Document:

Exhibit 4.2

    
      

    

    Exhibit
      4.2

     

    

     

    APPLIED
      DIGITAL SOLUTIONS, INC.

    
 

     

    1999
      EMPLOYEES STOCK PURCHASE PLAN

     

    (As
      amended through April 27, 2005)

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      APPLIED
        DIGITAL SOLUTIONS, INC.

       

      1999
        EMPLOYEES STOCK PURCHASE PLAN

       

      (As
        amended through April 27, 2005)

    

     

    Table
      of Contents

     

    

     

    
      	 	 	 	
              Page

            
	 	 	 	 
	
              1.
                NAME AND PURPOSE

            	 
	 	
              1.1.
                Name.

            	
              1

            
	 	
              1.2.
                Purpose.

            	
              1

            
	 	 	 	 
	
              2.
                DEFINITIONS OF TERMS

            	 
	 	
              2.1.
                General Definitions.

            	 
	 	 	
              2.1.1.
                Board.

            	
              1

            
	 	 	
              2.1.2.
                Code.

            	
              1

            
	 	 	
              2.1.3.
                Company.

            	
              1

            
	 	 	
              2.1.4.
                Committee.

            	
              1

            
	 	 	
              2.1.5.
                Common Stock..

            	
              1

            
	 	 	
              2.1.6.
                Compensation.

            	
              1

            
	 	 	
              2.1.7.
                Effective Date

            	
              1

            
	 	 	
              2.1.8.
                Employee.

            	
              2

            
	 	 	
              2.1.9.
                Eligible Employee.

            	
              2

            
	 	 	
              2.1.10.
                Employer

            	
              2

            
	 	 	
              2.1.11.
                Entry Date.

            	
              2

            
	 	 	
              2.1.12.
                Exercise Date.

            	
              2

            
	 	 	
              2.1.13.
                Fair Market Value

            	
              2

            
	 	 	
              2.1.14.
                Offering.

            	
              2

            
	 	 	
              2.1.15.
                Offering Date

            	
              2

            
	 	 	
              2.1.16.
                Offering Period.

            	
              2

            
	 	 	
              2.1.17.
                Option

            	
              2

            
	 	 	
              2.1.18.
                Parent.

            	
              2

            
	 	 	
              2.1.19.
                Participant.

            	
              2

            
	 	 	
              2.1.20.
                Plan.

            	
              2

            
	 	 	
              2.1.21.
                Share.

            	
              3

            
	 	 	
              2.1.22.
                Subsidiary.

            	
              3

            
	 	 	
              2.1.23.
                Termination Date.

            	
              3

            
	 	 	
              2.1.24.
                Participation Agreement.

            	
              3

            
	 	
              2.2.
                Other Definitions.

            	
              3

            
	 	 	 
	
              3.
                SHARES TO BE OFFERED

            	 
	 	
              3.1.
                Number of Shares.

            	
              3

            
	 	
              3.2.
                Reusage.

            	
              3

            
	 	
              3.3.
                Adjustments.

            	
              3

            
	 	 	 
	
              4.
                ADMINISTRATION

            	 
	 	 
	 	
              4.1.
                Committee.

            	
              3

            
	 	
              4.2.
                Authority.

            	
              3

            

    

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    
      	 	
              4.3.
                Determination.

            	
              4

            
	 	
              4.4.
                Delegation.

            	
              4

            
	 	 	 
	
              5.
                AMENDMENT AND TERMINATION

            	 
	 	
              5.1.
                Power of Board.

            	
              4

            
	 	
              5.2.
                Limitation.

            	
              4

            
	 	
              5.3.
                Term.

            	
              4

            
	 	
              5.4.
                Termination.

            	
              4

            
	 	
              5.5.
                Effect.

            	
              4

            
	 	 	 
	
              6.
                OFFERINGS

            	 
	 	
              6.1.
                Offerings

            	
              4

            
	 	
              6.2.
                Terms of Offering

            	
              5

            
	 	 	 
	
              7.
                GRANTS, PARTICIPATION AND WITHDRAWAL

            	 
	 	
              7.1.
                Grants of Options.

            	
              5

            
	 	
              7.2.
                Options Not Transferable

            	
              5

            
	 	
              7.3.
                Election to Participate.

            	
              6

            
	 	
              7.4.
                Method of Payment and Stock Purchase Accounts.

            	
              6

            
	 	
              7.5.
                Withdrawal from the Plan

            	
              6

            
	 	 	 
	
              8.
                PURCHASE OF STOCK

            	 
	 	
              8.1.
                Exercise of Option

            	
              6

            
	 	
              8.2.
                Allotmeent of Shares

            	
              6

            
	 	
              8.3.
                Rights on Retirement, Death or Termination of Employment

            	
              6

            
	 	
              8.4.
                Delivery of Stock

            	
              7

            
	 	 	 
	
              9.
                MISCELLANEOUS PROVISIONS

            	 
	 	
              9.1.
                Underscored References.

            	
              7

            
	 	
              9.2.
                Number and Gender.

            	
              7

            
	 	
              9.3.
                Governing Law.

            	
              7

            
	 	
              9.4.
                Purchase for Investment

            	
              7

            
	 	
              9.5.
                Restricted Shares

            	
              7

            
	 	
              9.6.
                No Employment Contract

            	
              7

            
	 	
              9.7.
                Offset

            	
              7

            
	 	
              9.8.
                No Effect on Other Benefits.

            	
              7

            
	 	
              9.9.
                Notice to Company

            	
              8

            

    

    

     

    

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    APPLIED
      DIGITAL SOLUTIONS, INC.

     

    1999
      EMPLOYEES STOCK PURCHASE PLAN

     

    (As
      amended through April 27, 2005)

     

     

     

    1.
      NAME AND PURPOSE.

     

    1.1
      Name.

     

    The
      name
      of this Plan is the "Applied Digital Solutions, Inc. 1999 Employees Stock
      Purchase Plan".

     

    1.2
      Purpose and Construction.

     

    The
      Company has established this Plan to encourage and facilitate the purchase
      of
      its Common Stock by Eligible Employees. This Plan is intended to qualify as
      an
      "Employee Stock Purchase Plan" under Section 423 of the Code. Consequently,
      the
      provisions of this Plan shall be construed in a manner consistent with the
      requirements of Section 423 of the Code. Any term or provision of this Plan
      which is inconsistent with the requirements of Section 423 of the Code shall
      be
      inapplicable.

     

    2.
      DEFINITION OF TERMS.

     

    2.1
      General Definitions.

     

    The
      following words and phrases, when used in the Plan, unless otherwise
      specifically defined or unless the context clearly otherwise requires, shall
      have the following respective meanings:

     

    2.1.1
      Board.
      

     

    The
      Board
      of Directors of the Company.

     

    2.1.2
      Code.
      

     

    The
      internal Revenue Code of 1986, as amended. Any reference to the Code includes
      the regulations promulgated pursuant to the Code.

     

    2.1.3
      Company.
      

     

    Applied
      Digital Solutions, Inc.

     

    2.1.4
      Committee.
      

     

    The
      Committee described in Section 4.1.

     

    2.1.5
      Common Stock.
      

     

    The
      Company's $.01 par value common stock.

     

    2.1.6
      Compensation.
      

     

    The
      gross
      salary and wages earned by an Employee for services rendered to an Employer
      plus
      any other remuneration so earned as the Committee shall determine.

     

    2.1.7
      Effective Date.

     

    The
      date
      the Plan is approved by the shareholders of the Company which must occur within
      one year before or after approval by the Board. Any Offerings made prior to
      the
      approval by the shareholders of the Company and Options granted under such
      Offerings shall be void if such approval is not obtained.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

     

    2.1.8
      Employee.
      

     

    A
      person
      employed by the Employer.

     

    2.1.9
      Eligible Employee.
      

     

    With
      respect to each Offering, an Employee who is eligible to be granted an Option
      under the terms of such Offering. Notwithstanding the foregoing, with respect
      to
      any Offering, all Employees must be Eligible Employees except Employees who
      may
      be excluded under Section 423(b)(4) of the Code. Unless otherwise determined
      by
      the Committee, eligibility for an Offering shall be determined as of the
      Offering Date. For purposes of determining an Employee's eligibility under
      the
      Plan, the Committee shall have the right to determine that employment for an
      entity which is acquired by an Employer or whose assets are acquired by an
      Employer is employment by the Employer.

     

    2.1.10
      Employer.
      

     

    With
      respect to each Offering, the Company and all of its Parents and Subsidiaries
      whose Employees are eligible to be granted Options to purchase Common Stock
      in
      such Offering.

     

    2.1.11
      Entry Date.
      

     

    The
      Offering Date and any other dates selected by the Committee as of which an
      Eligible Employee may become a Participant.

     

    2.1.12
      Exercise Date.
      

     

    Each
      date
      on which an Option is exercised.

     

    2.1.13
      Fair Market Value.
      

     

    The
      closing price of Shares on the NASDAQ on a given date or in the absence of
      sales
      on a given date, the closing price on the NASDAQ on the last day on which a
      sale
      occurred prior to such date.

     

    2.1.14
      Offering.
      

     

    An
      offering consisting of grants of Options to purchase Shares under the
      Plan.

     

    2.1.15
      Offering Date.
      

     

    Each
      date
      selected by the Committee for the initial granting of Options to purchase Shares
      in an Offering.

     

    2.1.16
      Offering Period.
      

     

    With
      respect to each Offering, the period beginning on the Offering Date and ending
      on the Termination Date.

     

    2.1.17
      Option.
      

     

    An
      option
      granted under the Plan to purchase Shares.

     

    2.1.18
      Parent.
      

     

    Any
      corporation (other than the Company or a Subsidiary) in an unbroken chain of
      corporations ending with the Company, if, at the time of the grant of an Option,
      each of the corporations (other than the Company) owns stock possessing 50%
      or
      more of the total combined voting power of all classes of stock in one of the
      other corporations in such chain.

     

    2.1.19
      Participant.
      

     

    An
      Eligible Employee who has elected to participate in the Plan.

     

    2.1.20
      Plan.
      

     

    The
      Applied Digital Solutions, Inc. 1999 Employee Stock Purchase Plan and all
      amendments and supplements to it.

     

    
      
        
        

      

      
        2

        
          

        

      

       

    

     

    2.1.21
      Share.
      

     

    A
      share
      of Common Stock.

     

    2.1.22
      Subsidiary.
      

     

    Any
      corporation, other than the Company, in an unbroken chain of corporations
      beginning with the Company if, at the time of grant of an Option, each of the
      corporations, other than the last corporation in the unbroken chain, owns stock
      possessing 50% or more of the total combined voting power of all classes of
      stock in one of the other corporations in such chain.

     

    2.1.23
      Termination Date.
      

     

    The
      date
      on which an Offering expires.

     

    2.1.24
      Participation Agreement.

     

    The
      written agreement pursuant to which an Eligible Employee becomes a Participant
      and elects such matters provided for in the Plan and as the Committee shall
      determine from time to time.

     

    2.2
      Other Definitions.

     

    In
      addition to the above definitions, certain words and phrases used in the Plan
      and in any Offering may be defined in other portions of the Plan or in such
      Offering.

     

    3.
      SHARES TO BE OFFERED.

     

    3.1
      Number of Shares.

     

    The
      number of Shares for which Options may be granted under the Plan shall be
      1,300,000. Such Shares may be authorized but unissued Shares, Shares held in
      the
      treasury, or both.

     

    3.2
      Reusage.

     

    If
      an
      Option expires or is terminated, surrendered or canceled without having been
      fully exercised, the Shares covered by such Option which were not purchased
      shall again be available for use under the Plan.

     

    3.3
      Adjustments.

     

    If
      there
      is any change in the Common Stock of the Company by reason of any stock
      dividend, spin-off, split-up, spin-out, recapitalization, merger, consolidation,
      reorganization, combination or exchange of shares, or otherwise, the class
      of
      stock and number of shares of such class available for Options, the class of
      stock and maximum number of shares of such class that may be purchased in the
      current Offering Period, and the price per share, as applicable, may be
      appropriately adjusted by the Committee.

     

    4.
      ADMINISTRATION.

     

    4.1
      Committee.

     

    The
      Plan
      shall be administered by the Committee. The Committee shall consist of the
      Board, unless the Board appoints a Committee of two or more but less than all
      of
      the Board. If the Committee does not include the entire Board, it shall serve
      at
      the pleasure of the Board, which may from time to time appoint members in
      substitution for members previously appointed and fill vacancies, however
      caused, in the Committee. The Committee may select one of its members as its
      Chairman and shall hold its meetings at such times and places as it may
      determine. A majority of its members shall constitute a quorum. All
      determinations of the Committee made at a meeting at which a quorum is present
      shall be made by a majority of its members present at the meeting. Any decision
      or determination reduced to writing and signed by a majority of the members
      shall be fully as effective as if it had been made by a majority vote at a
      meeting duly called and held.

     

    4.2
      Authority.

     

    Subject
      to the terms of the Plan, the Committee shall have complete authority
      to:

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    determine
      the terms and conditions of, and the Employers and the Eligible Employees under,
      each Offering, as described in Section 2.1.9;

     

    interpret
      and construe the Plan;

     

    prescribe,
      amend and rescind rules and regulations relating to the Plan;

     

    maintain
      accounts, records and ledgers relating to Options;

     

    maintain
      records concerning its decisions and proceedings;

     

    determine
      all questions relating to Options under the Plan;

     

    employ
      agents, attorneys, accountants or other persons for such purposes as the
      Committee considers necessary or desirable; and

     

    do
      and
      perform all acts which it may deem necessary or appropriate for the
      administration of the Plan and carry out the purposes of the Plan.

     

    4.3
      Determination.

     

    All
      determinations of the Committee shall be final.

     

    4.4
      Delegation.

     

    The
      Committee may delegate all or any part of its authority under the Plan to any
      Employee, Employees or committee.

     

    5.
      AMENDMENT AND TERMINATION.

     

    5.1
      Power of Board.

     

    Except
      as
      hereinafter provided, the Board shall have the sole right and power to amend
      the
      Plan at any time and from time to time.

     

    5.2
      Limitation.

     

    The
      Board
      may not amend the Plan, without approval of the shareholders of the
      Company:

     

    in
      a
      manner which would cause the Plan to fail to meet the requirements of Section
      423 of the Code; or

     

    in
      a
      manner which would violate applicable law or administrative regulation or
      rule.

     

    5.3
      Term.

     

    The
      Plan
      shall commence as of the Effective Date and, subject to the terms of the Plan
      including those requiring approval by the shareholders of the Company, shall
      continue in full force and effect until terminated.

     

    5.4
      Termination.

     

    The
      Plan
      may be terminated at any time by the Board. The Plan shall automatically
      terminate when all of the Shares available for purchase under the Plan have
      been
      sold. Upon termination of the Plan, and the exercise or lapse of all outstanding
      Options, any balances remaining in each Participant's stock purchase account
      shall be refunded to him.

     

    5.5
      Effect.

     

    The
      amendment or termination of the Plan shall not adversely affect any Options
      granted prior to such amendment or termination.

     

    6.OFFERINGS.

     

    6.1
      Offerings.

     

    There
      may
      be one or more Offerings under the Plan, which shall occur at such time or
      times, if any, as the Committee shall determine. Offerings may run concurrently
      and/or consecutively. Except as otherwise provided in an Offering, all
      capitalized terms used in the Offering shall have the same meaning as in the
      Plan, and the Offering shall be subject to all of the terms and conditions
      of
      the Plan.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    6.2
      Terms of Offering.

     

    At
      the
      time each Offering is made, the Committee will determine all of the terms and
      conditions of the Offering, which terms and conditions shall include, but not
      be
      limited to, the following:

     

    The
      number of Shares to be offered, which in no event shall exceed the maximum
      number of Shares then available under the provisions of Section
      3.1.

     

    The
      Offering Period, which in no event shall exceed the maximum period permitted
      under Section 423 of the Code.

     

    The
      price
      per Share for which Common Stock will be sold to Participants who exercise
      Options, which price shall not be less than the lower of the
      following:

     

    85%
      of
      the Fair Market Value on the date upon which the Option was granted;
      or

     

    85%
      of
      the Fair Market Value on the Exercise Date upon which the Option is
      exercised.

     

    Notwithstanding
      the foregoing, in no event shall the price per Share be less than the par
      value.

     

    The
      Employers and Eligible Employees with respect to the Offering. However, no
      Employee shall be granted an Option:

     

    if,
      immediately after the grant, such Employee would own (within the meaning of
      Section 423(b)(3) of the Code) stock possessing 5% or more of the total combined
      voting power or value of all classes of stock of the Company or of any Parent
      or
      Subsidiary; or

     

    which
      permits his rights to purchase stock under all employees stock purchase plans
      (as defined in Section 423(b) of the Code) of the Company and its Parents and
      Subsidiaries to accrue at a rate which exceeds $25,000 of fair market value
      of
      such stock, determined as of the time such Option is granted, for each calendar
      year in which such Option is outstanding at anytime.

     

    The
      number of Entry Dates and the date of each Entry Date.

     

    The
      number of Exercise Dates and the date of each Exercise Date.

     

    The
      maximum number of Shares, if any, that may be purchased in the Offering Period
      by a Participant.

     

    The
      maximum number of Shares, if any, which may be purchased in an Offering Period
      by a Participant as a percentage of his Compensation.

     

    Whether
      or not interest will be paid on balances in Participant's stock purchase
      accounts, and, if interest is to be paid, the rate of interest or method of
      determining the rate of interest, and whether interest is to be used to purchase
      Shares or paid to the Participant.

     

    If,
      when,
      and the extent to which a Participant may change or cease payroll deductions
      during an Offering Period.

     

    7.
      GRANTS, PARTICIPATION AND WITHDRAWAL.

     

    7.1
      Grant of Options.

     

    On
      each
      Offering Date, each Eligible Employee shall be granted an Option to purchase
      Shares in accordance with the provisions of the Plan, and, if so permitted
      by
      the terms of the Offering, on each subsequent Entry Date within an Offering
      Period, if any, each Eligible Employee, who was not an Eligible Employee on
      the
      Offering Date, shall be granted an Option to purchase Shares in accordance
      with
      the provisions of the Plan. An Eligible Employee becomes a Participant for
      the
      Offering Period or the remainder of the Offering Period, as the case may be,
      by
      executing and delivering to the Company a Participation Agreement.

     

    7.2
      Options Not Transferable.
      

     

    Each
      option shall not be transferable by the grantee other than by will or under
      the
      laws of descent and distribution and shall be exercisable, during his lifetime,
      only by him.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

     

    7.3
      Election to Participate.

     

    An
      Eligible Employee who wishes to participate in the Plan as of an Entry Date
      must
      deliver his executed Participation Agreement to the Company no later than
      required by the Committee.

     

    7.4
      Method of Payment and Stock Purchase Accounts.

     

    Payment
      for Shares shall be made through payroll deductions from the Participant's
      Compensation, such deductions to be authorized by a Participant in the
      Participation Agreement, by separate cash payments which may be made by a
      Participant from time to time, if permitted by the Committee, and if permitted,
      in accordance with rules and limitations set by the Committee, and, with the
      consent of the Committee, and upon such terms as it shall require, in Shares
      which shall be valued at Fair Market Value on the Exercise Date. A stock
      purchase account shall be set up on the books of the Company in the name of
      each
      Participant. The amount of all payroll deductions, separate cash payments,
      and
      tender of Shares shall be credited to the respective stock purchase accounts
      of
      the Participants on the Company's books. The funds deducted and withheld by
      the
      Company through payroll deductions, the funds received by the Company from
      separate cash payments, and the tendered Shares may be used by the Company
      for
      any corporate purposes as the Board shall determine, and the Company shall
      not
      be obligated to segregate said funds or Shares in any way.

     

    7.5
      Withdrawal from the Plan.

     

    A
      Participant may not withdraw from the Plan unless permitted by the Committee
      and, if so permitted, only at such times and upon such conditions as the
      Committee shall determine.

     

    8.
      PURCHASE OF STOCK.

     

    8.1
      Exercise of Option.

     

    Unless
      a
      Participant shall have withdrawn from the Plan as provided in Section 7.5 his
      Option to purchase Shares will be automatically exercised for him on each
      Exercise Date for the number of full Shares or, in the event a custodial account
      described in Section 8.4 is established and such account may hold fractional
      shares, for the number of full and fractional Shares which the accumulated
      payroll deductions, separate cash payments (plus, if so permitted by the
      Committee pursuant to paragraph (i) of Section 6.2, interest on such cash
      deductions and payments) and tendered Shares as of the Exercise Date will
      purchase at the applicable Option price, subject to the limitations set forth
      in
      the Plan and the Offering and subject to allotment in accordance with Section
      8.2. Any balance remaining in a Participant's stock purchase account after
      the
      exercise of an Option will remain in such account unless the Offering is over
      and there is no Offering which begins immediately after the Termination Date
      of
      the Offering or the Participant is not a Participant in such subsequent
      Offering.

     

    8.2
      Allotment of Shares.

     

    In
      the
      event that, on any Exercise Date, the aggregate funds and Shares available
      for
      the purchase of Shares, pursuant to the provisions of Section 8.1, would
      purchase a greater number of Shares than the number of Shares then available
      for
      purchase under the Plan on such Exercise Date, the Company shall issue to each
      Participant, on a pro rata basis, such number of Shares as, when taken together
      with the Shares issued to all other Participants, will result in the issuance
      of
      Shares totaling no more than the number of Shares then remaining available
      for
      issuance under the Plan on such Exercise Date. 

     

    8.3
      Rights on Retirement, Death or Termination of
      Employment.

     

    In
      the
      event of a Participant's retirement, death or termination of employment, no
      payroll deduction shall be taken from any Compensation due and owing to him
      at
      such time, and the amount in the Participant's stock purchase account shall
      be
      applied as of the next Exercise Date in the manner set forth in Section 8.1,
      as
      if the retirement, death or termination of employment had not occurred, unless
      the former Employee or, in the event of his death, the person or persons to
      whom
      his rights pass by will or the laws of the descent and distribution (including
      his estate during the period of administration) requests in writing prior to
      the
      Exercise Date that such amount be refunded; provided, however, if the
      retirement, death or termination of employment occurs more than three months
      prior to the next Exercise Date, such amount shall automatically be refunded.
      An
      Employee of a Subsidiary or a Parent which ceases to be a Subsidiary or a Parent
      shall be deemed to have terminated his employment for purposes of
      this

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    Section
      8.3 as of the date such corporation ceases to be a Subsidiary or a Parent,
      as
      the case may be, unless, as of such date, the Employee shall become an Employee
      of the Company or any Subsidiary or Parent.

     

    8.4
      Delivery of Stock.

     

    Unless
      the Committee establishes a account custodian, as described below, certificates
      for Shares purchased will be issued and delivered as soon as practicable. None
      of the rights or privileges of a shareholder of the Company shall exist with
      respect to Shares purchased under the Plan until the certificates representing
      such Shares are issued. Notwithstanding the foregoing, if so determined by
      the
      Committee, Shares acquired on the Exercise Date shall be credited to an account
      maintained for the benefit of the Participant by the custodian selected by
      the
      Committee. If such an arrangement is established, it will be governed by and
      subject to the terms and conditions of the agreement between the Company or
      the
      Committee and the custodian, and each Participant, by enrolling in the Plan,
      shall be deemed to have consented to such terms and conditions.

     

    9.
      MISCELLANEOUS PROVISIONS.

     

    9.1
      Underscored References.

     

    The
      underscored references contained in the Plan are included only for convenience,
      and they shall not be construed as a part of the Plan or in any respect
      affecting or modifying its provisions.

     

    9.2
      Number and Gender.

     

    The
      masculine and neuter, wherever used in the Plan, shall refer to either the
      masculine, neuter or feminine; and, unless the context otherwise requires,
      the
      singular shall include the plural and the plural the singular.

     

    9.3
      Governing Law.

     

    This
      Plan
      shall be construed and administered in accordance with the laws of the State
      of
      Missouri.

     

    9.4
      Purchase for Investment.

     

    The
      Committee may require each person purchasing Shares pursuant to an Option to
      represent to and agree with the Company in writing that such person is acquiring
      the Shares for investment and without a view to distribution or resale. The
      certificates for such shares may include any legend which the Committee deems
      appropriate to reflect any restrictions on transfer. All certificates for Shares
      delivered under the Plan shall be subject to such stock transfer orders and
      other restrictions as the Committee may deem advisable under all applicable
      laws, rules, and regulations, and the Committee may cause a legend or legends
      to
      be put on any such certificates to make appropriate references to such
      restrictions.

     

    9.5
      Restricted Shares.

     

    Shares
      purchased under the Plan may be subject to restrictive agreements between an
      Employer and a Participant. In such case, the Employer shall have the right
      to
      include a legend reflecting any such restriction on any certificate for such
      Shares.

     

    9.6
      No Employment Contract.

     

    The
      adoption of the Plan shall not confer upon any Employee any right to continued
      employment nor shall it interfere in any way with the right of the Company,
      a
      Parent or Subsidiary to terminate the employment of any of its employees at
      any
      time.

     

    9.7
      Offset.

     

    In
      the
      event that any Participant wrongfully appropriates funds or other property
      of an
      Employer and thereby becomes indebted to such Employer, any funds or Shares
      in
      his stock purchase account may be applied against and used to satisfy such
      indebtedness.

     

    9.8
      No Effect on Other Benefits.

     

    The
      grant
      of Options under the Plan shall have no effect on any benefits to which a
      Participant may be entitled from the Employer, under another plan or otherwise,
      or preclude a Participant from receiving any such benefits.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    9.9
      Notice to Company.

     

    Each
      Participant shall promptly give the Company prior written notice of any
      disposition of Shares purchased under the Plan which occurs within 2 years
      of
      the date of grant of the Option pursuant to which such Shares were
      purchased.

     

     

     

     

     

     

     

    8Exhibit 10.1

    
      

    

    Exhibit
      10.1

     

     

    Second
      Amendment To Loan Documents 

     

     

    THIS
      SECOND AMENDMENT TO LOAN DOCUMENTS (the “Amendment”) is dated as of June 28,
      2005 by and between APPLIED DIGITAL SOLUTIONS, INC., a Missouri corporation
      having an address of 1690 South Congress Avenue, Suite 200, Delray Beach,
      Florida 33445 (the “Borrower”), and INFOTECH USA, INC., a Delaware corporation
      having an address of 7 Kingsbridge Road, Fairfield, New Jersey 07004 (the
“Lender”). 

     

     

    Recitals

     

    A. On
      or
      about June 27, 2003, the Lender made a loan to the Borrower in the original
      principal amount of $1,000,000 (the “Loan”). 

     

     

    B. The
      Loan
      is evidenced and secured by, among other things, the following loan documents,
      all of which are dated June 27, 2003 and all of which were amended by that
      certain First Amendment to Loan Documents, dated June 29, 2004, between the
      Borrower and the Lender (collectively, the “Loan Documents”): 

     

     

    (i) Commercial
      Loan Agreement between the Borrower and the Lender. 

     

     

    (ii) Term
      Note
      from the Borrower to the Lender (the “Note”). 

     

     

    (iii) Stock
      Pledge Agreement from the Borrower to the Lender. 

     

     

    C. The
      Borrower and the Lender have agreed to amend the Loan and the Loan Documents,
      all on the terms and conditions set forth in this Amendment. 

     

     

    NOW,
      THEREFORE, in consideration of the foregoing and other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      parties hereto agree as follows: 

     

     

    Agreement

     

    1. Defined
      Terms.
      Capitalized terms used in this Amendment and not otherwise defined shall have
      the meanings given to such terms in the Loan Documents. 

     

     

    2. Extension
      of Maturity Date.
      The
      Loan Documents are hereby amended to provide that the Maturity Date of the
      Loan
      is extended for one (1) year from June 30, 2005 to June 30, 2006. Without
      limiting the generality of the foregoing, the definition of the term “Maturity
      Date” set forth in the Note is hereby changed from “June 30, 2005” to “June 30,
      2006.”

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

      
        

      

    

    

     

    3. No
      Defenses.
      The
      Borrower acknowledges that, as of the date hereof, the outstanding principal
      balance of the Loan is $1,000,000. The Borrower acknowledges and agrees that,
      as
      of the date hereof, it has no offsets, counterclaims or defenses of any nature
      whatsoever to its obligations to the Lender under the Loan Documents.

     

    4. Representations
      and Warranties.
      In
      order to induce the Lender to enter into this Amendment and to amend the Loan
      Documents as provided herein, the Borrower hereby represents and warrants to
      the
      Lender that: 

     

    (a) All
      of
      the representations and warranties of the Borrower set forth in the Loan
      Documents are true, complete and correct in all material respects on and as
      of
      the date hereof with the same force and effect as if made on and as of the
      date
      hereof and as if set forth at length herein.

     

    (b) No
      Event
      of Default presently exists and is continuing on and as of the date
      hereof.

    

    (c) The
      Borrower has full power and authority to execute, deliver and perform any action
      or step which may be necessary to carry out the terms of this Amendment, and
      this Amendment has been duly executed and delivered by the Borrower and is
      the
      legal, valid and binding obligation of the Borrower enforceable in accordance
      with its terms, subject to any applicable bankruptcy, insolvency, general equity
      principles or other similar laws affecting the enforcement of creditors’ rights
      generally.

    

    (d) The
      execution, delivery and performance of this Amendment will not (i) violate
      any
      provision of any existing law, statute, rule, regulation or ordinance, (ii)
      conflict with, result in a breach of, or constitute a default under (A) the
      certificate of incorporation or by-laws of the Borrower, (B) any order,
      judgment, award or decree of any court, governmental authority, bureau or
      agency, or (C) any mortgage, indenture, lease, contract or other material
      agreement or undertaking to which the Borrower is a party or by which the
      Borrower or any of its properties or assets may be bound, or (iii) result in
      the
      creation or imposition of any lien or other encumbrance upon or with respect
      to
      any property or asset now owned or hereafter acquired by the Borrower, other
      than liens in favor of the Lender.

    

    (e) No
      consent, license, permit, approval or authorization of, exemption by, notice
      to,
      report to, or registration, filing or declaration with any person is required
      in
      connection with the execution, delivery and performance by the Borrower of
      this
      Amendment or the validity thereof or the transactions contemplated
      thereby.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      
        

      

    

     

     

    5. Counterparts.
      This
      Amendment may be signed in several counterparts, each of which shall be an
      original and all of which shall constitute one and the same instrument.

     

     

    6. No
      Change.
      Except
      as expressly amended by this Amendment, all of the terms and provisions of
      the
      Loan Documents shall continue unmodified in full force and effect, and the
      same
      are hereby ratified and reaffirmed in their entirety. 

     

     

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

     

     

    8. Wells
      Fargo Contingency.
      Notwithstanding anything to the contrary contained in this Amendment, it is
      understood and agreed that this Amendment and the amendments to the Loan and
      the
      Loan Documents effected hereby are expressly conditioned and contingent upon
      the
      prior written consent of Wells Fargo Business Credit, Inc. 

     

    IN
      WITNESS WHEREOF, the undersigned have caused their duly authorized
      representatives to execute and deliver this Amendment as of the date set forth
      on the first page hereof. 

     

    

     

    Applied
      Digital Solutions, Inc.

     

    By:
      /s/ Evan
      C. McKeown

    Name:
      Evan C. McKeown

    Title:
      Senior V.P., Chief Financial Officer

     

    InfoTech
      USA, Inc.

     

    By:
      /s/ J.
      Robert Patterson 

    Name:
      J.
      Robert Patterson

    Title:
      Vice President, Chief Financial Officer

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