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                                                                Exhibit 10.3

                                                            EXHIBIT B TO THE
                                               SECURITIES PURCHASE AGREEMENT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR
SALE, SOLD OR TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR
TRANSFER. SUBJECT TO COMPLIANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE PLEDGED OR HYPOTHECATED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THIS
WARRANT OR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT.

                              SERIES D WARRANT

                          TO PURCHASE COMMON STOCK

                                     OF

                       APPLIED DIGITAL SOLUTIONS, INC.

ISSUE DATE: OCTOBER 21, 2004                                  WARRANT NO. D-1

         THIS CERTIFIES that SATELLITE STRATEGIC FINANCE ASSOCIATES, LLC, a
Delaware limited liability company or any subsequent holder hereof (the
"Holder"), has the right to purchase from APPLIED DIGITAL SOLUTIONS, INC., a
 ------
Missouri corporation (the "Company"), up to 666,667 fully paid and
                           -------
nonassessable shares of the Company's common stock, par value $0.01 per
share (the "Common Stock"), subject to adjustment as provided herein, at a
            ------------
price per share equal to the Exercise Price (as defined below), at any time
and from time to time beginning on the one-year anniversary of the date on
which this Warrant is issued (the date on which this Warrant is issued being
referred to herein as the "Issue Date") and ending at 5:00 p.m., eastern
                           ----------
time, on the sixth (6th) anniversary of the Issue Date (the "Expiration
                                                             ----------
Date"). This Warrant is issued pursuant to a Securities Purchase Agreement,
----
dated as of October 21, 2004 (the "Securities Purchase Agreement").
                                   -----------------------------
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Securities Purchase Agreement.

         1.  Exercise.
             --------

         (a) Right to Exercise; Exercise Price. The Holder shall have the
             ---------------------------------
right to exercise this Warrant at any time and from time to time during the
period beginning on the one-year anniversary of the Issue Date and ending on
the Expiration Date as to all or any part of the shares of Common Stock
covered hereby (the "Warrant Shares"). The "Exercise Price" for each Warrant
                     --------------         --------------
Share purchased by the Holder upon the exercise of this Warrant shall be
equal to $5.05 subject to adjustment for the events specified in Section 6
below.

         (b) Exercise Notice. In order to exercise this Warrant, the Holder
             ---------------
shall (i) send by facsimile transmission, at any time prior to 5:00 p.m.,
eastern time, on the Business Day on which the Holder wishes to effect such
exercise (the "Exercise Date"), to the Company an executed copy of the
               -------------
notice of exercise in the form attached hereto as Exhibit A (the "Exercise
                                                  ---------       --------
Notice"), (ii) deliver the original Warrant and, in the case of a Cash
------
Exercise (as defined below), the Exercise Price to the Company. The Exercise
Notice shall also state the name or names (with address) in which the shares
of Common Stock that are issuable on such exercise shall be issued. If
shares are to be issued in the name of a person other than the Holder, the
Holder will pay all transfer taxes payable with respect thereto. In the case
of a dispute as to the calculation of the Exercise Price or the number of
Warrant Shares issuable hereunder (including, without limitation, the
calculation of any adjustment pursuant to Section 6 below), the Company
shall promptly issue to the Holder the number of Warrant Shares that are not
disputed and shall submit the disputed calculations to a certified public
accounting firm of national recognition (other than the Company's
independent accountants) within two (2) Business Days following the date on
which the Exercise Notice is delivered to the Company. The Company shall
cause such accountant to calculate the Exercise Price and/or the number of
Warrant Shares issuable hereunder and to notify the Company and the Holder
of the results in writing no later than three (3) Business Days following
the day on which such accountant received the disputed calculations (the
"Dispute Procedure"). Such accountant's calculation shall be deemed
 -----------------
conclusive absent manifest error. The fees of any such accountant shall be
borne by the party whose calculations were most at variance with those of
such accountant.

         (c) Holder of Record. The Holder shall, for all purposes, be deemed
             ----------------
to have become the holder of record of the Warrant Shares specified in an
Exercise Notice on the Exercise Date specified therein, irrespective of the
date of delivery of such Warrant Shares. Except as specifically provided
herein, nothing in this Warrant shall be construed as conferring upon the
Holder hereof any rights as a shareholder of the Company, including, without
limitation, the right to vote, the right to receive dividends or other
distributions made to shareholders of the Company, and the right to exercise
preemptive rights, prior to the Exercise Date.

         (d) Cancellation of Warrant. This Warrant shall be canceled upon
             -----------------------
its exercise and, if this Warrant is exercised in part, the Company shall,
at the time that it delivers Warrant Shares to the Holder pursuant to such
exercise as provided herein, issue a new warrant, and deliver to the Holder
a certificate representing such new warrant, with terms identical in all
respects to this Warrant (except that such new warrant shall be exercisable
into the number of shares of Common Stock with respect to which this Warrant
shall remain unexercised); provided, however, that the Holder shall be
                           --------  -------
entitled to exercise all or any portion of such new warrant at

                                     2

any time following the time at which this Warrant is exercised, regardless
of whether the Company has actually issued such new warrant or delivered to
the Holder a certificate therefor.

         2.  Delivery of Warrant Shares Upon Exercise. Upon receipt of an
             ----------------------------------------
Exercise Notice pursuant to paragraph 1 above, the Company shall, (A) in the
case of a Cash Exercise (as defined below) no later than the close of
business on the later to occur of (i) the third (3rd) Business Day following
the Exercise Date set forth in such Exercise Notice and (ii) the date on
which the Company has received payment of the Exercise Price and the taxes
specified in paragraph 1(b) above, if any, are paid in full, (B) in the case
of a Cashless Exercise (as defined below), no later than the close of
business on the third (3rd) Business Day following the Exercise Date set
forth in such Exercise Notice, and (C) with respect to Warrant Shares that
are the subject of a Dispute Procedure, the close of business on the third
(3rd) Business Day following the determination made pursuant to paragraph
1(b) (each of the dates specified in (A), (B) or (C) being referred to as a
"Delivery Date"), issue and deliver or cause to be delivered to the Holder
 -------------
the number of Warrant Shares as shall be determined as provided herein. The
Company shall effect delivery of Warrant Shares to the Holder by, as long as
the Transfer Agent participates in the Depository Trust Company ("DTC") Fast
                                                                  ---
Automated Securities Transfer program ("FAST"), crediting the account of the
                                        ----
Holder or its nominee at DTC (as specified in the applicable Exercise
Notice) with the number of Warrant Shares required to be delivered, no later
than the close of business on such Delivery Date. In the event that the
Transfer Agent is not a participant in FAST, or if the Warrant Shares are
not otherwise eligible for delivery through FAST, or if the Holder so
specifies in an Exercise Notice or otherwise in writing on or before the
Exercise Date, the Company shall effect delivery of Warrant Shares by
delivering to the Holder or its nominee physical certificates representing
such Warrant Shares, no later than the close of business on such Delivery
Date.

         3.  Failure to Deliver Warrant Shares.
             ---------------------------------

         (a) In the event that the Company fails for any reason (other than
as a result of the Holder's failure to deliver the original Warrant to the
Company or, in the case of a Cash Exercise (as defined below), to pay the
aggregate Exercise Price for the Warrant Shares being purchased) to deliver
to the Holder the number of Warrant Shares specified in the applicable
Exercise Notice on or before the Delivery Date therefor (an "Exercise
                                                             --------
Default"), and such default continues for five (5) Business Days following
-------
delivery of a written notice of such default by the Holder to the Company,
the Company shall pay to the Holder payments ("Exercise Default Payments")
                                               -------------------------
in the amount of (i) (N/365) multiplied by (ii) the aggregate Exercise Price
                             -------------
of the Warrant Shares which are the subject of such Exercise Default
multiplied by (iii) the lower of fifteen percent (15%) and the maximum rate
-------------
permitted by applicable law (the "Default Interest Rate"), where "N" equals
                                  ---------------------
the number of days elapsed between the original Delivery Date of such
Warrant Shares and the date on which all of such Warrant Shares are issued
and delivered to the Holder. Cash amounts payable hereunder shall be paid on
or before the fifth (5th) Business Day of each calendar month following the
calendar month in which such amount has accrued.

         (b) The Holder's rights and remedies hereunder are cumulative, and
no right or remedy is exclusive of any other. The Holder shall have the
right to pursue all other remedies available to it at law or in equity
(including, without limitation, a decree of specific performance

                                     3

and/or injunctive relief). Nothing herein shall limit the Holder's right to
pursue actual damages for the Company's failure to issue and deliver Warrant
Shares on the applicable Delivery Date (including, without limitation,
damages relating to any purchase of Common Stock by the Holder to make
delivery on a sale effected in anticipation of receiving Warrant Shares upon
exercise, such damages to be in an amount equal to (A) the aggregate amount
paid by the Holder for the Common Stock so purchased minus (B) the aggregate
                                                     -----
amount of net proceeds, if any, received by the Holder from the sale of the
Warrant Shares issued by the Company pursuant to such exercise).

         4.  Exercise Limitations.
             --------------------

         (A) In no event shall the Holder be permitted to exercise this
Warrant, or part thereof, if, upon such exercise, the number of shares of
Common Stock beneficially owned by the Holder (other than shares which would
otherwise be deemed beneficially owned except for being subject to a
limitation on conversion or exercise analogous to the limitation contained
in this paragraph 4), would exceed 4.99% of the number of shares of Common
Stock then issued and outstanding. As used herein, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules thereunder. To the extent
that the limitation contained in this paragraph 4 applies, the submission of
an Exercise Notice by the Holder shall be deemed to be the Holder's
representation that this Warrant is exercisable pursuant to the terms hereof
and the Company shall be entitled to rely on such representation without
making any further inquiry as to whether this Section 4 applies. The Company
shall have no liability to any person if the Holder's determination of
whether this Warrant is convertible pursuant to the terms hereof is
incorrect. Nothing contained herein shall be deemed to restrict the right of
a Holder to exercise this Warrant, or part thereof, at such time as such
exercise will not violate the provisions of this Section 4. This Section 4
may not be amended unless such amendment is agreed to in writing by the
Holder and approved by the holders of a majority of the Common Stock then
outstanding; provided, however, that the Holder shall have the right to
             --------  -------
waive the provisions of this Section 4 upon prior written notice to the
Company following the announcement of a Major Transaction (as defined
below), or otherwise upon sixty (60) days' prior written notice to the
Company.

         (B) Until Shareholder Approval (as defined below) is obtained, or
the Holder obtains an opinion of counsel reasonably satisfactory to the
Company and its counsel that such approval is not required, the Holder shall
be prohibited from exercising this Warrant if, as a result of such exercise,
the aggregate number of Warrant Shares issued pursuant to all exercises of
this Warrant would exceed the Cap Amount (as defined below). If, at any
time, the sum of (i) the number of Warrant Shares theretofore issued under
this Warrant plus (ii) the number of Warrant Shares then issuable upon
exercise of this Warrant (without giving effect to any limitation on such
exercise contained in this Warrant), exceeds the Cap Amount, the Company
shall, upon the written request of the Holder, hold a meeting of its
shareholders within sixty (60) days following such request, and use its best
efforts to obtain the approval of its shareholders for the transactions
described herein and the other Transaction Documents ("Shareholder
                                                       -----------
Approval"). In the event that Shareholder Approval is not obtained at a
--------
shareholder meeting held after such request by the Holder, the Company shall
continue to use its best efforts to seek Shareholder Approval as soon as
practicable after such meeting but no less frequently than quarterly
thereafter. For purposes

                                     4

hereof, "Cap Amount" means 19.99% of the Common Stock outstanding on the
         ----------
Issue Date (subject to adjustment upon a stock split, stock dividend or
similar event). In the event that the Holder shall sell or otherwise
transfer all or any portion of this Warrant, the transferee shall be deemed
to have been allocated a pro rata share of the Cap Amount.

         5.  Payment of the Exercise Price; Cashless Exercise. The Holder may
             ------------------------------------------------
pay the Exercise Price in either of the following forms or, at the election
of Holder, a combination thereof:

         (a) through a cash exercise (a "Cash Exercise") by delivering
                                         -------------
immediately available funds, or

         (b) if, following the one-year anniversary of the Issue Date, an
effective Registration Statement is not available for the resale of all of
the Warrant Shares issuable hereunder at the time an Exercise Notice is
delivered to the Company, through a cashless exercise (a "Cashless
                                                          --------
Exercise"). The Holder may effect a Cashless Exercise by surrendering this
--------
Warrant to the Company and noting on the Exercise Notice that the Holder
wishes to effect a Cashless Exercise, upon which the Company shall issue to
the Holder a number of Warrant Shares determined as follows:

                   X = Y x (A-B)/A

where:             X = the number of Warrant Shares to be issued to the Holder;

                   Y = the number of Warrant Shares with respect to
                   which this Warrant is being exercised;

                   A = the Market Price as of the Exercise Date; and

                   B = the Exercise Price.

         It is intended and acknowledged that the Warrant Shares issued in a
Cashless Exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares required by Rule 144
shall be deemed to have been commenced, on the Issue Date. For purposes
hereof, (A) "Market Price" means, as of a particular date, the average of
             ------------
the Closing Prices for the Common Stock occurring during the ten (10)
Trading Day period ending on (and including) the Trading Day immediately
preceding such date, and (B) "Closing Price" means, with respect to the
                              -------------
Common Stock as of any Trading Day, the closing price on such date for the
Common Stock on the Principal Market as reported by Bloomberg Financial
Markets ("Bloomberg"), or if the Principal Market begins to operate on an
          ---------
extended hours basis, and does not designate the closing price, then the
last price at 4:00 p.m. (eastern time), as reported by Bloomberg, or if the
foregoing do not apply, the last closing price of the Common Stock in the
over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no closing price is reported for such
security by Bloomberg, the last closing trade price for such security as
reported by Bloomberg, or, if no last closing trade price is reported for
such security by Bloomberg, the average of the prices of any market makers
for such

                                     5

security as reported in the "pink sheets" by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Price cannot be calculated
for the Common Stock on such date on any of the foregoing bases, then the
Company shall submit such calculation to an independent investment banking
firm of national reputation, and shall cause such investment banking firm to
perform such determination and notify the Company and each Investor of the
results of determination no later than two (2) Business Days from the time
such calculation was submitted to it by the Company. Such investment banking
firm's determination shall be deemed conclusive absent manifest error. All
such determinations shall be appropriately adjusted for any stock dividend,
stock split or other similar transaction during such period.

         6.  Anti-Dilution Adjustments; Distributions; Other Events. The
             ------------------------------------------------------
Exercise Price and the number of Warrant Shares issuable hereunder shall be
subject to adjustment from time to time as provided in this Section 6.

         (a) Subdivision or Combination of Common Stock. If the Company, at
             ------------------------------------------
any time after the Issue Date, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise)
its shares of Common Stock into a greater number of shares, then after the
date of record for effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced. If
the Company, at any time after the Issue Date, combines (by reverse stock
split, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a smaller number of shares, then, after the date
of record for effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionally increased.

         (b) Distributions. If the Company shall declare or make any
             -------------
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend or otherwise (including
without limitation any dividend or distribution to the Company's
stockholders in cash or shares (or rights to acquire shares) of capital
stock of a subsidiary) (a "Distribution"), the Company shall deliver written
                           ------------
notice of such Distribution (a "Distribution Notice") to the Holder at least
                                -------------------
ten (10) Business Days prior to the earlier to occur of (i) the record date
for determining stockholders entitled to such Distribution (the "Record
                                                                 ------
Date") and (ii) the date on which such Distribution is made (the
----
"Distribution Date"). The Holder shall be entitled, at its option (to be
 -----------------
exercised by written notice delivered to the Company on or before the tenth
(10th) Business Day following the date on which a Distribution Notice is
delivered to the Holder), either (A) upon any exercise of this Warrant on or
after the Record Date, to be entitled to receive on the Distribution Date
(for any exercise effected on or prior to the Distribution Date) or the
applicable Delivery Date (for any exercise effected after the Distribution
Date), the amount of such assets which would have been payable to the holder
with respect to the shares of Common Stock issuable upon such exercise
(without giving effect to any limitations on such exercise contained in this
Warrant) had the Holder been the holder of such shares of Common Stock on
the Record Date or (B) upon any exercise of this Warrant on or after the
Record Date, to reduce the Exercise Price applicable to such exercise by
reducing the Exercise Price in effect on the Business Day immediately
preceding the Record Date by an amount equal to the fair market value of the
assets to be distributed divided by the number of shares of Common Stock as
                         ----------
to which such Distribution is to be made, such fair market value to be
reasonably determined in good faith by the independent members of the Board
of Directors of

                                     6

the Company.

         (c) Dilutive Issuances.
             ------------------

             (i)   Adjustment Upon Dilutive Issuance. If, at any time
                   ---------------------------------
after the Issue Date, the Company issues or sells, either directly or upon
the exercise of Convertible Securities or Purchase Rights, any shares of
Common Stock for no consideration or for a consideration per share less than
the Exercise Price on the date of such issuance or sale (a "Dilutive
                                                            --------
Issuance"), then the Exercise Price shall be adjusted as follows:
--------

                   (A) If such Dilutive Issuance occurs prior to the
         Effective Date (as defined in the Registration Rights Agreement),
         then effective immediately upon the Dilutive Issuance, the Exercise
         Price shall be adjusted so as to equal the consideration received
         or receivable by the Company (on a per share basis) for the
         additional shares of Common Stock so issued, sold or deemed issued
         or sold in such Dilutive Issuance (which, in the case of a deemed
         issuance or sale, shall be calculated in accordance with
         subparagraph (ii) below).

                   (B) If such Dilutive Issuance occurs on or after
         the Effective Date, then effective immediately upon the Dilutive
         Issuance, the Exercise Price shall be adjusted so as to equal an
         amount determined by multiplying such Exercise Price by the
         following fraction:

                   N(inferior)0 + N(inferior)1
                   -          -----          -

                   N(inferior)0 + N(inferior)2
                   -          -

         where:

                   N(inferior)0 = the number of shares of Common Stock
                                  outstanding immediately prior to the
                                  issuance, sale or deemed issuance or
                                  sale of such additional shares of Common
                                  Stock in such Dilutive Issuance (without
                                  taking into account any shares of Common
                                  Stock issuable upon conversion, exchange
                                  or exercise of any securities or other
                                  instruments which are convertible into
                                  or exercisable or exchangeable for
                                  Common Stock ("Convertible Securities")
                                                 ----------------------
                                  or options, warrants or other rights to
                                  purchase or subscribe for Common Stock
                                  or Convertible Securities ("Purchase
                                                              --------
                                  Rights"), including the Warrants);
                                  ------

                   N(inferior)1 = the number of shares of Common Stock
                                  which the aggregate consideration, if
                                  any, received or receivable by the
                                  Company for the total number of such
                                  additional shares of Common Stock so
                                  issued, sold or deemed issued or sold in
                                  such Dilutive Issuance (which, in the
                                  case of a deemed issuance or sale, shall
                                  be calculated in accordance with
                                  subparagraph (iii) below) would purchase
                                  at the Exercise Price in effect
                                  immediately prior to such Dilutive
                                  Issuance; and

                                     7

                   N(inferior)2 = the number of such additional shares
                                  of Common Stock so issued, sold or
                                  deemed issued or sold in such Dilutive
                                  Issuance.

                   Notwithstanding the foregoing, no adjustment shall be
         made pursuant hereto if such adjustment would result in an increase
in the Exercise Price.

             (ii)  Adjustment Upon Below Market Issuance. If, at any time
                   -------------------------------------
after the Issue Date, the Company issues or sells, or in accordance with
subparagraph (iii) of this paragraph (c), is deemed to have issued or sold,
any shares of Common Stock for no consideration or for a consideration per
share less than the Market Price on the date of such issuance or sale (or
deemed issuance or sale) (a "Below Market Issuance"), then the Exercise
                             ---------------------
Price shall be adjusted so as to equal an amount determined by multiplying
such Exercise Price by the following fraction:

                   N(inferior)0 + N(inferior)1
                   -          -----          -

                   N(inferior)0 + N(inferior)2

         where:

                   N(inferior)0 = the number of shares of Common Stock
                                  outstanding immediately prior to the
                                  issuance, sale or deemed issuance or
                                  sale of such additional shares of Common
                                  Stock in such Below Market Issuance
                                  (without taking into account any shares
                                  of Common Stock issuable upon
                                  conversion, exchange or exercise of any
                                  Convertible Securities or Purchase
                                  Rights, including the Warrants);

                   N(inferior)1 = the number of shares of Common Stock
                                  which the aggregate consideration, if
                                  any, received or receivable by the
                                  Company for the total number of such
                                  additional shares of Common Stock so
                                  issued, sold or deemed issued or sold in
                                  such Below Market Issuance (which, in
                                  the case of a deemed issuance or sale,
                                  shall be calculated in accordance with
                                  subparagraph (iii) below) would purchase
                                  at the Market Price in effect on the
                                  date of such Below Market Issuance; and

                   N(inferior)2 = the number of such additional shares
                                  of Common Stock so issued, sold or
                                  deemed issued or sold in such Below
                                  Market Issuance.

                   Notwithstanding the foregoing, no adjustment shall be
         made pursuant to this paragraph (c)(ii) if such adjustment
         would result in an increase in the Exercise Price or if such
         adjustment would lead to a higher exercise price than an adjustment
         pursuant to paragraph c(i), in which case the provisions of
         paragraph (c)(i) shall apply.

             (iii) Effect On Exercise Price Of Certain Events. For
                   ------------------------------------------
purposes of determining the adjusted Exercise Price under subparagraph (i)
or (ii) of this paragraph (c), the following will be applicable:

                   (A) Issuance Of Purchase Rights. If the Company
                       ---------------------------
         issues or sells any

                                     8

         Purchase Rights, whether or not immediately exercisable, and the
         price per share for which Common Stock is issuable upon the
         exercise of such Purchase Rights (and the price of any conversion
         of Convertible Securities, if applicable) is less than the Market
         Price in effect on the date of issuance or sale of such Purchase
         Rights, then the maximum total number of shares of Common Stock
         issuable upon the exercise of all such Purchase Rights (assuming
         full conversion, exercise or exchange of Convertible Securities,
         if applicable) shall, as of the date of the issuance or sale
         of such Purchase Rights, be deemed to be outstanding and to
         have been issued and sold by the Company for such price per share.
         For purposes of the preceding sentence, the "price per share for
         which Common Stock is issuable upon the exercise of such Purchase
         Rights" shall be determined by dividing (x) the total amount, if
         any, received or receivable by the Company as consideration for the
         issuance or sale of all such Purchase Rights, plus the minimum
         aggregate amount of additional consideration, if any, payable to
         the Company upon the exercise of all such Purchase Rights, plus, in
                                                                    ----
         the case of Convertible Securities issuable upon the exercise of
         such Purchase Rights, the minimum aggregate amount of additional
         consideration payable upon the conversion, exercise or exchange
         thereof (determined in accordance with the calculation method set
         forth in subparagraph (iii)(B) below) at the time such Convertible
         Securities first become convertible, exercisable or exchangeable,
         by (y) the maximum total number of shares of Common Stock issuable
         upon the exercise of all such Purchase Rights (assuming full
         conversion, exercise or exchange of Convertible Securities, if
         applicable). No further adjustment to the Exercise Price shall be
         made upon the actual issuance of such Common Stock upon the
         exercise of such Purchase Rights or upon the conversion, exercise
         or exchange of Convertible Securities issuable upon exercise of
         such Purchase Rights. To the extent that shares of Common Stock or
         Convertible Securities are not delivered pursuant to such Purchase
         Rights, upon the expiration or termination of such Purchase Rights,
         the Exercise Price shall be readjusted to the Exercise Price that
         would then be in effect had the adjustments made upon the issuance
         of such Purchase Rights been made on the basis of delivery of only
         the number of shares of Common Stock actually delivered.

                   (B) Issuance Of Convertible Securities. If the
                       ----------------------------------
         Company issues or sells any Convertible Securities, whether or not
         immediately convertible, exercisable or exchangeable, and the price
         per share for which Common Stock is issuable upon such conversion,
         exercise or exchange is less than the Market Price in effect on the
         date of issuance or sale of such Convertible Securities, then the
         maximum total number of shares of Common Stock issuable upon the
         conversion, exercise or exchange of all such Convertible Securities
         shall, as of the date of the issuance or sale of such Convertible
         Securities, be deemed to be outstanding and to have been issued and
         sold by the Company for such price per share. If the Convertible
         Securities so issued or sold do not have a fluctuating conversion
         or exercise price or exchange ratio, then for the purposes of the
         immediately preceding sentence, the "price per share for which
         Common Stock is issuable upon such conversion, exercise or
         exchange" shall be determined by dividing (x) the total amount, if
         any, received or receivable by the Company as consideration for the
         issuance or sale of all such Convertible Securities, plus the
         minimum aggregate amount of additional consideration, if any,
         payable to the Company upon the conversion, exercise or exchange
         thereof (determined in accordance with the calculation method set
         forth in this subparagraph (iii)(B)) at the time such Convertible
         Securities first become

                                     9

         convertible, exercisable or exchangeable, by (y) the maximum
         total number of shares of Common Stock issuable upon the
         exercise, conversion or exchange of all such Convertible
         Securities. If the Convertible Securities so issued or sold have a
         fluctuating conversion or exercise price or exchange ratio (a
         "Variable Rate Convertible Security") (provided, however, that if
          ----------------------------------
         the conversion or exercise price or exchange ratio of a Convertible
         Security may fluctuate solely as a result of provisions designed to
         protect against dilution, such Convertible Security shall not be
         deemed to be a Variable Rate Convertible Security), then for
         purposes of the first sentence of this subparagraph (B), the "price
         per share for which Common Stock is issuable upon such conversion,
         exercise or exchange" shall be deemed to be the lowest price per
         share which would be applicable (assuming all holding period and
         other conditions to any discounts contained in such Variable Rate
         Convertible Security have been satisfied) if the conversion price
         of such Variable Rate Convertible Security on the date of issuance
         or sale thereof were seventy-five percent (75%) of the actual
         conversion price on such date (the "Assumed Variable Market
                                             -----------------------
         Price"), and, further, if the conversion price of such Variable
         -----
         Rate Convertible Security at any time or times thereafter is less
         than or equal to the Assumed Variable Market Price last used for
         making any adjustment under this paragraph (c) with respect to any
         Variable Rate Convertible Security, the Exercise Price in effect at
         such time shall be readjusted to equal the Exercise Price which
         would have resulted if the Assumed Variable Market Price at the
         time of issuance of the Variable Rate Convertible Security had been
         seventy-five percent (75%) of the actual conversion price of such
         Variable Rate Convertible Security existing at the time of the
         adjustment required by this sentence. No further adjustment to the
         Exercise Price shall be made upon the actual issuance of such
         Common Stock upon conversion, exercise or exchange of such
         Convertible Securities. To the extent that shares of Common Stock
         are not delivered pursuant to conversion of such Convertible
         Securities, upon the expiration or termination of the right to
         convert such Convertible Securities into Common Stock, the Exercise
         Price shall be readjusted to the Exercise Price that would then be
         in effect had the adjustments made upon the issuance of such
         Convertible Securities been made on the basis of delivery of only
         the number of shares of Common Stock actually delivered.

                   (C) Change In Option Price Or Conversion Rate.
                       -----------------------------------------
         If, following an adjustment to the Exercise Price upon the issuance
         of Purchase Rights or Convertible Securities pursuant to a Below
         Market Issuance, there is a change at any time in (x) the amount of
         additional consideration payable to the Company upon the exercise
         of any Purchase Rights; (y) the amount of additional consideration,
         if any, payable to the Company upon the conversion, exercise or
         exchange of any Convertible Securities; or (z) the rate at which
         any Convertible Securities are convertible into or exercisable or
         exchangeable for Common Stock (in each such case, other than under
         or by reason of provisions designed to protect against dilution),
         then in any such case, the Exercise Price in effect at the time of
         such change shall be readjusted to the Exercise Price which would
         have been in effect at such time had such Purchase Rights or
         Convertible Securities still outstanding provided for such changed
         additional consideration or changed conversion, exercise or
         exchange rate, as the case may be, at the time initially issued or
         sold.

                   (D) Calculation Of Consideration Received. If any
                       -------------------------------------
         Common Stock, Purchase Rights or Convertible Securities are issued
         or sold for cash, the consideration

                                     10

         received therefor will be the amount received by the Company
         therefor. In case any Common Stock, Purchase Rights or Convertible
         Securities are issued or sold for a consideration part or all of
         which shall be other than cash, including in the case of a
         strategic or similar arrangement in which the other entity will
         provide services to the Company, purchase services from the Company
         or otherwise provide intangible consideration to the Company, the
         amount of the consideration other than cash received by the Company
         (including the net present value of the consideration expected by
         the Company for the provided or purchased services) shall be the
         fair market value of such consideration, except where such
         consideration consists of securities, in which case the amount of
         consideration received by the Company will be the average of the
         last sale prices thereof on the principal market for such
         securities during the period of ten Trading Days immediately
         preceding the date of receipt. In case any Common Stock, Purchase
         Rights or Convertible Securities are issued in connection with any
         merger or consolidation in which the Company is the surviving
         corporation, the amount of consideration therefor will be deemed to
         be the fair market value of such portion of the net assets and
         business of the non-surviving corporation as is attributable to
         such Common Stock, Purchase Rights or Convertible Securities, as
         the case may be. Notwithstanding anything else herein to the
         contrary, if Common Stock, Purchase Rights or Convertible
         Securities are issued or sold in conjunction with each other as
         part of a single transaction or in a series of related
         transactions, the Holder may elect to determine the amount of
         consideration deemed to be received by the Company therefor by
         deducting the fair value of any type of securities (the
         "Disregarded Securities") issued or sold in such transaction or
          ----------------------
         series of transactions. If the holder makes an election pursuant to
         the immediately preceding sentence, no adjustment to the Exercise
         Price shall be made pursuant to this paragraph (c) for the issuance
         of the Disregarded Securities or upon any conversion, exercise or
         exchange thereof. The independent members of the Company's Board of
         Directors shall calculate reasonably and in good faith, using
         standard commercial valuation methods appropriate for valuing such
         assets, the fair market value of any consideration other than cash
         or securities.

                   (E) Issuances Pursuant To Existing Securities. If
                       -----------------------------------------
         the Company issues (or becomes obligated to issue) shares of Common
         Stock pursuant to any antidilution or similar adjustments (other
         than as a result of stock splits, stock dividends and the like)
         contained in any Convertible Securities or Purchase Rights
         outstanding as of the date hereof but not included in the
         Disclosure Schedule to the Securities Purchase Agreement, then all
         shares of Common Stock so issued shall be deemed to have been
         issued for no consideration. If the Company issues (or becomes
         obligated to issue) shares of Common Stock pursuant to any
         antidilution or similar adjustments contained in any Convertible
         Securities or Purchase Rights disclosed in a schedule to the
         Securities Purchase Agreement as a result of the issuance of the
         Warrants and the number of shares that the Company issues (or is
         obligated to issue) as a result of such initial issuance exceeds
         the amount specified in such schedule, such excess shares shall be
         deemed to have been issued for no consideration.

             (iv)  Exceptions To Adjustment Of Exercise Price.
                   ------------------------------------------
Notwithstanding the foregoing, no adjustment to the Exercise Price shall be
made pursuant to this paragraph (c) upon the issuance of any Excluded
Securities. For purposes hereof, "Excluded Securities" means (I)
                                  -------------------

                                     11

securities purchased under the Securities Purchase Agreement; (II)
securities issued upon exercise of the Warrants; (III) shares of Common
Stock issuable or issued to (x) employees or directors from time to time
either directly or upon the exercise of options, in such case granted or to
be granted in the discretion of the Board of Directors (or a duly authorized
committee thereof) pursuant to one or more stock option plans or restricted
stock plans or stock purchase plans in effect as of the Issue Date or
adopted after the Issue Date by the Board of Directors (or a duly authorized
committee thereof) or by the Company's shareholders, or (y) vendors, either
directly or pursuant to warrants to purchase Common Stock that are
outstanding on the date hereof or issued hereafter, provided such issuances
are approved by the Board of Directors (or a duly authorized committee
thereof) or by the Company's shareholders; (IV) shares of Common Stock
issued in connection with any stock split, stock dividend or
recapitalization of the Company; (V) shares of Common Stock issued in
connection with the acquisition by the Company or a Subsidiary of any Person
or business not for the purpose or with the effect of raising equity
capital; (VI) shares of Common Stock issued in connection with any
Convertible Securities or Purchase Rights outstanding on the date hereof;
(VII) shares issued to Persons with whom the Company or a Subsidiary is
entering into a joint venture, strategic alliance or other commercial
relationship in connection with the operation of the Company's business and
not in connection with a transaction the primary purpose of which is to
raise equity capital; (VIII) shares of Common Stock, Convertible Securities
or Purchase Rights issued in connection with the settlement of a bona fide
litigation approved by the Board of Directors; and (IX) shares of Common
Stock issued to a Subsidiary under a share exchange agreement.

             (v)   Notice Of Adjustments. Upon the occurrence of one or
                   ---------------------
more adjustments or readjustments of the Exercise Price pursuant to this
paragraph (c) resulting in a change in the Exercise Price by more than one
percent (1%) in the aggregate, or any change in the number or type of stock,
securities and/or other property issuable upon exercise of this Warrant, the
Company, at its expense, shall promptly compute such adjustment or
readjustment or change and prepare and furnish to the Holder a certificate
setting forth such adjustment or readjustment or change and showing in
detail the facts upon which such adjustment or readjustment or change is
based. The Company shall, upon the written request at any time of the
Holder, furnish to the Holder a like certificate setting forth (i) such
adjustment or readjustment or change, (ii) the Exercise Price at the time in
effect and (iii) the number of shares of Common Stock and the amount, if
any, of other securities or property which at the time would be received
upon exercise of this Warrant.

         (d) Major Transactions. In the event of a merger, consolidation,
             ------------------
business combination, tender offer, exchange of shares, recapitalization,
reorganization, redemption or other similar event, as a result of which
shares of Common Stock of the Company shall be changed into the same or a
different number of shares of the same or another class or classes of stock
or securities or other assets of the Company or another entity or the
Company shall sell all or substantially all of its assets (each of the
foregoing being a "Major Transaction"), the Company will give the Holder at
                   -----------------
least ten (10) Business Days written notice prior to the closing of such
Major Transaction; provided, however, that the Company shall publicly
                   --------  -------
disclose the terms of any such Major Transaction on or before the date on
which it delivers notice of a Major Transaction to the Holder. Upon the
occurrence of a Major Transaction, (i) the Holder shall be permitted to
exercise this Warrant in whole or in part at any time prior to the record
date for the receipt of such consideration and shall be entitled to receive,
for each share of Common Stock

                                     12

issued to Holder for such exercise, the same per share consideration paid to
the other holders of Common Stock in connection with such Major Transaction,
and (ii) if and to the extent that the Holder retains any portion of this
Warrant following such record date, the Company will cause the surviving or,
in the event of a sale of assets, purchasing entity, as a condition
precedent to such Major Transaction, to assume the obligations of the
Company under this Warrant, with such adjustments to the Exercise Price and
the securities covered hereby as are deemed appropriate by the Company's
Board of Directors in order to preserve the economic benefits of this
Warrant to the Holder.

         (e) Adjustments; Additional Shares, Securities or Assets. In the
             ----------------------------------------------------
event that at any time, as a result of an adjustment made pursuant to this
paragraph 6, the Holder of this Warrant shall, upon exercise of this
Warrant, become entitled to receive securities or assets (other than Common
Stock) then, wherever appropriate, all references herein to shares of Common
Stock shall be deemed to refer to and include such shares and/or other
securities or assets; and thereafter the number of such shares and/or other
securities or assets shall be subject to adjustment from time to time in a
manner and upon terms as nearly equivalent as practicable to the provisions
of this paragraph 6. Any adjustment made herein other than pursuant to
Section 6(c) hereof that results in a decrease in the Exercise Price shall
also effect a proportional increase in the number of shares of Common Stock
into which this Warrant is exercisable.

         7.  Fractional Interests.
             --------------------

             No fractional shares or scrip representing fractional
shares shall be issuable upon the exercise of this Warrant. If, on exercise
of this Warrant, the Holder hereof would be entitled to a fractional share
of Common Stock or a right to acquire a fractional share of Common Stock,
the Company shall, in lieu of issuing any such fractional share, pay to the
Holder an amount in cash equal to the product resulting from multiplying
such fraction by the Market Price as of the Exercise Date.

         8.  Transfer of this Warrant.
             ------------------------

             The Holder may sell, transfer, assign, pledge or otherwise
dispose of this Warrant, in whole or in part, as long as such sale or other
disposition is made pursuant to an effective registration statement or an
exemption from the registration requirements of the Securities Act, and
applicable state securities laws, and is otherwise made in accordance with
the applicable provisions of the Securities Purchase Agreement. Upon such
transfer or other disposition, the Holder shall deliver this Warrant to the
Company together with a written notice to the Company, substantially in the
form of the Transfer Notice attached hereto as Exhibit B (the "Transfer
                                               ---------       --------
Notice"), indicating the person or persons to whom this Warrant shall be
------
transferred and, if less than all of this Warrant is transferred, the number
of Warrant Shares to be covered by the part of this Warrant to be
transferred to each such person. Within ten (10) Business Days of receiving
a Transfer Notice, an executed Investment Certificate and the original of
this Warrant, the Company shall deliver to the each transferee designated by
the Holder a Warrant or Warrants of like tenor and terms for the appropriate
number of Warrant Shares and, if less than all this Warrant is transferred,
shall deliver to the Holder a Warrant for the remaining number of Warrant
Shares.

                                     13

         9.  Benefits of this Warrant.
             ------------------------

             This Warrant shall be for the sole and exclusive benefit
of the Holder of this Warrant and nothing in this Warrant shall be construed
to confer upon any person other than the Holder of this Warrant any legal or
equitable right, remedy or claim hereunder.

         10. Loss, theft, destruction or mutilation of Warrant.
             -------------------------------------------------

             Upon receipt by the Company of evidence of the loss,
theft, destruction or mutilation of this Warrant, and (in the case of loss,
theft or destruction) of indemnity reasonably satisfactory to the Company,
and upon surrender of this Warrant, if mutilated, the Company shall execute
and deliver a new Warrant of like tenor and date in replacement for the
lost, stolen, destroyed or mutilated Warrant.

         11. Notice or Demands.
             -----------------

             Any notice, demand or request required or permitted to be
given by the Company or the Holder pursuant to the terms of this Warrant
shall be in writing and shall be deemed delivered (i) when delivered
personally or by verifiable facsimile transmission, unless such delivery is
made on a day that is not a Business Day, in which case such delivery will
be deemed to be made on the next succeeding Business Day, (ii) on the next
Business Day after timely delivery to an overnight courier and (iii) on the
Business Day actually received if deposited in the U.S. mail (certified or
registered mail, return receipt requested, postage prepaid), addressed as
follows:

             If to the Company:

             Applied Digital Solutions, Inc.
             1690 South Congress Avenue
             Suite 200
             Delray Beach, Florida 33445
             Attn: Scott R. Silverman
             Tel:  561-805-8000
             Fax:  561-805-0002

             with a copy to:

             Holland & Knight LLP
             701 Brickell Avenue, Suite 3000
             Miami, Florida 33131
             Mailing Address: P.O. Box 015441, Florida, 33101
             Attn: Harvey A. Goldman, Esq.
             Tel:  305-374-8500
             Fax:  305-789-7799

                                     14

and if to the Holder, to such address as shall be designated by the Holder
in writing to the Company.

         12. Taxes.
             -----

         (a) The issue of stock certificates on exercises of this Warrant
shall be made without charge to the exercising Holder for any tax in respect
of the issue thereof. The Company shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved in the issue
and delivery of stock in any name other than that of the Holder of any
Warrant exercised, and the Company shall not be required to issue or deliver
any such stock certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or
shall have established to the reasonable satisfaction of the Company that
such tax has been paid.

         (b) Notwithstanding any other provision of this Warrant or any
other Transaction Document, for income tax purposes, any assignee or
transferee shall agree that the Company and the Transfer Agent shall be
permitted to withhold from any amounts payable to such assignee or
transferee any taxes required by law to be withheld from such amounts.
Unless exempt from the obligation to do so, each assignee or transferee
shall, upon request, execute and deliver to the Company or the Transfer
Agent, as applicable, a properly completed Form W-8 or W-9, indicating that
such assignee or transferee is not subject to back-up withholding for United
States Federal income tax purposes.

         13. Applicable Law.
             --------------

             This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the State of
Delaware applicable to contracts made and to be performed entirely within
the State of Delaware.

         14. Amendments.
             ----------

             No amendment, modification or other change to, or waiver
of any provision of, this Warrant may be made unless such amendment,
modification or change is (A) set forth in writing and is signed by the
Company and the Holder and (B) agreed to in writing by the holders of at
least sixty-six percent (66%) of the number of shares into which the
Warrants are exercisable (without regard to any limitation contained therein
on such exercise), it being understood that upon the satisfaction of the
conditions described in (A) and (B) above, each Warrant (including any
Warrant held by the Holder who did not execute the agreement specified in
(B) above) shall be deemed to incorporate any amendment, modification,
change or waiver effected thereby as of the effective date thereof.

                         [Signature Page to Follow]

                                     15

         IN WITNESS WHEREOF, the Company has duly executed and delivered
this Warrant as of the Issue Date.

                                            APPLIED DIGITAL SOLUTIONS, INC.

                                            By: /s/ Scott Silverman
                                               ----------------------------
                                               Name:  Scott Silverman
                                               Title: CEO

                                     16

                                                         EXHIBIT A to WARRANT
                                                         --------------------

                               EXERCISE NOTICE
                               ---------------

         The undersigned Holder hereby irrevocably exercises the right to
purchase _______ of the shares of Common Stock ("Warrant Shares") of APPLIED
                                                 --------------
DIGITAL SOLUTIONS, INC. evidenced by the attached Warrant (the "Warrant").
                                                                -------
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.

         1.  Form of Exercise Price. The Holder intends that payment of the
Exercise Price shall be made as:

             _____ a Cash Exercise with respect to _____ Warrant Shares; and/or
                     -------------

             _____ a Cashless Exercise with respect to __________ Warrant
                     -----------------
Shares, as permitted by Section 5(b) of the attached Warrant.

         2.  Payment of Exercise Price. In the event that the Holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to
be issued pursuant hereto, the Holder shall pay the sum of $________________
to the Company in accordance with the terms of the Warrant.

Date:
     ---------------------

--------------------------------------
      Name of Registered Holder

By:
   -----------------------------------
   Name:
   Title:

         By tendering this Exercise Notice, the Holder represents to the
Company that it is an "accredited investor" as that term is defined in Rule
501 of Regulation D, and that it is acquiring the Warrants Shares solely for
its own account, and not with a present view to the public resale or
distribution of all or any part thereof, except pursuant to sales that are
registered under the Securities Act or are exempt from the registration
requirements of the Securities Act; provided, however, that, in making such
                                    --------  -------
representation, the Holder does not agree to hold the Warrants Shares for
any minimum or specific term and reserves the right to sell, transfer or
otherwise dispose of the Warrants Shares at any time in accordance with the
provisions of the Warrant and with Federal and state securities laws
applicable to such sale, transfer or disposition.

                                     17

                                                          EXHIBIT B to WARRANT
                                                          --------------------

                               TRANSFER NOTICE
                               ---------------

FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby
sells, assigns and transfers unto the person or persons named below the
right to purchase ______ shares of the Common Stock of APPLIED DIGITAL
SOLUTIONS, INC. evidenced by the attached Warrant. By signing this Transfer
Notice, the transferee agrees to be legally bound by the terms of the
attached Warrant and of the related Securities Purchase Agreement and
Registration Rights Agreement applicable to an Investor.

Date:
     ------------------------

-----------------------------------
     Name of Registered Holder

By:
   --------------------------------
   Name:
   Title:

Accepted and Agreed:

-----------------------------------
         Transferee Name

By:
   --------------------------------
   Name:
   Title:

Address:

-----------------------------------

-----------------------------------

-----------------------------------

                                     18<PAGE>

                                                                Exhibit 10.4

                                                            EXHIBIT C TO THE
                                               SECURITIES PURCHASE AGREEMENT

                        REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
                                              ---------
October 21, 2004, by and between APPLIED DIGITAL SOLUTIONS, INC., a Missouri
corporation (the "Company"), and SATELLITE STRATEGIC FINANCE ASSOCIATES,
                  -------
LLC, a Delaware limited liability company (the "Investor").
                                                --------

         The Company has agreed, on the terms and subject to the conditions
set forth in the Securities Purchase Agreement, dated as of October 21, 2004
(the "Securities Purchase Agreement"), to issue and sell to the Investor (i)
      -----------------------------
shares (the "Shares") of the Company's common stock, par value $0.01 per
             ------
share (the "Common Stock"), (ii) a Series C Warrant in the form attached to
            ------------
the Securities Purchase Agreement as Exhibit A (the "Series C Warrant") and
                                     ---------       ----------------
(iii) a Series D Warrant in the form attached to the Securities Purchase
Agreement as Exhibit B (the "Series D Warrant"). The Series C Warrant and
             ---------       ----------------
the Series D Warrant are collectively referred to herein as the "Warrants".
                                                                 --------

         The shares of Common Stock into which the Warrants are exercisable
are referred to herein as the "Warrant Shares".
                               --------------

         In order to induce the Investor to enter into the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended (the "Securities Act"),
                                                          --------------
and under applicable state securities laws. Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in
the Securities Purchase Agreement.

         In consideration of the Investor entering into the Securities
Purchase Agreement, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as
follows:

1.       DEFINITIONS.
         -----------

         For purposes of this Agreement, the following terms shall have the
meanings specified:

                  (a) "Effective Date" means the date on which the
                       --------------
         Registration Statement is declared effective by the Securities and
         Exchange Commission (the "Commission");
                                   ----------

                  (b) "Filing Deadline" means the thirtieth (30th) calendar
                       ---------------
         day following the Closing Date;

                  (c) "Holder" means any person owning or having the right
                       ------
         to acquire, including without limitation through exercise of the
         Warrants, Registrable Securities, including initially the Investor
         and thereafter any assignee permitted hereunder;

                  (d) "Outstanding Registrable Securities" means, at any
                       ----------------------------------
         time, all Registrable Securities that at such time are either
         issued and outstanding or issuable upon exercise of the Warrants
         (without regard to any limitation on such exercise);

                  (e) "Registrable Securities" means the Shares and the
                       ----------------------
         Warrant Shares and any other shares of Common Stock issuable
         pursuant to the exercise of the Warrants (without regard to any
         limitation on such exercise), and any shares of capital stock
         issued or issuable from time to time (with any adjustments) in
         replacement of, in exchange for or otherwise in respect of the
         Shares or the Warrant Shares; provided, however, that "Registrable
                                       --------  -------
         Securities" shall not include any such shares that have been sold
         pursuant to the Registration Statement or Rule 144;

                  (f) "Registration Deadline" means the one hundred and
                       ---------------------
         twentieth (120th) calendar day following the Closing Date, subject
         to reasonable extensions for any delays caused by comments to the
         Registration Statement made by the Commission pertaining solely to
         the transactions contemplated hereby and/or to the Investor;

                  (g) "Registration Period" means the period beginning on
                       -------------------
         the Registration Deadline (or such earlier date on which the
         Registration Statement may have been declared effective by the
         Commission) and ending on the earlier to occur of (A) the date on
         which all Registrable Securities have been sold under the
         Registration Statement or Rule 144 and (B) the date on which any
         Registrable Securities (in the reasonable opinion of counsel to the
         Company or any Holder) may be sold to the public under Rule 144(k)
         or any successor provision by a Person that is not an Affiliate of
         the Company at the time of such sale or during the period of ninety
         (90) days prior thereto; and

                  (h) "Registration Statement" means the Registration
                       ----------------------
         Statement to be filed hereunder relating to resales of the
         Registrable Securities.

         2.       REGISTRATION.
                  ------------

                  (a) Registration Statement. On or before the Filing
                      ----------------------
Deadline, the Company shall use reasonable best efforts to prepare and file
with the Commission a Registration Statement on Form S-3 as a "shelf"
registration statement under Rule 415 under the Securities Act ("Rule 415")
                                                                 --------
covering the resale of a number of shares of common stock equal to the
number of shares required to be reserved pursuant to the Securities Purchase
Agreement as of the Closing Date. The Registration Statement shall state, to
the extent permitted by Rule 416 under the Securities Act, that it also
covers such indeterminate number of additional shares of Common Stock as may
become issuable upon the exercise of the Warrants in order to prevent
dilution resulting from stock splits, stock dividends or similar events. In
the event that the Company is at any time not eligible to use Form S-3 to
register the resale of Registrable Securities by the Holders, the Company
shall file the Registration Statement on such form as may then be available
to the Company, and thereafter shall use its reasonable best efforts, as
soon as reasonably practicable following the date on which it becomes
eligible to use Form S-3 (but in no event later than the thirtieth (30th)
day after such date),

                                    -2-

to convert the Registration Statement to a Form S-3, or file a new
registration statement on such form, covering the greater of (i) the number
of shares of Common Stock covered by the Registration Statement and
remaining unsold thereunder and (ii) the number of Outstanding Registrable
Securities. The Company shall not permit any securities other than
Registrable Securities to be included in any registration statement or
amendment to any registration statement required to be filed hereunder.
Notwithstanding anything in this Agreement to the contrary, the Company
shall be permitted to register with the Commission the Excluded Securities
(as defined in the Series D Warrant) on or prior to the effectiveness of the
Registration Statement.

                  (b) Effectiveness. The Company shall use its reasonable
                      -------------
best efforts to cause the Registration Statement to become effective as soon
as practicable following the filing thereof, but in no event later than the
Registration Deadline. The Company shall respond promptly to any and all
comments made by the staff of the Commission on the Registration Statement,
and shall promptly submit to the Commission, within two (2) Business Days
after the Company learns that no review of the Registration Statement will
be made by the staff of the Commission or that the staff of the Commission
has no further comments on the Registration Statement, as the case may be, a
request for acceleration of the effectiveness of the Registration Statement
to a time and date not later than two (2) Business Days following the
submission of such request. The Company shall use its reasonable best
efforts to maintain the effectiveness of the Registration Statement during
the Registration Period.

                  (c) Registration Default. If (A) the Registration
                      --------------------
Statement is not filed on or before the Filing Deadline or declared
effective by the Commission on or before the Registration Deadline, (B)
after the Registration Statement has been declared effective by the
Commission and other than during a period in which an Allowed Delay (as
hereinafter defined) is in effect, sales of Registrable Securities cannot be
made by a Holder under the Registration Statement for any reason not within
the exclusive control of such Holder, (C) trading in the Common Stock on the
Principal Exchange is suspended or restricted, or (D) an amendment to the
Registration Statement, or a new registration statement, required to be
filed pursuant to the terms of paragraph 4(k) below is not filed on or
before the date required by such paragraph, (each of (A), (B), (C) and (D)
being referred to herein as a "Registration Default"), the Company shall
                               --------------------
make cash payments to each Holder equal to one percent (1.0%) of the
Purchase Price for the Securities then held by such Holder for each thirty
(30) day period until such Registration Default is cured (such payment to be
prorated for any period in which a Registration Default continues for less
than thirty days). Each such payment shall be made in immediately available
funds within five (5) Business Days following the last day of the calendar
month in which a Registration Default occurs or is continuing. Any such
payment shall be in addition to any other remedies available to each Holder
at law or in equity, whether pursuant to the terms hereof, the Securities
Purchase Agreement, or otherwise.

                  (d) Allowed Delay. The Company may delay the disclosure of
                      -------------
material non-public information, and suspend the availability of the
Registration Statement, for a period not to exceed (i) five (5) consecutive
Business Days at any one time (each such five Business Day period to be
separated by at least ten (10) Business Days from the next such period) or
(ii) twenty (20) calendar days in any twelve (12) month period; provided,
                                                                --------
however, that the Company may delay such disclosure only in the event of a
-------
proposed merger, reorganization or similar transaction

                                    -3-

involving the Company where its board of directors (A) has determined, upon
the advice of counsel, that such information would be required to be
disclosed in an offering registered under the Securities Act and (B)
reasonably deems it in the best interests of the Company and its
shareholders not to disclose such information publicly (an "Allowed Delay").
                                                            ------- -----
The Company shall promptly (i) notify each Holder in writing of the
existence of information giving rise to an Allowed Delay (but in no event,
without the prior written consent of such Holder, shall the Company disclose
to such Holder any material non-public information), (ii) advise each Holder
in writing to cease all sales under the Registration Statement until the
termination of the Allowed Delay and (iii) notify each Holder in writing
immediately upon the termination or expiration of an Allowed Delay.

                  (e) Allocation of Warrant Shares. The initial number of
                      ----------------------------
Warrant Shares included in any Registration Statement and each increase in
the number thereof included therein shall be allocated pro rata among the
                                                       --------
Holders based on the aggregate number of Outstanding Registrable Securities
held by each Holder at the time the Registration Statement covering such
initial number of Registrable Securities or increase thereof is declared
effective by the Commission (without regard to any restriction on the
ability of a Holder to exercise such Holder's Warrants as of such date). In
the event that a Holder sells or otherwise transfers any of such Holder's
Registrable Securities, each transferee shall be allocated the portion of
the then remaining number of Registrable Securities included in such
Registration Statement allocable to the transferor. Any portion of the
Registrable Securities included in such Registration Statement and allocated
to a Holder or other Person which no longer holds any Registrable Securities
shall be reallocated to the remaining Holders pro rata based on the number
of Outstanding Registrable Securities.

         3.       PIGGYBACK REGISTRATION.
                  ----------------------

         If at any time prior to the expiration of the Registration Period,
(i) the Company proposes to register shares of Common Stock under the
Securities Act in connection with the public offering of such shares for
cash (a "Proposed Registration") other than a registration statement on Form
         ---------------------
S-8 or Form S-4 or any successor or other forms promulgated for similar
purposes and (ii) a Registration Statement covering the sale of all of the
Registrable Securities is not then effective and available for sales thereof
by the Holders, the Company shall, at such time, promptly give each Holder
written notice of such Proposed Registration. Each Holder shall have ten
(10) Business Days from its receipt of such notice to deliver to the Company
a written request specifying the amount of Registrable Securities that such
Holder intends to sell and such Holder's intended method of distribution.
Upon receipt of such request, the Company shall use its commercially
reasonable efforts to cause all Registrable Securities which the Company has
been requested to register to be registered under the Securities Act to the
extent necessary to permit their sale or other disposition in accordance
with the intended methods of distribution specified in the request of such
Holder; provided, however, that the Company shall have the right to postpone
        --------  -------
or withdraw any registration effected pursuant to this Section 3 without
obligation to the Holder. If, in connection with any underwritten public
offering for the account of the Company or for stockholders of the Company
that have contractual rights to require the Company to register shares of
Common Stock, the managing underwriter(s) thereof shall impose a limitation
on the number of shares of Common Stock which may be included in a
registration statement because, in the judgment of such underwriter(s),
marketing or other factors dictate such limitation is necessary to
facilitate such

                                    -4-

offering, then the Company shall be obligated to include in the registration
statement only such limited portion of the Registrable Securities with
respect to which each Holder has requested inclusion hereunder as such
underwriter(s) shall permit. Any exclusion of Registrable Securities shall
be made pro rata among the Holders seeking to include Registrable Securities
in a registration statement, in proportion to the number of Registrable
Securities sought to be included by such Holders; provided, however, that
the Company shall not exclude any Registrable Securities unless the Company
has first excluded all outstanding securities, the holders of which are not
entitled to inclusion of such securities in the registration statement or
are not entitled to pro rata inclusion with the Registrable Securities; and
provided, further, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in
the registration statement.

         4.       OBLIGATIONS OF THE COMPANY.
                  --------------------------

         In addition to performing its obligations hereunder, including
without limitation those pursuant to paragraphs 2(a), (b) and (c) above, the
Company shall:

                  (a) prepare and file with the Commission such amendments
and supplements to the Registration Statement and the prospectus used in
connection with the Registration Statement as may be necessary to comply
with the provisions of the Securities Act or to maintain the effectiveness
of the Registration Statement during the Registration Period (subject to any
Allowed Delays), or as may be reasonably requested by a Holder in order to
incorporate information concerning such Holder or such Holder's intended
method of distribution;

                  (b) use commercially reasonable efforts to secure the
listing of all Registrable Securities on the Principal Market, and provide
each Holder with reasonable evidence thereof;

                  (c) upon the effectiveness of the Registration Statement,
furnish to each Holder such number of copies of the prospectus included in
the Registration Statement, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as such Holder may reasonably request in order to facilitate the
disposition of such Holder's Registrable Securities;

                  (d) use all commercially reasonable efforts to register or
qualify the Registrable Securities under the securities or "blue sky" laws
of such jurisdictions within the United States as shall be reasonably
requested in writing from time to time by a Holder, and do any and all other
acts or things which may be necessary or advisable to enable such Holder to
consummate the public sale or other disposition of the Registrable
Securities in such jurisdictions; provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
jurisdiction;

                  (e) in the event of an underwritten public offering of the
Registrable Securities, enter into (together with all Holders proposing to
distribute Registrable Securities through such underwriting) and perform its
obligations under an underwriting agreement, in usual and customary form
reasonably acceptable to the Company, with the managing underwriter of such
offering;

                                    -5-

                  (f) notify each Holder immediately after becoming aware of
the occurrence of any event (but shall not, without the prior written
consent of such Holder, disclose to such Holder any facts or circumstances
constituting material non-public information) as a result of which the
prospectus included in the Registration Statement, as then in effect,
contains an untrue statement of material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and
(except during an Allowed Delay) as promptly as practicable prepare, and
file with the Commission and furnish to each Holder a reasonable number of
copies of a supplement or an amendment to such prospectus as may be
necessary so that such prospectus does not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing;

                  (g) use all commercially reasonable efforts to prevent the
issuance of any stop order or other order suspending the effectiveness of
the Registration Statement and, if such an order is issued, to obtain the
withdrawal thereof at the earliest possible time and to notify each Holder
of the issuance of such order and the resolution thereof;

                  (h) furnish to each Holder, within two (2) Business Days
following the date on which the Registration Statement, or any successor
registration statement, becomes effective, (x) a letter, dated such date,
from the Company addressed to such Holder, confirming such effectiveness
and, to the knowledge of the Company, the absence of any stop order, and (y)
in the case of an underwriting, (A) a copy of an opinion, dated such date,
of such outside counsel, in such form and substance as is required to be
given to the underwriters, and (B) a copy of a letter, dated such date, from
the Company's independent certified public accountants, in such form and
substance as is required to be given by the Company's independent certified
public accountants to such underwriters;

                  (i) during the Registration Period or at any other time
when a Registration Statement is effective and available to the Holders for
the resale of Registrable Securities, provide to each Holder and its
representatives, upon reasonable prior notice and execution of a reasonable
non-disclosure agreement by such Holder, the opportunity to conduct a
reasonable inquiry of the Company's financial and other records during
normal business hours and make available its officers for questions
regarding information which such Holder may reasonably request in order to
fulfill any due diligence obligation on its part;

                  (j) permit counsel for each Holder to review the
Registration Statement and all amendments and supplements thereto, and any
comments made by the staff of the Commission concerning such Holder and/or
the transactions contemplated by the Transaction Documents and the Company's
responses thereto, within a reasonable period of time (but in no event less
than three (3) Business Days after such Holder has received such documents)
prior to the filing thereof with the Commission (or, in the case of comments
made by the staff of the Commission, within a reasonable period of time
following the receipt thereof by the Company); and

                  (k) in the event that, at any time, the number of shares
available under the

                                    -6-

Registration Statement is insufficient to cover one hundred percent (100%)
of the number of Outstanding Registrable Securities, the Company shall
promptly amend the Registration Statement or file a new registration
statement, in any event as soon as practicable, but not later than the
thirtieth (30th) day following notice from a Holder of the occurrence of
such event, so that the Registration Statement or such new registration
statement, or both, covers no less than (i) one hundred percent (100%) of
the outstanding Shares and issued Warrant Shares that constitute Registrable
Securities, plus (ii) one hundred percent (100%) of the Warrant Shares
issuable upon exercise of the Series C Warrant that constitute Registrable
Securities, plus (iii) one hundred twenty five percent (125%) of the Warrant
Shares issuable upon exercise of the Series D Warrant (without giving effect
to any limitation on such exercise that may be set forth in the Series D
Warrant) that constitute Registrable Securities. The Company shall use its
best efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof. Any
Registration Statement filed pursuant to this paragraph 4(k) shall state
that, to the extent permitted by Rule 416 under the Securities Act, such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon exercise of the Warrants
in order to prevent dilution resulting from stock splits, stock dividends or
similar events. Unless and until such amendment or new Registration
Statement becomes effective, each Holder shall have the rights described in
Section 2(c) above.

         5. OBLIGATIONS OF EACH HOLDER.
            --------------------------

         In connection with the registration of Registrable Securities
pursuant to a Registration Statement, each Holder shall:

                  (a) timely furnish to the Company in writing such
information regarding itself and the intended method of disposition of such
Registrable Securities as the Company shall reasonably request in order to
effect the registration thereof;

                  (b) upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraphs 4(f) or 4(g),
immediately discontinue any sale or other disposition of such Registrable
Securities pursuant to such Registration Statement until the filing of an
amendment or supplement as described in paragraph 4(f) or withdrawal of the
stop order referred to in paragraph 4(g), and, if such Holder has agreed in
writing to receive material, non-public information, to use commercially
reasonable efforts to maintain the confidentiality of such notice and its
contents;

                  (c) in the event of an underwritten offering of such
Registrable Securities in which such Holder participates pursuant to Section
3 hereof, enter into a customary and reasonable underwriting agreement and
execute such other documents (including without limitation "lock-up" and
indemnity agreements) as the Company and the managing underwriter for such
offering may reasonably request;

                  (d) to the extent required by applicable law, deliver a
preliminary and definitive prospectus to the purchaser of Registrable
Securities sold under the Registration Statement;

                                    -7-

                  (e) notify the Company when it has sold all of the
Registrable Securities held by it;

                  (f) notify the Company promptly in the event that any
information supplied by such Holder in writing for inclusion in such
Registration Statement or related prospectus is untrue or omits to state a
material fact required to be stated therein or necessary to make such
information not misleading in light of the circumstances then existing;
immediately discontinue any sale or other disposition of such Registrable
Securities pursuant to such Registration Statement until the filing of an
amendment or supplement to such prospectus as may be necessary so that such
prospectus does not contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing; and provide the Company with updates on such information as may be
appropriate to make such amendment or supplement effective for such purpose;
and

                  (g) otherwise use commercially reasonable efforts to
assist the Company and the underwriters, if any, in the preparation of
documentation reasonably necessary or desirable to effectuate the resale of
Registrable Securities pursuant to any Registration Statement filed in
accordance herewith.

         6.       INDEMNIFICATION.
                  ---------------

         In the event that any Registrable Securities are included in a
Registration Statement under this Agreement:

                  (a) To the extent permitted by law, the Company shall
indemnify and hold harmless each Holder, the officers, directors, employees,
agents and representatives of such Holder, and each person, if any, who
controls such Holder within the meaning of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), against
                                                  ------------
any losses, claims, damages, liabilities or reasonable out-of-pocket
expenses (whether joint or several) (collectively, including legal or other
expenses reasonably incurred in connection with investigating or defending
same, "Losses"), insofar as any such Losses arise out of or are based upon
       ------
(i) any untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Subject to the provisions of paragraph 6(c) below, the
Company will reimburse such Holder, and each such officer, director,
employee, agent, representative or controlling person, for any legal or
other out-of-pocket expenses as reasonably incurred by any such entity or
person in connection with investigating or defending any Loss; provided,
however, that the foregoing indemnity shall not apply to amounts paid in
settlement of any Loss if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably withheld), nor shall
the Company be obligated to indemnify any person for any Loss to the extent
that such Loss is (i) based upon and is in conformity with written
information furnished by such person expressly for use in such Registration
Statement or (ii) based on a failure of such person to deliver or cause to
be delivered the final prospectus contained in the Registration Statement
and made available by the Company, if such delivery is required by
applicable law.

                                    -8-

                  (b) To the extent permitted by law, each Holder who is
named in such Registration Statement as a selling stockholder, acting
severally and not jointly, shall indemnify and hold harmless the Company,
the officers, directors, employees, agents and representatives of the
Company, and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, against any Losses
arising out of (i) any untrue statement or alleged untrue statement of a
material fact contained in such Registration Statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, to the extent (and only to the extent) that
any such statement or omission is based upon and in conformity with written
information furnished by such Holder expressly for use in such Registration
Statement. Subject to the provisions of paragraph 6(c) below, such Holder
will reimburse any legal or other expenses as reasonably incurred by the
Company and any such officer, director, employee, agent, representative, or
controlling person, in connection with investigating or defending any such
Loss; provided, however, that the foregoing indemnity shall not apply to
      --------  -------
amounts paid in settlement of any such Loss if such settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld); and provided, further, that, in no event shall any indemnity
               --------  -------
under this subsection 6(b) exceed the net proceeds resulting from the sale
of the Registrable Securities sold by such Holder under such Registration
Statement.

                  (c) Promptly after receipt by an indemnified party under
this Section 6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in
and to assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have the right
to retain its own counsel, with the reasonably incurred fees and expenses of
one such counsel for all indemnified parties to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate under applicable standards
of professional conduct due to actual or potential conflicting interests
between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified
party under this Section 6 with respect to such action, but the omission so
to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 6 or with respect to any other action unless the indemnifying
party is materially prejudiced as a result of not receiving such notice.

                  (d) In the event that the indemnity provided in paragraph
(a) or (b) of this Section 6 is unavailable or insufficient to hold harmless
an indemnified party for any reason, the Company and each Holder agree,
severally and not jointly, to contribute to the aggregate Losses to which
the Company or such Holder may be subject in such proportion as is
appropriate to reflect the relative fault of the Company and such Holder in
connection with the statements or omissions which

                                    -9-

resulted in such Losses; provided, however, that in no case shall such
Holder be responsible for any amount in excess of the net proceeds resulting
from the sale of the Registrable Securities sold by it under the
Registration Statement. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information
provided by the Company or by such Holder. The Company and each Holder agree
that it would not be just and equitable if contribution were determined by
pro rata allocation or any other method of allocation which does not take
account of the equitable considerations referred to above. Notwithstanding
the provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. For purposes of this Section 6, each
person who controls a Holder within the meaning of either the Securities Act
or the Exchange Act and each officer, director, employee, agent or
representative of such Holder shall have the same rights to contribution as
such Holder, and each person who controls the Company within the meaning of
either the Securities Act or the Exchange Act and each officer, director,
employee, agent or representative of the Company shall have the same rights
to contribution as the Company, subject in each case to the applicable terms
and conditions of this paragraph (d).

                  (e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in an underwriting
agreement entered into in connection with an underwritten public offering
are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.

                  (f) Unless otherwise superceded by an underwriting
agreement entered into in connection with an underwritten public offering,
the obligations of the Company and each Holder under this Section 6 shall
survive the exercise of the Warrants in full, the completion of any offering
or sale of Registrable Securities pursuant to a Registration Statement under
this Agreement, or otherwise.

         7.       REPORTS.
                  -------

                  For such time as any Registrable Securities are
outstanding, with a view to making available to each Holder the benefits of
Rule 144 under the Securities Act ("Rule 144") and any other similar rule or
                                    --------
regulation of the Commission that may at any time permit such Holder to sell
securities of the Company to the public without registration, the Company
agrees to:

                  (a) make and keep public information available, as those
terms are understood and defined in Rule 144;

                  (b) file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Exchange Act;

                  (c) furnish to such Holder, so long as such Holder owns
any Registrable Securities, promptly upon written request (i) a written
statement by the Company, if true, that it has complied with the reporting
requirements to enable such Holder to rely on Rule 144(c), and that it has
also complied with the reporting requirements of the Securities Act and the
Exchange Act, (ii)

                                    -10-

to the extent not publicly available through the Commission's EDGAR
database, a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested by such Holder
in connection with such Holder's compliance with any rule or regulation of
the Commission which permits the selling of any such securities without
registration; and

                  (d) not at any time disclose material non-public
information to such Holder without first receiving such Holder's written
consent to such disclosure.

         8.       MISCELLANEOUS.
                  -------------

                  (a) Expenses of Registration. Except as otherwise provided
                      ------------------------
in the Securities Purchase Agreement, all reasonable expenses, other than
underwriting discounts and commissions and fees and expenses of counsel and
other advisors to each Holder, incurred in connection with the
registrations, filings or qualifications described herein, including
(without limitation) all registration, filing and qualification fees,
printers' and accounting fees, the fees and disbursements of counsel for the
Company, and the fees and disbursements incurred in connection with the
opinion and letter described in paragraph 4(h) hereof, shall be borne by the
Company.

                  (b) Amendment; Waiver. Except as expressly provided
                      -----------------
herein, neither this Agreement nor any term hereof may be amended or waived
except pursuant to a written instrument executed by the Company and the
Holders of at least two-thirds (2/3) of the number of Outstanding
Registrable Securities. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each Holder, each future Holder and the
Company, provided, however, that any such waver or consent shall be
         --------  -------
effective only in the specific instance and for the specific purpose for
which given.

                  (c) Notices. Any notice, demand or request required or
                      -------
permitted to be given by the Company or an Investor pursuant to the terms of
this Agreement shall be in writing and shall be deemed delivered (i) when
delivered personally or by verifiable facsimile transmission, unless such
delivery is made on a day that is not a Business Day, in which case such
delivery will be deemed to be made on the next succeeding Business Day, (ii)
on the next Business Day after timely delivery to an overnight courier and
(iii) on the Business Day actually received if deposited in the U.S. mail
(certified or registered mail, return receipt requested, postage prepaid),
addressed as follows:

                  If to the Company:

                  Applied Digital Solutions, Inc.
                  1690 South Congress Avenue
                  Suite 200
                  Delray Beach, Florida 33445
                  Attn: Scott R. Silverman
                  Tel:  561-805-8000
                  Fax:  561-805-0002

                                    -11-

                  with a copy to:

                  Holland & Knight LLP
                  701 Brickell Avenue, Suite 3000
                  Miami, Florida 33131
                  Mailing Address: P.O. Box 015441, Florida, 33101
                  Attn: Harvey A. Goldman, Esq.
                  Tel:  305-374-8500
                  Fax:  305-789-7799

and if to a Holder, to such address as shall be designated by such Holder in
writing to the Company.

                  (d) Assignment. Upon the transfer of any Warrant or
                      ----------
Registrable Securities by a Holder, the rights and obligations of such
Holder hereunder with respect to such securities so transferred shall be
assigned and delegated automatically to the transferee thereof, and such
transferee shall thereupon be deemed to be a "Holder" for purposes of this
Agreement, as long as: (i) the Company is, within a reasonable period of
time following such transfer, furnished with written notice of the name and
address of such transferee, (ii) the transferee agrees in writing with the
Company to be bound by all of the provisions hereof, and (iii) such transfer
is made in accordance with the applicable requirements of the Securities
Purchase Agreement; provided, however, that the registration rights granted
                    --------  -------
in this Agreement shall not be transferred to any person or entity that
receives any Warrant or Registrable Securities in a public transaction
pursuant to an effective registration statement under the Securities Act or
pursuant to Rule 144.

                  (e) Counterparts. This Agreement may be executed in
                      ------------
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed one and the same instrument. This Agreement, once
executed by a party, may be delivered to any other party hereto by facsimile
transmission.

                  (f) Governing Law. This Agreement shall be governed by and
                      -------------
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed entirely within the State of Delaware.

                  (g) Holder of Record. A person is deemed to be a Holder
                      ----------------
whenever such person owns or is deemed to own of record any Warrant or
Registrable Securities.

                  (h) Entire Agreement. This Agreement, the Securities
                      ----------------
Purchase Agreement, the Warrants, and the other Transaction Documents
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
and therein. This Agreement, the Securities Purchase Agreement, the
Warrants, and the other Transaction Documents supersede all prior agreements
and understandings among the parties hereto with respect to the subject
matter hereof and thereof.

                                    -12-

                  (i) Headings. The headings in this Agreement are for
                      --------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (j) Third Party Beneficiaries. This Agreement is intended
                      -------------------------
for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.

                         [Signature Pages to Follow]

                                    -13-

         IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first-above written.

APPLIED DIGITAL SOLUTIONS, INC.

By: /s/ Scott Silverman
   -------------------------------
   Name:  Scott Silverman
   Title: CEO

SATELLITE STRATEGIC FINANCE ASSOCIATES, LLC

By: Satellite Asset Management, L.P., its Manager

    By: /s/ Simon Raykher
       ---------------------------
       Simon Raykher
       General Counsel

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