2006 TAX ALLOCATION AGREEMENT

THIS 2006 TAX ALLOCATION AGREEMENT ("Agreement") is entered into effective as of the Deconsolidation Date among Applied Digital Solutions Inc., a Missouri corporation with its principal place of business at Delray Beach, Florida ("Applied Digital"), VeriChip Corporation, a Delaware corporation also with its principal place of business at Delray Beach, Florida ("VeriChip") and each other corporation that is a member of the Consolidated Group as defined below. Applied Digital and VeriChip are hereinafter collectively referred to as the "Parties" and singularly as a "Party".

WHEREAS, VeriChip is considering selling a certain number of its newly- issued shares of common stock so that Applied Digital’s ownership interest in VeriChip would be less than 80 percent thereby precluding VeriChip from being included in the consolidated federal income tax returns prepared by Applied Digital as common parent for the taxable periods following the Deconsolidation Date;

WHEREAS, VeriChip has, with the consent of Applied Digital, represented in various public statements that the Deconsolidation will not have a material adverse effect on its financial condition or results of operations; and

NOW, THEREFORE, the Parties to this Agreement agree as follows:

1.1 DEFINITIONS: As used in this Agreement, the following terms have the following meanings:

"Code" means the Internal Revenue Code of 1986, as amended, or corresponding provisions of any subsequent federal tax laws.

"Consolidated Group" means the "affiliated group" of corporations of which Applied Digital is the "common parent corporation", as such terms are defined in

Code §1504(a)(1).

"Consolidated Minimum Tax Credit(s)" means the consolidated minimum tax credit(s) computed in accordance with Code §§53, 1502, and 1503, and shown in a Consolidated Return with respect to those tax periods up to and including the

Deconsolidation Date.

"Consolidated Return" means the consolidated federal income tax return of the Consolidated Group for each taxable year as filed or to be filed by Applied Digital on behalf of the Consolidated Group.

"Consolidated Tax Liability" means, generally, the consolidated federal income tax liability computed in accordance with Treasury Regulation §1.1502-2 and shown on a Consolidated Return, taking into account all credits to which the Consolidated Group is entitled under the Code, but not taking into account any "consolidated alternative minimum tax liability" (as provided under Code §§55, 1502, and 1503) or any Consolidated Minimum Tax Credit.

"Deconsolidation" means that event which causes Applied Digital to no longer have the requisite ownership interest in VeriChip so as to allow VeriChip to file as part of a Consolidated Group with Applied Digital.

"Deconsolidation Date" means February 14, 2007, the date when Applied Digital and VeriChip no longer are members of the same Consolidated Group.

“Other Tax” or “Other Taxes” means any and all taxes of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any governmental authority or taxing authority, including, but not limited to, federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code §59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the tax liability of any other Person, other than any such item included in the definition of Tax.

"Party" and "Parties" have that meaning ascribed to them in the Recitals.

"Pre-Deconsolidation Date Period" means, chronologically, those tax years that end prior to the tax year in which the Deconsolidation Date occurs plus that period in time beginning on the first day of such year and ending on and including the Deconsolidation Date.

"Post-Deconsolidation Date Period" means, chronologically, that period following the Deconsolidation Date.

“Subsidiary” means any corporation or other entity with respect to which Applied Digital, on the one hand, or VeriChip, on the other, owns, directly or indirectly, at least 50% of the common stock or other equity or profits interests or has the power, directly or indirectly, to elect a majority of the members of the board of directors or comparable governing body.

"Taxes" or "Tax" means federal income taxes as provided in Code §11, alternative minimum tax as provided in Code §55, and any state taxes measured by net income (including state taxes measured by net income reflected in any Unitary Tax Returns filed by Applied Digital) and any interest or penalties thereon or additions to tax. The term Taxes or Tax, however, specifically excludes any tax imposed by any foreign government.

"Unitary Tax Return" means a state income tax return which reflects the combined and/or consolidated reporting (either on a domestic or worldwide basis) of Applied Digital and its affiliates for a state which either (i) imposes an income tax on the apportioned and/or allocable share of the net income of Applied Digital and its United States affiliates that are engaged in a "unitary business", part of which is conducted in the state or (ii) imposes an income tax on the apportioned and/or allocable share of the net income of a taxpayer and its affiliates—both domestic and foreign--that are engaged in a unitary business.

Other terms defined herein have the meanings given them.

2.1 VERICHIP'S TAX INDEMNIFICATION FOR THE PRE-DECONSOLIDATION DATE PERIOD: VeriChip shall be liable for, indemnify, and hold Applied Digital harmless for all Taxes (i) imposed on or incurred by VeriChip for the Pre-Deconsolidation Date Period and (ii) equitably apportioned to VeriChip by Applied Digital for all tax periods beginning before and ending after the Deconsolidation Date. Except as provided in Section 2.2(c), VeriChip, in turn, shall be entitled to receive all refunds of Taxes attributable to the Pre-Deconsolidation Date Period, if any, that are imposed or incurred by VeriChip or equitably apportioned to VeriChip from either the applicable tax authorities or Applied Digital (in the event such refund(s) have been made directly to Applied Digital).

2.2 VERICHIP'S 2006 TAX LIABILITY AND PAYMENT

(a) VeriChip's liability for Taxes for the portion of the Pre-Deconsolidation Date Period attributable to the tax year in which the

Deconsolidation Date occurs shall be based on Applied Digital's preparation of the Consolidated Return for such taxable year and VeriChip's review thereof. Any discrepancies between Applied Digital's return position and VeriChip's subsequent review shall be resolved by consultation by each Party's respective tax officers and Applied Digital's ultimate determination shall be controlling as long as such determination does not have a material adverse effect on VeriChip's financial condition or results of operations.

(b) The Parties agree that, in determining VeriChip's allocable share of the (i) Unitary and (ii) Consolidated Tax Liabilities for the tax year in which the Deconsolidation Date occurs, they shall follow a reasonable method agreed to by both Parties.

(c) VeriChip shall pay Applied Digital its allocable share of the estimated Unitary and Consolidated Tax Liabilities for that portion of the tax year in which the Deconsolidation Date occurs that precedes the Deconsolidation Date within 45 days from the Deconsolidation Date. A "true-up" payment, should one be necessary, shall be made by VeriChip to Applied Digital or Applied Digital to VeriChip within 15 days after Applied Digital's subsequent determination of VeriChip's liability based on taxable income and tax credits reported as part of Applied Digital's Unitary and Consolidated Returns and VeriChip's separate state Tax return