Document:

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                                                                   Exhibit 10.2

                                                                 EXECUTION COPY

                                                  For Discussion Purposes Only;
                                                              Not a Commitment;
                       Subject to IBM Credit's Internal Credit Approval Process

                         APPLIED DIGITAL SOLUTIONS, INC.
                            DIGITAL ANGEL SHARE TRUST

                              FORBEARANCE AGREEMENT

                         SUMMARY OF TERMS AND CONDITIONS
                                 MARCH 24, 2003

                This Summary of Terms and Conditions (the "Term Sheet") sets
                                                           ----------
forth the indicative terms and conditions of the Forbearance Agreement (the
"Forbearance Agreement") among IBM Credit LLC, Applied Digital Solutions, Inc.,
 ---------------------
Digital Angel Share Trust and the other Loan Parties party to the Third Amended
and Restated Credit Agreement, dated as of March 1, 2002 (as amended through the
date hereof, the "Credit Agreement"), among IBM Credit LLC, Applied Digital
                  ----------------
Solutions, Inc., Digital Angel Share Trust and the other Loan Parties party
thereto. Terms used but not defined herein shall have the meanings assigned to
such terms in the Credit Agreement.

                THIS TERM SHEET DOES NOT CONSTITUTE A COMMITMENT OF IBM CREDIT
TO LEND OR AN AGREEMENT OF IBM CREDIT TO PREPARE, NEGOTIATE, EXECUTE OR DELIVER
SUCH A COMMITMENT.

1.       PARTIES TO FORBEARANCE AGREEMENT
         --------------------------------

Borrowers:                           Digital Angel Share Trust, a Delaware
                                     statutory business trust (in such capacity,
                                     the "Trust" and in its capacity as a
                                          -----
                                     Borrower, the "Tranche A Borrower"); and
                                                    ------------------

                                     Applied Digital Solutions, Inc., a Missouri
                                     corporation ("ADS" or the "Tranche B
                                                   ---          ---------
                                     Borrower").
                                     --------

Guarantors:                          Each of the Tranche B Borrower and its
                                     Subsidiaries (other than Digital Angel
                                     Corporation), as a guarantor for the
                                     Tranche A Borrower's obligations under
                                     the Tranche A Facility (as described below)
                                     (in such capacity, the "Tranche A
                                                             ---------
                                     Guarantors"); and
                                     ----------

                                     The Tranche A Borrower, as a guarantor for
                                     the Tranche B Borrower's obligations under
                                     the Tranche B Facility (as described below)
                                     (in such capacity, the "Tranche B
                                                             ---------
                                     Guarantor"; together with
                                     ---------

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                                     the Tranche A Guarantors, the
                                     "Guarantors").
                                      ----------

Lender:                              IBM Credit LLC, a Delaware limited
                                     liability company ("IBM Credit").
                                                         ----------

2.       FORBEARANCE PROVISIONS
         ----------------------
Forbearance:                         Notwithstanding the occurrence and
                                     continuance of the Specified Events of
                                     Default (as defined below), subject to the
                                     terms and conditions hereof and of the
                                     Forbearance Agreement, IBM Credit will
                                     agree to forbear, during the Forbearance
                                     Period, from the exercise of any or all
                                     rights and remedies under the Credit
                                     Agreement, the other applicable
                                     Restructuring Documents and applicable law
                                     solely in respect of the Specified Events
                                     of Default; it being understood that the
                                     foregoing is not and shall not be construed
                                     as an amendment, waiver or modification of
                                     the Credit Agreement except as expressly
                                     provided herein and in the Forbearance
                                     Agreement.

Forbearance Period:                  The period beginning on the Effective
                                     Date (as defined below) and ending on
                                     the Termination Date (as defined below).

Specified Events of Default:         "Specified Events of Default"  are:
                                      ---------------------------
                                     (i) the Events of Default occurring and
                                     continuing under Section 8.1(A) of the
                                     Credit Agreement as a result of the
                                     Borrowers' failure to pay to IBM Credit in
                                     immediately available funds the amounts
                                     due and payable in accordance with Section
                                     2.3(B) and 2.4(B), respectively, of the
                                     Credit Agreement or, alternatively, forty
                                     percent (40%) of the original principal
                                     amount of the Loans and interest and
                                     expenses ($46,228,415.89) due and payable
                                     since February 28, 2003, in accordance
                                     with Section 2.8 of the Credit Agreement
                                     and IBM Credit's letter to the Borrowers,
                                     dated  March 3, 2003 and (ii) any Events
                                     of Default existing on the date hereof
                                     which IBM Credit is aware of (including
                                     the Events of Default resulting from the
                                     failure to comply with the financial
                                     conditions covenants set forth in
                                     Section 7.1 of the Credit Agreement for
                                     the applicable period ending December 31,
                                     2002).

                                     In the Notice of Default, dated March 6,
                                     2003, IBM Credit notified the Borrowers and
                                     the other Loan Parties of the Specified
                                     Events of Default and that all Obligations
                                     are immediately due and payable in
                                     accordance with Section 8.2 of the Credit
                                     Agreement.

                                       2

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                                     All the Loans and other Obligations remain
                                     outstanding and continue to be due and
                                     payable.

Termination Date:                    The earlier to occur of (i) the date
                                     on which the Loans and other Obligations
                                     are repaid in full or otherwise satisfied
                                     under "Payment Provisions" or (ii) a
                                     Termination Event.

Termination Events:                  The occurrence of any of the following
                                     events is a "Termination Event": (i)
                                                  -----------------
                                     failure of ADS to be cash flow positive on
                                     a consolidated operational basis (excluding
                                     Digital Angel) at all times on and after
                                     the 30-day anniversary of the Effective
                                     Date; or (ii) failure to deliver the Budget
                                     (as defined below) to IBM Credit within
                                     one (1) Business Day of the date when due
                                     in form and substance satisfactory to IBM
                                     Credit; or (iii) the filing of any ADS or
                                     Digital Angel shareholder lawsuit deemed
                                     to be material, as determined by IBM Credit
                                     in its sole and absolute discretion, or any
                                     lawsuit by or on behalf of ADS or Digital
                                     Angel or any other Loan Party against the
                                     Tranche A Borrower, IBM Credit, IBM or any
                                     Affiliate thereof; or (iv) the occurrence
                                     of an Event of Default other than a
                                     Specified Event of Default after the date
                                     hereof or an Event of Default existing on
                                     or prior to the date hereof and continuing
                                     after the date hereof which IBM Credit is
                                     not aware of; or (v) failure to repay the
                                     Loans when due as set forth under
                                     "Payment Provisions" below (subject to the
                                     exercise of purchase rights set forth
                                     under "Purchase Rights" thereunder); or
                                     (vi) breach of any other covenant or
                                     agreement set forth herein or in the
                                     Forbearance Agreement and the
                                     Restructuring Documents.

3.       PAYMENT PROVISIONS
         ------------------

Repayment:                           The Tranche A Loan must be repaid in full
                                     no later than September 30, 2003 provided
                                                                      --------
                                     that all but $3 million of the Tranche A
                                     Loan (the "Tranche A Deficiency Amount")
                                                ---------------------------
                                     will be deemed to be paid in full on such
                                     date if less than the full amount of
                                     the Tranche A Loan is repaid but all of
                                     the net cash proceeds of the Digital Angel
                                     Share Sale (as defined below) on terms
                                     satisfactory to IBM Credit are applied to
                                     the repayment of the Tranche A Loan. The
                                     Tranche A Deficiency Amount (if any) must
                                     be repaid no later than March 31, 2004.

                                     The Tranche B Loan must be repaid in full
                                     no later than March 31, 2004. All legal
                                     fees incurred by IBM Credit as set forth in
                                     "Expenses" will be capitalized as
                                     additional principal under the Tranche B
                                     Loan. From and after the date of this Term
                                     Sheet, the

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                                     Tranche B Loan will bear interest at seven
                                     percent (7%) per annum.

Purchase Rights:                     The Loans may be purchased by or on behalf
                                     of the Borrowers as follows:

                                     1. The Loans and all the other Obligations
                                     may be purchased on or before June 30, 2003
                                     for $30 million cash.

                                     2. The Loans and all the other Obligations
                                     may be purchased on or before September 30,
                                     2003 for $50 million cash.

                                     3. Notwithstanding anything to the contrary
                                     stated above, the Tranche A Loan may be
                                     purchased on or before September 30, 2003
                                     for $40 million cash with an additional $10
                                     million cash payment in respect of the
                                     Tranche A Deficiency Amount and the Tranche
                                     B Loan due on or before December 31, 2003.
                                     Payment of $50 million in aggregate by the
                                     date set forth above shall constitute
                                     satisfaction of the Obligations.

4.       DIGITAL ANGEL SHARE SALE    The following conditions must be satisfied
         ------------------------    in respect of the sale under the Trust
                                     Agreement of the Digital Angel shares held
                                     by the Trust (the "Digital Angel Share
                                                        -------------------
                                     Sale"). Such engagement will include
                                     ----
                                     provision of a fairness opinion, if
                                     requested by the Trust.

                                     1. Promptly, and in any event within 30
                                     days of the Effective Date, the Trust shall
                                     engage an investment bank (the "Investment
                                                                     ----------
                                     Bank") reasonably acceptable to IBM Credit
                                     ----
                                     to conduct the Digital Angel Share Sale.

                                     2. The Investment Bank fee structure will
                                     be on customary terms and based upon the
                                     success of the Digital Angel Share Sale,
                                     such fees to be reasonably acceptable to
                                     IBM Credit. IBM Credit will not be required
                                     to indemnify the Investment Bank.

                                     3. Within 30 days of the Effective Date,
                                     the Investment Bank will have prepared and
                                     delivered to IBM Credit, the Trust and ADS
                                     a report, in form and substance
                                     satisfactory to IBM Credit in its
                                     reasonable discretion, in respect of the
                                     Digital Angel Share Sale process
                                     (including, without limitation, a timetable
                                     to conduct such sale, the persons
                                     responsible for managing such process, the
                                     parameters of the expected transaction
                                     terms and the Investment Bank's expected
                                     range of proceeds). Any Digital Angel Share
                                     Sale must be consummated without any
                                     indemnification claims or contingencies
                                     against the proceeds.

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                                     4. (a) Unanimous written consent of the
                                     Advisory Board Members (as defined in the
                                     Trust Agreement) approving pursuit of the
                                     Digital Angel Share Sale on the terms
                                     proposed by the Investment Bank will have
                                     been delivered to IBM Credit. Upon such
                                     approval, the Trust will diligently and
                                     expeditiously pursue the Digital Angel
                                     Share Sale consistent with its obligations
                                     under the Trust Agreement.

                                        (b) Other required consents to the
                                     Digital Angel Share Sale (including any
                                     consents required under the Digital
                                     Angel/Wells Fargo Credit Agreement, dated
                                     as of October 30, 2002) will have been
                                     obtained.

                                     5. Digital Angel will agree to cooperate
                                     (including, without limitation, assisting
                                     and preparation of road show materials and
                                     making senior management of Digital Angel
                                     available to participate in meetings with
                                     any prospective investors in a road show)
                                     with the Investment Bank and the Trust to
                                     facilitate the Digital Angel Share Sale.

                                     6. All proceeds of the Digital Angel Share
                                     Sale will be applied to the Loans and other
                                     Obligations to the extent required under
                                     the "Repayment" paragraph of the "Payment
                                     Provisions" section above.

5.       CASH COLLATERAL
         ---------------

Budget:                              On a weekly basis, IBM Credit will receive
                                     a detailed budget (the "Budget") in respect
                                                             ------
                                     of each operating company of ADS (including
                                     Digital Angel,  SysComm and Computer
                                     Equity) on both a consolidated and an
                                     entity-by-entity basis. The Budget will be
                                     provided to IBM Credit on a rolling 13-week
                                     basis itemizing all revenues projected to
                                     be received and all expenses proposed to
                                     be made in the ordinary course of business
                                     of such entities, such as expenses incurred
                                     or payable in respect of vendors,
                                     materialmen and payroll (it being expressly
                                     understood by the parties hereto that any
                                     legal and other professional fees
                                     (including, without limitation, retainers
                                     and expenses incurred or paid) in
                                     connection with a defense of any
                                     shareholder suit are not ordinary course
                                     business expenses) during such periods and
                                     other cash flow and financial projections,
                                     all in form and substance satisfactory to
                                     IBM Credit in its reasonable discretion.

Deposit Accounts:                    Collateral consisting of collected funds
                                     deposited (whether directly or transmitted
                                     from lockboxes) in Deposit Accounts shall
                                     remain subject to the control of IBM Credit
                                     in accordance with the

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                                     Contingent Blocked Account Agreement or
                                     the other Deposit Account Control
                                     Agreements, as applicable (including,
                                     without limitation, any Deposit Account
                                     and related Deposit Account Control
                                     Agreement replacing or in substitution of
                                     the Contingent Blocked Account Agreement
                                     and the Deposit Accounts thereunder) (such
                                     Collateral, the "Cash Collateral").
                                                      ---------------

Usage:                               IBM Credit will make available Cash
                                     Collateral from the Deposit Accounts to
                                     ADS to pay expenses of ADS and its
                                     Subsidiaries (excluding Digital Angel and
                                     SysComm) in accordance with the Budget.
                                     The Budget (excluding the budget in respect
                                     of Digital Angel and SysComm) may be
                                     adjusted on a week-to-week basis by an
                                     amount equal to 10% of permitted
                                     expenditures in the aggregate (the
                                     "Maximum Adjustment Amount") provided that
                                      -------------------------   --------
                                     no single line item for permitted
                                     expenditures in the Budget may be adjusted
                                     on a week-to-week basis by an amount in
                                     excess of 20% of the Maximum Aggregate
                                     Adjustment Amount.

6.       OTHER COLLATERAL            Tranche A Facility: The Borrowers and the
         ----------------            ------------------
                                     other Loan Parties hereby confirm and
                                     reaffirm that the Tranche A Facility and
                                     the Obligations will continue to be secured
                                     by a perfected first priority security
                                     interest in the Digital Angel shares held
                                     by the Trust for the benefit of IBM Credit
                                     up to the aggregate amount of the
                                     outstanding Tranche A Loan and Tranche B
                                     Loan.

                                     Tranche B Facility: The Borrowers and the
                                     ------------------
                                     other Loan Parties hereby confirm and
                                     reaffirm that the Tranche B Facility and
                                     the Obligations will continue to be secured
                                     by a perfected, first priority security
                                     interest in (i) substantially all the
                                     assets of the Tranche B Borrower and its
                                     Subsidiaries, excluding the assets of
                                     Digital Angel or its Subsidiaries, (ii) all
                                     Capital Stock in Subsidiaries and other
                                     investments held by the Tranche B Borrower,
                                     and (iii) any notes or other securities
                                     held by the Tranche B Borrower in
                                     connection with the sale of assets or
                                     investments.

                                     The Borrowers and the other Loan Parties
                                     hereby confirm and reaffirm that they will
                                     take all necessary or reasonably desirable
                                     actions to maintain and preserve IBM
                                     Credit's prior perfected security interest
                                     in the Collateral (including, without
                                     limitation, in respect of any Collateral
                                     consisting of Deposit Accounts pursuant to
                                     any replacement or substitute cash
                                     management system or arrangement).

                                       6

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7.       CERTAIN CONDITIONS          The Forbearance Agreement will be effective
         ------------------          on the date (the "Effective Date") on which
                                                       --------------
                                     all of the following conditions precedent
                                     to the Forbearance Agreement are satisfied
                                     (such date to occur on or before March 31,
                                     2003):

                                     (a) IBM Credit shall have received a copy
                                     of the Forbearance Agreement, all the
                                     material terms of which shall be
                                     substantially the same as the material
                                     terms set forth in this Term Sheet and
                                     otherwise in form and substance
                                     satisfactory to IBM Credit, duly executed
                                     by the parties thereto.

                                     (b) IBM Corporation ("IBM") and IBM Credit
                                                           ---
                                     shall have received releases from each of
                                     ADS (on behalf of itself and its officers
                                     and directors), Digital Angel, the other
                                     Loan Parties, Richard Sullivan (in all
                                     capacities relating to the Restructuring
                                     Documents), Jerome Artigliere, Garrett
                                     Sullivan and the Advisory Board Members (as
                                     defined in the Trust Agreement)
                                     (collectively, the "Releasing Parties")
                                                         -----------------
                                     satisfactory to IBM and IBM Credit forever
                                     releasing and discharging IBM and IBM
                                     Credit or any affiliate thereof, together
                                     with their past and present officers,
                                     directors, stockholders, employees,
                                     subsidiaries, affiliates, related
                                     companies, predecessors, successors,
                                     assigns, agents, trustees, attorneys, or
                                     other representatives and each of them from
                                     all actions, causes of action, proceedings,
                                     charges, complaints, claims, demands,
                                     damages, costs, liabilities, agreements,
                                     and obligations of every kind, which they
                                     have ever had, now have or may have in the
                                     future in respect of any matter under,
                                     arising out of or relating to the
                                     Restructuring Documents, this Term Sheet,
                                     the Forbearance Agreement and the Lawsuit
                                     (as defined below). Such releases shall
                                     contain covenants not to sue IBM Credit,
                                     IBM or any affiliate thereof in respect of
                                     any matter under, arising out of or
                                     relating to the Restructuring Documents,
                                     this Term Sheet and the Forbearance
                                     Agreement and the Lawsuit. Such releases
                                     shall be duly authorized by all
                                     organizational action (including Board
                                     resolutions) as applicable, executed and
                                     delivered by each of the Releasing Parties.

                                     (c) The Advisory Board Members (as defined
                                     in the Trust Agreement) will be
                                     satisfactory to IBM Credit and duly
                                     authorized by all applicable organizational
                                     action of the Trust (including applicable
                                     resolutions).

                                     (d) The Advisory Board and Digital Angel
                                     shall have agreed in writing that IBM
                                     Credit is a third party beneficiary in the
                                     Digital Angel Share Sale process.

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                                     (e) Each of ADS, Digital Angel, the
                                     Advisory Board, the Trust and the other
                                     Loan Parties shall have taken all necessary
                                     organizational action (including applicable
                                     applicable Board resolutions) authorizing
                                     the transactions contemplated by this Term
                                     Sheet and the Forbearance Agreement
                                     (including, without limitation, any
                                     releases and the Digital Angel Share Sale).

                                     (f) ADS shall have delivered to IBM Credit
                                     an initial Budget, satisfactory in form and
                                     substance to IBM Credit in its reasonable
                                     discretion.

                                     (g) ADS shall take any actions requested by
                                     IBM Credit to enable IBM Credit to continue
                                     its "control" of Deposit Accounts.

8.       CERTAIN ADDITIONAL COVENANTS
         ----------------------------

DISMISSAL OF LAWSUIT:                ADS WILL CAUSE THE LAWSUIT, INITIALLY
                                     FILED ON MARCH 7, 2003, AS CASE NO.
                                     CA 03-02512AE IN THE FIFTEENTH JUDICIAL
                                     CIRCUIT IN AND FOR PALM BEACH COUNTY,
                                     FLORIDA AND REMOVED TO THE SOUTHERN
                                     DISTRICT OF FLORIDA, CASE NO. 03-80186-
                                     CIV-PAINE ON MARCH 12, 2003 (THE
                                     "LAWSUIT"), TO BE DISMISSED WITH PREJUDICE
                                      -------
                                     WITHIN ONE (1) BUSINESS DAY OF EXECUTION
                                     OF THIS TERM SHEET BY THE PARTIES HERETO.

Press Releases:                      ADS and the other applicable Loan Parties
                                     will deliver to IBM Credit prior to
                                     the issuance thereof, any press releases
                                     relating to the transactions contemplated
                                     hereby (including, without limitation, the
                                     Digital Angel Share Sale). IBM Credit will
                                     review such press releases solely for
                                     accuracy of the transactions contemplated
                                     hereby. The Borrowers will have sole
                                     liability in respect of any such press
                                     releases.

9.       ASSIGNMENTS                 IBM Credit may assign its Loans and other
         -----------                 Obligations to any affiliate or any other
                                     Person; provided that such Person agrees to
                                             --------
                                     be bound by the terms of the Forbearance
                                     Agreement.

10.      EXPENSES                    Each Borrower and each other Loan Party
         --------                    agrees to pay and reimburse IBM Credit for
                                     all its reasonable costs and expenses
                                     incurred in connection with the preparation
                                     and delivery of this Term Sheet, the
                                     Digital Angel Share Sale and the
                                     Forbearance Agreement,

                                       8

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                                     including, without limitation, the
                                     reasonable fees and disbursements of Jones
                                     Day, counsel to IBM Credit, and the
                                     reasonable fees and costs and expenses of
                                     the Investment Bank. Each Borrower and
                                     each other Loan Party further agree to
                                     pay all reasonable costs and expenses
                                     incurred in connection with the Digital
                                     Angel Share Sale (including, without
                                     limitation, the reasonable fees and
                                     disbursements of the Investment Bank and
                                     Jones Day, counsel to IBM Credit)
                                     regardless of any purchase of the Loans
                                     and other Obligations under "Payment
                                     Provisions - Purchase Rights." Legal fees
                                     will be payable in accordance with the
                                     provisions of "Payment Provisions -
                                     Repayment."

11.      INDEMNIFICATION             Each Borrower and each other Loan Party
         ---------------             hereby agree to indemnify and hold
                                     harmless IBM, IBM Credit and their
                                     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 Term Sheet and the
                                     Forbearance Agreement and the
                                     documentation relating hereto, 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 Term Sheet and the Forbearance
                                     Agreement relating to any financing
                                     arrangements IBM Credit may from time to
                                     time have with (i) such Borrower, (ii)
                                     any Person that shall be acquired by such
                                     Borrower or (iii) any Person that such
                                     Borrower may acquire all or substantially
                                     all of the assets of, or (b) directly
                                     or indirectly relating to the execution,
                                     delivery or performance of this Term
                                     Sheet and the Forbearance Agreement or the
                                     consummation of the transactions
                                     contemplated hereby or thereby or to any
                                     of the Collateral or to any act or
                                     omission of the Borrower in connection
                                     therewith. Such indemnification will
                                     include any Losses arising out of or
                                     relating to any press releases as described
                                     under "Certain Additional Covenants - Press
                                     Releases." Notwithstanding the
                                     foregoing, a Loan Party shall not be
                                     obligated to indemnify IBM or IBM Credit
                                     for any Losses incurred by IBM or IBM
                                     Credit which are a result of IBM's or IBM
                                     Credit's gross negligence or willful
                                     misconduct. The indemnity provided herein
                                     shall survive the termination of this Term
                                     Sheet and the Forbearance Agreement
                                     and shall be in addition to the indemnity
                                     provisions set forth in Section 9.2 of
                                     the Credit Agreement.

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12.      COUNTERPARTS                This Term Sheet may be executed by one
         ------------                or more of the parties to this Term Sheet
                                     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
                                     Term Sheet signed by the parties hereto
                                     shall be delivered to each Borrower and
                                     IBM Credit.

13.      GOVERNING LAW               THIS TERM SHEET AND THE RIGHTS AND
         -------------               OBLIGATIONS OF THE PARTIES UNDER THIS TERM
                                     SHEET 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.

14.      LIMITATION OF TRUSTEE       It is expressly understood and agreed by
         ---------------------       the parties that (a) this document
         LIABILITY                   is executed and delivered by Wilmington
         ---------                   Trust Company, not individually or
                                     personally, but solely as Trustee, in the
                                     exercise of the powers and authority
                                     conferred and vested in it, pursuant to the
                                     Trust Agreement, (b) each of the
                                     representations, undertakings and
                                     agreements herein made on the part of the
                                     Trust is made and intended not as personal
                                     representations, undertakings and
                                     agreements by Wilmington Trust Company but
                                     is made and intended for the purpose for
                                     binding only the Trust, (c) nothing herein
                                     contained shall be construed as creating
                                     any liability on Wilmington Trust Company,
                                     individually or personally, to perform any
                                     covenant either expressed or implied
                                     contained herein, all such liability, if
                                     any, being expressly waived by the parties
                                     hereto and by any person claiming by,
                                     through or under the parties hereto, and
                                     (d) under no circumstances shall Wilmington
                                     Trust Company be personally liable for the
                                     payment of any indebtedness or expenses of
                                     the Trust or be liable for the breach or
                                     failure of any obligation, representation,
                                     warranty or covenant made or undertaken by
                                     the Trust under this Term Sheet or any
                                     other related documents.

15.      INTERPRETATION
         --------------

Continuing Effect of the             The Borrowers and each other Loan Party
Credit Agreement:                    hereby acknowledge and agree that the
                                     Credit Agreement shall continue to be
                                     and shall remain unchanged and in full
                                     force and effect in accordance with its

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                                     terms, except as expressly modified hereby
                                     and by the Forbearance Agreement.

No Limitation on Remedies after      The Borrowers and each Loan Party hereby
Forbearance Period:                  acknowledge  and agree that, at the end of
                                     the Forbearance Period, the provisions
                                     hereof and of the Forbearance Agreement
                                     shall become of no force and effect and
                                     IBM Credit shall be free, in accordance
                                     with the Credit Agreement and the other
                                     Restructuring Documents, to exercise and
                                     enforce, or to take steps to exercise and
                                     enforce, all rights, powers, privileges
                                     and remedies available to them under the
                                     Credit Agreement, any other Restructuring
                                     Document or applicable law on account
                                     of the Specified Events of Default (or any
                                     other Default or Event of Default) as
                                     if the Forbearance Agreement had not been
                                     entered into by the parties hereto.

RESERVATION OF RIGHTS:               NOTWITHSTANDING ANYTHING CONTAINED IN THIS
                                     TERM SHEET OR THE FORBEARANCE AGREEMENT TO
                                     THE CONTRARY, THE BORROWERS AND EACH
                                     OTHER LOAN PARTY ACKNOWLEDGE THAT IBM
                                     CREDIT DOES NOT WAIVE, AND EXPRESSLY
                                     RESERVES, THE RIGHT TO EXERCISE, AT ANY
                                     TIME DURING THE FORBEARANCE PERIOD, ANY
                                     AND ALL OF ITS RIGHTS AND REMEDIES UNDER
                                     (A) THE CREDIT AGREEMENT, ANY OTHER
                                     RESTRUCTURING DOCUMENT AND APPLICABLE LAW
                                     IN RESPECT OF THE SPECIFIED EVENTS OF
                                     DEFAULT AGAINST ANY PERSON OTHER THAN THE
                                     BORROWERS OR ANY SUCH LOAN PARTY AND
                                     (B) THE CREDIT AGREEMENT, ANY OTHER
                                     RESTRUCTURING DOCUMENT AND APPLICABLE LAW
                                     IN RESPECT OF ANY DEFAULT OR EVENT OF
                                     DEFAULT OTHER THAN THE SPECIFIED EVENTS OF
                                     DEFAULT.

16.    CONSENT                       Notwithstanding any provisions to the
       -------                       contrary in the Credit Agreement, IBM
                                     Credit hereby agrees to consent to the buy
                                     out by ADS of the respective Employment
                                     Agreements of each respective Employee
                                     with ADS common stock with a current market
                                     value not to exceed the required
                                     buyout amount under the applicable
                                     Employment Agreement.

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                IN WITNESS WHEREOF, each of IBM Credit, each Borrower, each
Guarantor and each other Loan Party hereto has read this entire Term Sheet, and
has caused their respective authorized representatives to execute this Term
Sheet and has caused its corporate seal, if any, to be affixed hereto as of the
date first written above.

<TABLE>
<C>                                                          <C>
IBM CREDIT CORPORATION,                                      APPLIED DIGITAL SOLUTIONS, INC.,
as Lender                                                    as Tranche B Borrower and Tranche A Guarantor

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

DIGITAL ANGEL SHARE TRUST,                                   ADS MONTEREY, INC.
as Tranche A Borrower and Tranche B Guarantor

By:    Wilmington Trust Company, not in its                  By: _________________________________________________
       individual capacity but solely as Trustee
                                                             Name:
By: ___________________________________________________
                                                             Title:
Name:           Wilmington Trust Company

Title:          Trustee

ADVANCED POWER SOLUTIONS, INC.                               THE AMERICOM GROUP, INC.

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

<PAGE>
<PAGE>

APPLIED DIGITAL SOLUTIONS FINANCIAL CORP.                   BALVA FINANCIAL CORPORATION

By: ___________________________________________________     By: __________________________________________________

Name:                                                       Name:

Title:                                                      Title:

COMPUTER EQUITY CORPORATION                                 DIGITAL ANGEL CORPORATION

By: ___________________________________________________     By: _________________________________________________

Name:                                                       Name:

Title:                                                      Title:

DIGITAL ANGEL HOLDINGS, LLC                                 FEDERAL CONVENTION CONTRACTORS, INC.

By: ___________________________________________________     By: _________________________________________________

Name:                                                       Name:

Title:                                                      Title:

FEDERAL SERVICES, INC.                                      GOVERNMENT TELECOMMUNICATIONS, INC.

By: ___________________________________________________     By: _________________________________________________

Name:                                                       Name:

Title:                                                      Title:

<PAGE>
<PAGE>

INFORMATION TECHNOLOGY SERVICES, INC.                        INFOTECH USA, INC.

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

PDS ACQUISITION CORP.                                        PERIMETER ACQUISITION CORP.

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

PRECISION POINT CORPORATION                                  SYSCOMM INTERNATIONAL CORPORATION

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name: Anat Ebenstein

Title:                                                       Title: President

U.S. ELECTRICAL PRODUCTS CORP.                               VERICHIP CORPORATION

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

<PAGE>
<PAGE>

WEBNET SERVICES, INC.                                        ACT COMMUNICATIONS INC.

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

ACT-GFX CANADA, INC.                                         ADS BAY AREA, INC.

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

ADSI TELECOMM SERVICES, INC.                                 ADSI TELECOMM SERVICES OF MARYLAND, INC.

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

ADVANCED TELECOMM OF MARYLAND, INC.                          ADVANCED TELECOMM OF PITTSBURGH

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

<PAGE>
<PAGE>

ADVANCED TELECOMMUNICATIONS, INC.                            APPLIED DIGITAL ORACLE PRACTICE, INC.

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

ARJANG, INC.                                                 BLUE STAR ELECTRONICS, INC.

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

BOSTEK, INC.                                                 CYBERTECH STATION, INC.

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

ELITE COMPUTER SERVICES, INC.                                INDEPENDENT ACQUISITION, INC.

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

<PAGE>
<PAGE>

INTELLESALE, INC.                                            MICRO COMPONENTS INTERNATIONAL INCORPORATED

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

NEIRBOD CORP.                                                NORCOM RESOURCES INCORPORATED

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

PIZARRO RE-MARKETING, INC.                                   SERVICE TRANSPORT COMPANY

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

TELEDATA CONCEPTS, INC.                                      WYR, INC.

By: ___________________________________________________      By: _________________________________________________

Name:                                                        Name:

Title:                                                       Title:

<PAGE>

Acknowledged and agreed:

--------------------------------------------
Richard Sullivan

--------------------------------------------
Garrett Sullivan

--------------------------------------------
Jerome Artigliere
</TABLE><PAGE>

                                                                Exhibit 10.3

March 24, 2003

PERSONAL AND CONFIDENTIAL

Mr. Richard J. Sullivan
c/o Applied Digital Solutions, Inc.
400 Royal Palm Way, Suite 410
Palm Beach, FL 33480

Re: Letter Agreement between Applied Digital Solutions,  Inc. and R. J. Sullivan
    ----------------------------------------------------------------------------

Dear Dick:

This will confirm that you and Applied Digital Solutions, Inc. ("ADSX") have
agreed to the following:

     1.   The consideration set forth in this letter agreement ("Agreement")
          to be provided by ADSX is in full satisfaction of all compensation and
          other benefits owed to you under your employment agreement and
          otherwise by ADSX.

     2.   You shall receive 56,000,000 shares of common stock of ADSX (the
          "Shares") immediately upon registration of such Shares. ADSX shall
          promptly, and in any event prior to May 1, 2003, file for
          registration of such shares with the Securities and Exchange
          Commission ("SEC") and shall complete such registration no later than
          December 31, 2003. Such registration statement shall remain effective
          for at least one year. ADSX shall advise you immediately when the SEC
          has issued a no comment letter or declared the registration statement
          effective.

     3.   All of your stock options (for ADSX stock) shall be immediately
          vested and exercisable by you and the exercise price shall be 1 cent
          per share. The other terms and conditions of such options shall remain
          unchanged.

     4.   The number of shares of ADSX stock mentioned in paragraphs 2 and 3
          and the option price of 1 cent per share shall be appropriately
          adjusted in the event of any stock split, stock dividend, reverse
          stock dividend or similar event.

     5.   You and your family (to the extent that your children remain young
          enough to be covered) will remain covered under ADSX's health
          insurance (or such other health insurance as

<PAGE>
<PAGE>

Mr. Richard J. Sullivan
March 24, 2003
Page 2

          ADSX may obtain) until the death of the survivor of you and your
          wife at ADSX's sole expense.

     6.   ADSX will continue to lease, for your use, the automobile which you
          now drive, on the same terms and conditions as presently exist. At the
          termination of the lease, or at such earlier time as ADSX shall
          determine, title to the automobile shall be converted to you free and
          clear of the lease and any other encumbrances at no cost to you.

     7.   Except for the obligations set forth in this Agreement, you and
          ADSX hereby release, remise, acquit, and forever discharge the other
          from all claims, demands, contracts, agreements (other than option
          grants), causes of actions, sums of money that either of us may have
          or may hereafter hence based on any event which has occurred except
          for releases that are prohibited by law. The foregoing release of and
          by ADSX includes all of its subsidiaries and affiliates. In addition
          your release of ADSX includes ADSX, its subsidiaries, affiliates, and
          each of their respective employees, officers, agents, attorneys, and
          representatives.

     8.   If a shareholder vote is required, ADSX covenants to put such items
          as requires shareholder approval in the proxy (in which case any time
          requirements on either party set forth herein shall be extended by
          such amount of time required by the inclusion in the proxy).

     9.   We represent that this Agreement has been approved by the Board of
          Directors of ADSX, and that the appropriate body of ADSX has agreed to
          amend the stock options in the manner set forth above.

    10.   YOU ACKNOWLEDGE THAT BY AGREEING TO THIS YOU ARE EXCHANGING OVER
          $17 MILLION OF CONSIDERATION (MUCH OR MOST OF WHICH WOULD BE PAYABLE
          IN CASH) AND OTHER BENEFITS IN EXCHANGE FOR THE CONSIDERATION SET
          FORTH HEREIN. YOU HAVE BEEN GIVEN THE OPPORTUNITY TO SEEK LEGAL AND
          OTHER COUNSEL.

    11.   The provisions of Paragraph 13 (nondisclosure; return of records)
          of your Employment Agreement shall remain in full force and effect.

    12.   You represent:

              (1)     The Shares to be received by you hereunder will be
                      acquired for your own account, not as nominee or
                      agent, for investment purposes and not with a view to,
                      or for offer or sale in connection with directly or
                      indirectly, any distribution in violation of the
                      Securities Act of 1933, as amended, or any other
                      applicable securities law ("Securities Act").

<PAGE>
<PAGE>

Mr. Richard J. Sullivan
March 24, 2003
Page 3

              (2)     You are not a registered broker dealer or engaged in the
                      business of being a broker dealer.

              (3)     You acknowledge (i) that you can bear the economic
                      risk and complete loss of your investment in the
                      Shares and have such knowledge and experience in
                      financial or business matters that you are capable of
                      evaluating the merits and risks of the investment
                      contemplated hereby, and (ii) that there may be
                      material adverse nonpublic information regarding the
                      ADS that could affect the value of the Shares.

              (4)     You are an accredited investor as defined in Rule 501(a)
                      of Regulation D, as amended, under the Securities Act.

    13.   You will sign such releases and other similar documents as our
          lender shall require, provided that no such release or other similar
          document shall obligate you in any way on our loan.

If the foregoing correctly sets forth the understanding between us, please sign
and return the enclosed copy of this Agreement.

Very truly yours,

APPLIED DIGITAL SOLUTIONS, INC.

By: /s/ Scott Silverman, CEO
   -----------------------------

Read and Agreed to
this 24th day of March, 2003.

/s/ Richard J. Sullivan
--------------------------------
Richard J. Sullivan

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