
      Agreement.
      For the
      avoidance of doubt, the Lender hereby ratifies and confirms that the existence
      of any lien on the Debtor's assets, including the Collateral, shall not be
      deemed a breach of or an event of default under the Security Agreement,
      including without limitation, Sections 3(e) and 5(b) thereof, if such liens
      arise in the ordinary course of the Debtor's business or by operation of law
      and, in any such case, either such lien shall not be prior in right and dignity
      to the security interest granted to the Lender under the Security Agreement
      or
      the existence of such lien shall not have a material adverse effect on the
      Debtor.

    

    
      	
              4.

            	
              Representations
                and Warranties.
                The terms and conditions, representations and warranties, and covenants
                as
                set forth in the Agreement, the Security Agreement, and all other
                loan
                documents executed by Borrower in favor of Lender in connection with
                the
                Loan are hereby ratified and affirmed by Borrower, and Borrower hereby
                agrees that the said terms and conditions, and covenants are valid,
                true
                and correct as if made on the date hereof.

            

    

     

    
      	
              5.

            	
              No
                Implied Modifications; Inconsistencies.
                Except as expressly modified hereby, all terms and provisions of
                the
                Agreement and the Security Agreement shall remain unchanged and in
                full
                force and effect. In
                the event of an inconsistency between the terms of this Fourth Amendment
                and the terms of the Agreement or the Security Agreement, the terms
                hereof
                shall control. 

            

    

     

    
      	
              6.

            	
              Counterparts.
                This Fourth Amendment may be executed in any number of counterparts,
                and
                all such counterparts shall together constitute but one instrument.
                

            

    

     

    
      	
              7.

            	
              Governing
                Law.
                This Fourth Amendment shall be governed by and construed in accordance
                with the laws of the State of New
                Hampshire.

            

    

     

    [Signature
      Page to Follow]

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the parties hereto have by their duly authorized
      representatives executed this Fourth Amendment on the date first above
      written.

     

    
      	 	
              BORROWER:

            
	 	 
	 	
              VERICHIP
                CORPORATION, a Delaware corporation

            
	 	 	 
	 	 	 
	 	
              By:

            	/s/
William
              J. Caragol	
            
	 	
              Print
                Name: William J. Caragol

            
	 	
              Title:
                Chief Financial Officer

            
	 	 	 
	 	
              LENDER:

            
	 	 
	 	
              APPLIED
                DIGITAL SOLUTIONS, INC., a Missouri corporation

            
	 	 	 
	 	 	 
	 	
              By:

            	/s/
Lorraine
              Breece	
            
	 	
              Print
                Name: Lorraine Breece

            
	 	
              Title:
                Senior Vice President and Chief Accounting
                Officer

            

    

     

     

    3

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