Document:

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                                                                    Exhibit 10.2

                               BIRCH TELECOM, INC.

                AMENDED AND RESTATED PURCHASERS RIGHTS AGREEMENT
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                              AMENDED AND RESTATED
                           PURCHASERS RIGHTS AGREEMENT

         THIS AMENDED AND RESTATED PURCHASERS RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of April 13, 2000 by and among BIRCH
TELECOM, INC., a Delaware corporation (the "Company"), and certain purchasers of
the Company's Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred (together, the
"Series Preferred"), and of the Company's Common Stock (the "Common Stock")
(including the purchasers of the Common Shares), and certain holders of stock
options, each as set forth on Exhibit A hereto. Such purchasers of the Series
Preferred and Common Stock and holders of stock options or Option Shares
(including members of Key Management) shall be referred to hereinafter as the
"Purchasers" and each individually as a "Purchaser."

                                    RECITALS

         WHEREAS, the Purchasers possess registration rights, information rights
and other rights pursuant to that certain Amended and Restated Purchaser Rights
Agreement, dated as of March 30, 1999, among the Company and the Purchasers (the
"Prior Agreement");

         WHEREAS, the Purchasers desire to amend and restate the Prior
Agreement.

         NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto further agree as follows:

1.       CERTAIN DEFINITIONS.

         Capitalized terms used herein and not otherwise defined shall have the
meaning ascribed thereto in the Purchase Agreement. As used in this Agreement,
the following terms shall have the meanings set forth below:

                  (a) "AFFILIATE" shall have the meaning ascribed to such term
in Rule 12b-2 promulgated under the Exchange Act.

                  (b) "COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.

                  (c) "COMMON SHARES" shall mean the shares of the Company's
Common Stock issued pursuant to the Securities Purchase Agreement.

                  (d) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
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                  (e) "HOLDER" shall mean any Purchaser who holds Registrable
Securities and any holder of Registrable Securities to whom the registration
rights conferred by this Agreement have been transferred in compliance with
Section 2.9 and Section 3 hereof.

                  (f) "INITIATING HOLDERS" shall mean any Holder or Holders who
in the aggregate hold at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding Registrable Securities.

                  (g) "KEY MANAGEMENT" shall mean David E. Scott, Jeffrey D.
Shackelford, Gary L. Chesser, David W. Vranicar, Donald H. Goldman, Bradley A.
Moline and Gregory C. Lawhon.

                  (h) "1998 AGREEMENT" shall mean that certain Purchaser Rights
Agreement, dated as of February 10, 1998, among the Company and certain Persons.

                  (i) "OPTION SHARES" shall mean the shares of Common Stock
issued or issuable upon the exercise of stock options granted pursuant to a
stock option plan of the Company (including the vested and unvested shares of
Common Stock held by Key Management as of the date hereof that were obtained
pursuant to the exercise of stock options pursuant to a stock option plan of the
Company).

                  (j) "OTHER PURCHASERS" shall mean persons other than Holders
who, by virtue of agreements with the Company, are entitled to include their
securities in certain registrations hereunder.

                  (k) "QUALIFYING PUBLIC OFFERING" shall mean the closing of a
firmly underwritten public offering pursuant to an effective registration
statement under the Securities Act covering the offer and sale of Common Stock
for the account of the Company in which the gross proceeds to the Company
(before underwriting discounts, commissions and fees) are at least $60,000,000.

                  (l) "PERSONS" shall mean any individual, corporation
(including non-profit corporation), general partnership, limited partnership,
limited liability partnership, joint venture, estate, trust, company, firm or
other enterprise, association, organization or entity, or any governmental body
or authority (federal, state or local).

                  (m) "REGISTRABLE SECURITIES" shall mean (i) the Common Shares
and fully vested Option Shares; and (ii) the shares of Common Stock issuable
upon the conversion of the Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock;
provided, however, that Registrable Securities shall not include any shares of
Common Stock which have previously been registered or which have been sold to
the public either pursuant to a registration statement or Rule 144, or which
have been sold in a private transaction in which the transferor's rights and
obligations under this Agreement are not assigned.

                  (n) The terms "REGISTER," "REGISTER" and "REGISTRATION" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the

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Securities Act and applicable rules and regulations thereunder, and the
declaration or ordering of the effectiveness of such registration statement.

                  (o) "REGISTRATION EXPENSES" shall mean all expenses incurred
in effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and expenses of any regular or special audits incident to or
required by any such registration, but shall not include Selling Expenses.

                  (p) "RESTRICTED HOLDERS" shall mean the Purchasers set forth
on Exhibit B hereto.

                  (q) "RESTRICTED SECURITIES" shall mean any Registrable
Securities required to bear the legend set forth in Section 3.4 hereof.

                  (r) "RULE 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.

                  (s) "RULE 145" shall mean Rule 145 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.

                  (t) "SECURITIES" shall mean (i) the Common Stock, (ii) the
Series Preferred, and (iii) the shares of Common Stock issuable upon the
conversion of the Series Preferred. Notwithstanding the foregoing, Securities
shall not include any shares of Common Stock that have been issued by the
Company pursuant to a registration statement or have been sold to the transferee
in a "public" sale pursuant to a registration statement or Rule 144, PROVIDED,
HOWEVER, that Securities sold to a transferee in a "public" sale pursuant to
Rule 144 that were sold by a Purchaser in an Exempt Transfer pursuant to
Sections 3.2(a), (b), (c), (d), (e), (f), (g) or (h) shall still be deemed to be
Securities.

                  (u) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.

                  (v) "SECURITIES PURCHASE AGREEMENT" shall mean that certain
Securities Purchase Agreement, dated as of February 10, 1998, by and among the
Company and certain of the Existing Purchasers, as the same may be amended and
in effect from time to time.

                  (w) "SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of
Registrable Securities.

                  (x) "WARRANTS" shall mean the Company's issued and outstanding
Warrants to purchase 1,409,734 shares of Common Stock issued pursuant to the
Warrant Agreement, dated as of June 23, 1998, between the Company and Norwest
Bank Minnesota, National Association, as warrant agent.

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         References to BTI herein shall refer to BTI and each of its Affiliates,
including, without limitation, Kohlberg Kravis Roberts & Co. L.P. and the KKR
1996 Fund L.P.

2.       REGISTRATION RIGHTS.

         2.1      REQUESTED REGISTRATION.

                  (a) REQUEST FOR REGISTRATION. If the Company shall receive
from Initiating Holders at any time after the earlier of (I) five years after
the date of this Agreement or (II) one year after the effective date of the
first registration statement filed by the Company pursuant to the Securities Act
covering an underwritten offering of Common Stock to the general public, a
written request that the Company effect any registration with respect to all or
a part of the Registrable Securities, the Company will:

                           (i) promptly give written notice of the proposed
registration to all other Holders; and

                           (ii) as soon as practicable, use its commercially
reasonable efforts to effect such registration (including, without limitation,
filing post-effective amendments, appropriate qualifications under applicable
blue sky or other state securities laws, and appropriate compliance with the
Securities Act) and as would permit or facilitate the sale and distribution of
all or such portion of such Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a written request
received by the Company within twenty (20) calendar days after such written
notice from the Company is given. The registration statement filed pursuant to
the request of the Initiating Holders may, subject to the provisions of Sections
2.1(e), include other securities of the Company, with respect to which
registration rights have been granted, and may include securities of the Company
being sold for the account of the Company.

         The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 2.1(a):

                                    (A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification, or compliance, unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;

                                    (B) After the Company has initiated one such
registration pursuant to this Section 2.1(a) (counting for these purposes only
registrations which have been declared or ordered effective and pursuant to
which securities have been sold and registrations which have been withdrawn by
the Holders as to which the Holders have not elected to bear the Registration
Expenses pursuant to Section 2.3 hereof and would, absent such election, have
been required to bear such expenses) or

                                    (C) During the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the date of filing
of, and ending on a date one hundred

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eighty (180) days after the effective date of, a Company-initiated registration;
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective.

                  (b) SPECIAL DEMAND RIGHTS. After 180 days after the effective
date of the first registration statement filed by the Company pursuant to the
Securities Act covering an underwritten offering of Common Stock to the general
public, upon the written request of BTI (or its Affiliates or a transferee who
agrees to be bound by the terms of this Agreement) (a "BTI Demand"), that the
Company effect any registration with respect to all or a part of the Registrable
Securities held by such entity, the Company will:

                           (i) promptly give written notice of the proposed
registration to all other Holders; and

                           (ii) as soon as practicable, use commercially
reasonable efforts to effect such registration (including, without limitation,
filing post-effective amendments, appropriate qualifications under applicable
blue sky or other state securities laws, and appropriate compliance with the
Securities Act) and as would permit or facilitate the sale and distribution of
all or such portion of such Registrable Securities as are specified in such
request (including shares of Common Stock issuable upon the conversion of Series
F Preferred Stock, if applicable), together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request received by the Company within twenty (20)
calendar days after such written notice from the Company is given. The
registration statement filed pursuant to a BTI Demand may, subject to the
provisions of Sections 2.1(e), include other securities of the Company, with
respect to which registration rights have been granted, and may include
securities of the Company being sold for the account of the Company.

         The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 2.1(b):

                                    (A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification, or compliance, unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;

                                    (B) After the Company has initiated pursuant
to this Section 2.1(b) (i) two such registrations, if BTI has not exercised the
Option in full, and (iii) three such registration if BTI has exercised the
Option in full (counting for these purposes only registrations which have been
declared or ordered effective and pursuant to which at least 80% of the
securities requested to be sold by BTI have been sold);

                                    (C) If the party making the BTI Demand holds
less than 5% of the outstanding shares of Common Stock (on an as converted
basis) at the time of such demand;

                                    (D) During the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the date of filing
of, and ending on a date one hundred eighty (180) days after the effective date
of, a Company-initiated registration; provided

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that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective;

                  (c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the requests contemplated in
Sections 2.1(a) and 2.1(b); provided, however, that if (I) in the good faith
judgment of the Board of Directors of the Company, such registration would be
seriously detrimental to the Company and the Board of Directors of the Company
concludes, as a result, that it is essential to defer the filing of such
registration statement at such time, and (II) the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company for such registration statement to be filed
in the near future and that it is, therefore, essential to defer the filing of
such registration statement, then the Company shall have the right to defer such
filing (except as provided in clause (C) above) for a period of not more than
one hundred twenty (120) days after receipt of the request of the Initiating
Holders or the BTI Demand, as the case may be, and, provided further, that the
Company shall not defer its obligation in this manner more than once in any
twelve-month period.

                  (d) UNDERWRITING. If the Holders requesting registration
intend to distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as part of their
request made pursuant to Section 2.1(a) or 2.1(b) and the Company shall include
such information in the written notice referred to in Section 2.1(a)(i) and
Section 2.1(b)(i). In such event, the right of any Holder to registration
pursuant to Sections 2.1(a) or 2.1(b) shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. A
Holder may elect to include in such underwriting all or a part of the
Registrable Securities such Holder holds.

                  (e) PROCEDURES. If the Company shall request inclusion in any
registration pursuant to Sections 2.1(a) or 2.1(b) of securities being sold for
its own account, or if other persons shall request inclusion in any registration
pursuant to Sections 2.1(a) or 2.1(b), the Initiating Holders or the party
making the BTI Demand shall, on behalf of all Holders, offer to include such
securities in the underwriting and may condition such offer on their acceptance
of the further applicable provisions of this Section 2. The Company shall
(together with all Holders and other persons proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders, in the case of registrations pursuant to Section 2.1(a) or the entity
making the BTI Demand, in the case of registrations pursuant to Section 2.1(b),
which underwriters are reasonably acceptable to the Company. Notwithstanding any
other provision of this Section 2.1(e), if the representative of the
underwriters advises the Initiating Holders or the entity making the BTI Demand,
in writing that marketing factors require a limitation on the number of shares
to be underwritten, the number of shares to be included in the underwriting or
registration shall be allocated: first, to the Holders of Registrable Securities
pro rata based on the number of shares of Registrable Securities for which
registration was requested; and second, to the Company for securities being sold
for its own account; and finally, to the holders of other securities of the
Company with

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registration rights pro rata based on the number of shares for which
registration was requested. The Company shall not limit the number of
Registrable Securities to be included in a registration statement pursuant to
this Section 2.1 in order to include shares held by Purchasers with no
registration rights or any other shares of stock issued to employees, officers,
directors or consultants pursuant to a stock option plan of the Company or in
order to include in such registration securities registered for the Company's
own account. If a person who has requested inclusion in such registration as
provided above does not agree to the terms of any such underwriting, such person
shall be excluded therefrom by written notice from the Company, the underwriter,
the Initiating Holders or BTI, as the case may be, and the securities so
excluded shall also be withdrawn from registration. Any Registrable Securities
or other securities excluded or withdrawn from such underwriting shall also be
withdrawn from such registration. If shares are so withdrawn from the
registration and if the number of shares to be included in such registration was
previously reduced as a result of marketing factors pursuant to this Section
2.1(e), then the Company shall offer to all holders who have retained rights to
include securities in the registration the right to include additional
securities in the registration in an aggregate amount equal to the number of
shares so withdrawn, with such shares to be allocated among such Holders
requesting additional inclusion in accordance with this Section 2.1(e).

         2.2      COMPANY REGISTRATION.

                  (a) If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or
holders exercising their respective demand registration rights (other than
pursuant to Section 2.1 hereof), other than a registration statement on Form S-8
relating solely to employee benefit plans, or a registration relating to a
corporate reorganization or other transaction under Rule 145, or a registration
on any registration form that does not permit secondary sales, the Company will:

                           (i) promptly give to each Holder written notice
thereof; and

                           (ii) use its best efforts to include in such
registration (and any related qualification under blue sky laws or other
compliance), except as set forth in Section 2.2(b) below, and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made by any Holder and received by the Company
within ten (10) calendar days after the written notice from the Company
described in clause (i) above is given by the Company. Such written request may
specify all or a part of a Holder's Registrable Securities.

                  (b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 2.2(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 2.2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected by the Company.

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                  (c) Notwithstanding any other provision of this Section 2.2,
if the representative of the underwriters advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise all holders of securities requesting registration, and
the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated: first, to the Company for
securities being sold for its own account; second, to the Holders of Registrable
Securities pro rata based on the number of shares of Registrable Securities for
which registration was requested; and finally, to the holders of other
securities of the Company with registration rights pro rata based on the number
of Other Shares for which registration was requested. The Company shall not
limit the number of Registrable Securities to be included in a registration
pursuant to this Agreement in order to include shares held by Purchasers with no
registration rights or any other shares of stock issued to employees, officers,
directors, or consultants pursuant to a stock option plan of the Company, in
order to include in such registration securities registered for the Company's
own account. If any person does not agree to the terms of any such underwriting,
he shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.

If shares are so withdrawn from the registration or if the number of shares of
Registrable Securities to be included in such registration was previously
reduced as a result of marketing factors, the Company shall then offer to all
persons who have retained the right to include securities in the registration
the right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among the persons requesting additional inclusion as set forth above.

         2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 2.1 and 2.2 hereof and reasonable fees and expenses of one counsel for
the selling Holders shall be borne by the Company; provided, however, that if
the Holders bear the Registration Expenses for any registration proceeding begun
pursuant to Section 2.1(a) and subsequently withdrawn by the Holders registering
shares therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 2.1(a)(ii)(B) hereof. Furthermore, in the event
that a withdrawal by the Holders is based upon material adverse information
relating to the Company that is different from the information known or
available (upon request from the Company or otherwise) to the Holders requesting
registration at the time of their request for registration under Section 2.1,
such registration shall not be treated as a counted registration for purposes of
Section 2.1 hereof, even though the Holders do not bear the Registration
Expenses for such registration. All Selling Expenses relating to securities so
registered shall be borne by the holders of such securities pro rata on the
basis of the number of shares of securities so registered on their behalf, as
shall any other expenses in connection with the registration required to be
borne by the holders of such securities.

         2.4 REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to Section 2, the Company will keep each Holder advised
in writing as to the

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initiation of each registration and as to the completion thereof. At its
expense, the Company will use commercially reasonable efforts to:

                  (a) Keep such registration effective for a period of one
hundred eighty (180) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs; provided, however, that such 180-day period shall be extended for
a period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company;

                  (b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;

                  (c) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Holder from time to time may reasonably request and provide the Holders,
underwriters and their respective counsel the opportunity to participate in the
preparation of such documents;

                  (d) Notify each seller of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;

                  (e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed and use commercially reasonable efforts to
register and qualify the Registrable Securities under state securities laws or
blue sky laws of those jurisdictions within the United States and Puerto Rico as
shall be reasonably required in order to effect the distribution of the
Registrable Securities; provided, however, that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the requirements of
this Section 2.4 be obligated to be so qualified or to consent to general
service of process in any such jurisdiction and provided that the Company shall
not be required to register or qualify such Registrable Securities in any
jurisdiction in which the Company would solely as a result thereof (i) become
subject to taxation, (ii) be required (or any shareholder would be required) to
escrow shares of Common Stock or be subject to other significant limitations on
its (or any such shareholder's) disposition of such shares or (iii) be required
to amend the terms of such public offering, in each case in a manner which is
materially adverse to the Company;

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                  (f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration;

                  (g) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and

                  (h) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 2.1 hereof, the Company will
enter into an underwriting agreement in form reasonably necessary to effect the
offer and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the underwriter
so requests the underwriting agreement will contain customary contribution
provisions.

                  (i) Use its commercially reasonable efforts to obtain the
withdrawal of any stop order suspending the effectiveness of such registration
statement or any post-effective amendment thereto at the earliest practicable
date;

                  (j) Cause to be furnished, at the request of each Holder of
Registrable Securities, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a registration, if
such Registrable Securities are being sold through underwriters, or, if such
Registrable Securities are not being sold through underwriters, on the date that
the registration statement with respect to such Registrable Securities becomes
effective, (i) a signed counterpart of an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance reasonably satisfactory to such Holder, addressed to the
underwriters, if any, and to each Holder of Registrable Securities, and (ii) a
letter dated such date, signed by the independent certified public accountants
of the Company, in form and substance reasonably satisfactory to such Holder of
Registrable Securities, addressed to the underwriters, if any, and to such
Holder of Registrable Securities, covering substantially the same matters with
respect to such registration statement (and the prospectus included therein)
and, in the case of the independent certified public accountants' letter, with
respect to events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuers' counsel and in independent certified
public accountants' letters delivered to the underwriters in underwritten public
offerings of securities and, in the case of the independent certified public
accountants' letter, such other financial matters, and, in the case of the legal
opinion, such other legal matters, as such Holder (or the underwriters, if any)
may reasonably request; and

                  (k) Otherwise use commercially reasonable efforts to make
available the executive officers of the Company (including David Scott and
Bradley Moline) to participate in such "Road Shows" or other selling efforts as
may be reasonably requested by the Holders in connection with the distribution
of the Registrable Securities.

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         2.5      INDEMNIFICATION.

                  (a) The Company will indemnify each Holder, each of its
officers, directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 2, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel, and accountants and each person controlling such Holder, each such
underwriter, and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability, or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability, or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by such Holder or underwriter and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this Section
2.5(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent has not been unreasonably withheld).

                  (b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify the Company, each of
its directors, officers, partners, legal counsel, and accountants and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, each other such Holder and Other
Purchaser, and each of their officers, directors, and partners, and each person
controlling such Holder or Other Purchaser, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, Other Purchasers,
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder and stated to be
specifically for use therein provided,

                                       11
<PAGE>

however, that the obligations of such Holder hereunder shall not apply to
amounts paid in settlement of any such claims, losses, damages, or liabilities
(or actions in respect thereof if such settlement is effected without the
consent of such Holder (which consent shall not be unreasonably withheld); and
provided that in no event shall any indemnity under this Section 2.5 exceed the
gross proceeds from the offering received by such Holder.

                  (c) Each party entitled to indemnification under this Section
2.5 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnifying Party otherwise agrees
or unless representation by the Indemnifying Party's counsel is inappropriate
due to actual or potential conflicts of interest), and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 2, to the
extent such failure is not prejudicial. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.

                  (d) If the indemnification provided for in this Section 2.5 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.

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

                                       12
<PAGE>

                  (f) Notwithstanding any of the foregoing, no Holder shall be
required to contribute any amount in excess of the amount of net proceeds
received by such Holder from the sale of Registrable Securities covered by such
registration statement and no person guilty of fraudulent misrepresentation
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

         2.6 INFORMATION BY HOLDER. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 2.

         2.7 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and until four
years after the date of this Agreement, if the Company enters into any agreement
with any holder or prospective holder of any securities of the Company giving
such holder or prospective holder any registration rights the terms of which are
more favorable than the registration rights granted to the Holders hereunder,
then the Company shall give equivalent registration rights to the Holders.

         2.8 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use commercially reasonable efforts to:

                  (a) Make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after ninety (90) days following the
effective date of the first registration under the Securities Act filed by the
Company for an offering of its securities to the general public;

                  (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 at any time after it has become subject to such reporting
requirements;

                  (c) So long as a Holder owns any Restricted Securities,
furnish to the Holder forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety (90) days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.

         2.9 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register securities granted to a Holder by the Company under this
Section 2 may be transferred or assigned by a Holder only to a transferee or
assignee of not less than 200,000 shares of Registrable Securities (as currently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits, and the like), provided that the Company is
given written notice prior to said transfer or assignment, stating the name and
address of the

                                       13
<PAGE>

transferee or assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned, and, provided further,
that the transferee or assignee of such rights assumes in writing the
obligations of such Holder under this Agreement.

         2.10 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of securities of the Company, a Purchaser shall not sell or
otherwise transfer or dispose of any securities of the Company held by such
Purchaser (other than those included in the registration) during the one hundred
eighty (180) day period following the effective date of a registration statement
of the Company filed under the Securities Act, provided that:

                  (a) such agreement shall only apply to the first such
registration statement of the Company, including securities to be sold on its
behalf to the public in an underwritten offering; and

                  (b) all officers and directors of the Company are bound by and
have entered into similar agreements.

         The obligations described in this Section 2.10 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.

         2.11 DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 2.

3.       RESTRICTIONS ON TRANSFER.

         3.1 TRANSFER. No Purchaser will, voluntarily or involuntarily, directly
or indirectly, sell, transfer, assign, donate, pledge or otherwise encumber or
dispose of any interest in all or any portion of the Securities or Option Shares
(a "Transfer") except pursuant to an Exempt Transfer.

         3.2 EXEMPT TRANSFER. The restrictions contained in this Section 3 will
not apply to any Transfer which is one of the following "Exempt Transfers":

                  (a) the Transfer by a partnership to its partners or retired
partners in accordance with partnership interests;

                  (b) the Transfer by a corporation to its shareholders in
accordance with their interest in the corporation;

                  (c) the Transfer by a limited liability company to its members
in accordance with their interest in the limited liability company;

                                       14
<PAGE>

                  (d) the Transfer by a Purchaser to such Purchaser's spouse,
lineal descendant, father, mother, brother or sister ("Immediate Family");

                  (e) the Transfer by a Purchaser to a custodian or trustee for
the account of such Purchaser or such Purchaser's Immediate Family;

                  (f) the Transfer by a Purchaser (other than Transfers of
Option Shares by a member of Key Management) to any Affiliate of that Purchaser;

                  (g) the Transfer to the Company or any other Purchaser;
provided, however, that a member of Key Management may not Transfer any Option
Shares to the Company or any other Purchaser during the Key Management
Restricted Period (as defined below), except for Transfers to the Company in
payment of the exercise price of any stock option granted pursuant to a stock
option plan and/or option agreement of the Company;

                  (h) a bona fide pledge or mortgage with a commercial lending
institution that creates a mere security interest;

                  (i) pursuant to Section 5 or 6 of this Agreement; PROVIDED,
THAT:

                           (i) Transfers of fully vested Option Shares held by
Key Management may be made only after the fifth anniversary of the date of the
option grant pursuant to which such Option Shares were acquired (the "Key
Management Restricted Period"); provided, however, that prior to the end of the
applicable Key Management Restricted Period with respect to any fully vested
Option Shares, each member of Key Management may exercise its co-sale rights
under Section 6 on Transfers by BTI or its Affiliates; and

                           (ii) Restricted Holders may not Transfer any of their
respective Securities under this subsection 3.2(i) for a period of three (3)
years from and including the closing date of the Company's first Qualifying
Public Offering (the "IPO Closing Date"); PROVIDED, HOWEVER, that:

                                    (A) Restricted Holders may transfer during
each of the periods set forth below up to the percentage of their respective
Securities (not including any Option Shares held by Key Management) outstanding
on the IPO Closing Date set forth opposite such periods:

<TABLE>
<CAPTION>
                   Period (measured in
               days from IPO Closing Date)           Percentage
               ---------------------------           ----------
<S>                                                      <C>
                     1 through 180                        0%
                     181 through 270                     12.5%
                     271 through 365                     12.5%
                     366 through 456                      8.75%
                     457 through 546                      8.75%
                     547 through 636                      8.75%
                     637 through 730                      8.75%
                     731 through 821                     10%

                                       15
<PAGE>

                     822 through 911                     10%
                     912 through 1001                    10%
                     1002 through 1095                   10%
</TABLE>

                                    (B) Any unused portion of the percentage of
Securities (not including any Option Shares held by Key Management) a Restricted
Holder may transfer pursuant to subsection 3.2(ii)(A) above for any given period
may be carried over and added to the percentage permitted to be transferred in a
subsequent period.

                  (j) pursuant to Section 2 or 7 of this Agreement; provided,
however, each member of Key Management acknowledges and agrees that he may not
Transfer any Option Shares pursuant to Section 2 until the expiration of the Key
Management Restricted Period, except that prior to the end of the applicable Key
Management Restricted Period with respect to any Option Shares, each member of
Key Management may request registration of fully vested Option Shares pursuant
to Section 2.1 or 2.2 in an amount equal to the product of (i) the number of
fully vested Option Shares then held by such member of Key Management and (ii)
the quotient determined by dividing (A) the total number of shares of Common
Stock requested by BTI or its Affiliates to be registered in such offering by
(B) the aggregate number of shares of Common Stock beneficially owned by BTI and
its Affiliates; or

                  (k) transfers of fully vested Option Shares held Key
Management that are made after a Qualifying Public Offering but before the fifth
anniversary of the date of the option grant pursuant to which such Option Shares
were acquired; provided, that (i) no more than ten percent (10%) of the fully
vested Option Shares held by any individual may be transferred in any given
calendar year pursuant to this Section 3.2(k), (ii) any unused portion of this
ten percent (10%) from a given calendar year may be carried over to, and be
available for transfers in, subsequent calendar years pursuant to this Section
3.2(k), and (iii) in no event can any individual transfer more than an aggregate
of twenty five percent (25%) of their fully vested Option Shares pursuant to
this Section 3.2(k).

         3.3 SECURITIES LAWS; ASSIGNMENT OF OBLIGATIONS. In addition to any
other restriction on Transfer herein, such Purchaser will not effect any
Transfer (other than Transfers pursuant to Sections 2, 3.2(i) or 7 hereof) until
the transferee has agreed in writing to be bound by the terms of this Agreement,
at which time such transferee shall be a "Purchaser" for all purposes of this
Agreement, and:

                  (a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or

                  (b) Such Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and if
reasonably requested by the Company, such Purchaser shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the

                                       16
<PAGE>

Securities Act; provided however, that it is agreed that the Company will not
require opinions of counsel for transactions made pursuant to Rule 144 except in
unusual circumstances.

         3.4 LEGEND.

                  (a) Each certificate representing Securities shall (unless
otherwise permitted by the provisions of this Agreement) be stamped or otherwise
imprinted with legends substantially similar to the following (in addition to
any legend required under applicable state securities laws):

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED TO EFFECTUATE
SUCH TRANSACTION.

THE SALE, TRANSFER OR PLEDGE OF THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN PURCHASER RIGHTS AGREEMENT BETWEEN THE COMPANY AND
CERTAIN HOLDERS OF ITS SECURITIES, AS THE SAME MAY BE AMENDED AND IN EFFECT FROM
TIME TO TIME. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO
THE SECRETARY OF THE COMPANY.

                  (b) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any Purchaser if the Purchaser shall
have obtained an opinion of counsel at such Purchaser's expense (which counsel
may be counsel to the Company) reasonably acceptable to the Company to the
effect that the securities proposed to be disposed of may lawfully be so
disposed of without registration, qualification or legend.

         3.5 IMPROPER TRANSFER. Any attempt to Transfer any Securities or Option
Shares which is not in accordance with this Agreement shall be null and void,
and the Company shall not give any effect to such attempted Transfer in the
records of the Company.

4.       PRE-EMPTIVE RIGHT.

         4.1 PRE-EMPTIVE RIGHT. The Company hereby grants to each Purchaser who
owns shares of Series Preferred or Common Stock (such Purchasers referred to as
the "Pre-Emptive Purchasers") the right to purchase a pro rata portion of New
Securities (as defined in Section 4.2) which the Company may, from time to time,
propose to sell and issue (the "Pre-Emptive Right"). Such Pre-Emptive
Purchaser's pro rata share for purposes of this Pre-Emptive Right is the ratio
of the number of shares of Common Stock owned by such Pre-Emptive Purchaser (on
an as-converted, as-exercised basis) immediately prior to the issuance of New
Securities, to the total number of shares of Common Stock outstanding
immediately prior to the issuance of New Securities, assuming full conversion of
all securities and full exercise of all outstanding rights,

                                       17
<PAGE>

options and warrants to acquire Common Stock of the Company. Each Pre-Emptive
Purchaser exercising their portion of the Pre-Emptive Right in full (an
"Exercising Pre-Emptive Purchaser") shall have a right of over-allotment such
that if any other Pre-Emptive Purchaser fails to exercise its right hereunder to
purchase its pro rata share of New Securities (a "Non-Purchasing Pre-Emptive
Purchaser"), such Exercising Pre-Emptive Purchaser may purchase such portion, on
a pro rata basis, by giving written notice to the Company within ten (10)
calendar days from the date that the Company provides written notice of the
amount of New Securities such Non-Purchasing Pre-Emptive Purchasers have failed
to exercise their Pre-Emptive Rights hereunder. This Pre-Emptive Right shall be
subject to the following provisions of this Section 4.

         4.2 NEW SECURITIES. "New Securities" shall mean any capital stock
(including Common Stock and/or Preferred Stock) of the Company whether now
authorized or not, and rights, options or warrants to purchase such capital
stock, and securities of any type whatsoever that are, or may become,
convertible into capital stock; provided that the term "New Securities" does not
include (i) securities purchased under the Securities Purchase Agreement, Series
D Purchase Agreement, dated July 2, 1999 (the "Series D Purchase Agreement"),
the plan of recapitalization adopted by the Board of Directors and stockholders
of the Company providing for the conversion of each share of the Series B
Preferred Stock into one share of Series B Preferred Stock and 0.22222 of a
share of Series E Preferred Stock (the "Series E Recapitalization") or Purchase
Agreement; (ii) securities issuable upon conversion or exercise of the
securities purchased under the Securities Purchase Agreement, Series D Purchase
Agreement, Series E Recapitalization or Purchase Agreement;(iii) securities
issued pursuant to the acquisition of another business entity or business
segment of any such entity by the Company by merger, purchase of substantially
all the assets or other reorganization whereby the Company will own more than
fifty percent (50%) of the voting power of such business entity or business
segment of any such entity; (iv) any borrowings, direct or indirect, from
financial institutions or other Persons by the Company, whether or not currently
authorized, including any type of loan or payment evidenced by any type of debt
instrument, provided such borrowings do not have any equity features including
warrants, options or other rights to purchase capital stock and are not
convertible into capital stock of the Company; (v) securities issued to
employees, consultants, officers or directors of the Company pursuant to any
stock option, stock purchase or stock bonus plan, agreement or arrangement
approved by the Board of Directors; (vi) securities issued to vendors or
customers or to other Persons in similar commercial situations with the Company
if such issuance is approved by the Board of Directors; (vii) securities issued
in connection with obtaining lease financing, whether issued to a lessor,
guarantor or other Person; (viii) securities issued in connection with any stock
split, stock dividend or recapitalization of the Company; and (ix) securities
issuable upon the exercise of warrants pursuant to the Warrant Agreement, dated
June 23, 1998, between the Company and Norwest Bank Minnesota, National
Association,

         4.3 NOTICE. In the event the Company proposes to undertake an issuance
of New Securities, it shall give each Pre-Emptive Purchaser written notice of
its intention, describing the type of New Securities, and their price and the
general terms upon which the Company proposes to issue the same. Each such
Pre-Emptive Purchaser shall have twenty (20) calendar days after any such notice
is given to agree to purchase such Pre-Emptive Purchaser's pro rata share of
such New Securities for the price and upon the terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.

                                       18
<PAGE>

         4.4 SELLING PERIOD. In the event any Pre-Emptive Purchaser or
Exercising Pre-Emptive Purchaser fails to exercise fully the Pre-Emptive Right
within said twenty (20) day period and after the expiration of the 10-day period
for the exercise of the over-allotment provisions of Section 4.1, the Company
shall have one hundred twenty (120) calendar days thereafter to sell or enter
into an agreement (pursuant to which the sale of New Securities covered thereby
shall be closed, if at all, within one hundred twenty (120) calendar days from
the date of said agreement) to sell the New Securities respecting which any
Pre-Emptive Purchasers' or Exercising Pre-Emptive Purchasers' Pre-Emptive Right
option set forth in this Section 4 was not exercised, at a price and upon terms
no more favorable to the purchasers thereof than specified in the Company's
notice to the Pre-Emptive Purchasers pursuant to Section 4.3. In the event the
Company has not sold within said 120-day period or entered into an agreement to
sell the New Securities in accordance with the foregoing within said 120-day
period from the date of said agreement, the Company shall not thereafter issue
or sell any New Securities, without first again offering such securities to the
Pre-Emptive Purchasers in the manner provided in Section 4.3 above.

         4.5 TRANSFER OF PRE-EMPTIVE RIGHT. The Pre-Emptive Right set forth in
this Section 4 may be transferred or assigned by a Pre-Emptive Purchaser only to
a transferee or assignee of not less than (i) 200,000 shares of Series B
Preferred Stock, (ii) 200,000 shares of Series C Preferred Stock, (iii) 200,000
shares of Series D Preferred Stock (iv) 200,000 shares of Series E Preferred
Stock, (v) 200,000 shares of Series F Preferred Stock or (vi) 200,000 shares of
Common Stock (in each case, as currently constituted and subject to subsequent
adjustments for stock splits, stock dividends, reverse stock splits, and the
like), provided that the Company is given written notice prior to said transfer
or assignment, stating the name and address of the transferee or assignee and
identifying the securities with respect to which such Pre-Emptive Rights are
being transferred or assigned, and, provided further, that the transferee or
assignee of such rights assumes in writing the obligations of such Pre-Emptive
Purchaser under this Agreement.

         4.6 TERMINATION OF PRE-EMPTIVE RIGHT. Notwithstanding any other
provision of this Article 4, no Purchaser shall have any Pre-Emptive Right
pursuant to this Agreement or otherwise with respect to the Company's initial
public offering of its common stock pursuant to a registration statement on Form
S-1 or Form S-3, and the Purchasers shall no longer have any Pre-Emptive Right
pursuant to this Agreement or otherwise after the Company's first Qualifying
Public Offering.

5.       RIGHT OF FIRST REFUSAL.

         5.1 RIGHT OF FIRST REFUSAL. Commencing on (i) the earlier of 180 days
after a Qualifying Public Offering and the third anniversary of the date of this
Agreement for Purchasers other than as provided in (ii), and (ii) the fifth
anniversary of the date of the option grant pursuant to which the fully vested
Option Shares held by members of Key Management were acquired, no Purchaser
shall sell, assign, pledge, or in any manner transfer any shares of capital
stock of the Company (whether now owned or hereafter acquired) or any right or
interest therein, whether voluntarily or by operation of law, or by gift or
otherwise, except as set forth herein:

                                       19
<PAGE>

                  (a) If Purchaser desires to sell or otherwise transfer any
shares of capital stock, then such Purchaser (the "Section 5 Selling Purchaser")
shall give at least thirty (30) calendar days written notice thereof to the
Company and the other Purchasers. The notice shall name the proposed transferee
and state the number of shares of capital stock to be transferred, the proposed
consideration, and all other terms and conditions of the proposed transfer.

                  (b) For twenty (20) calendar days following receipt of such
notice, the Company shall have the option but not the obligation to purchase all
(but not less than all) of the shares of capital stock specified in the notice
at the price and upon the terms set forth in such notice; provided, however,
that, with the consent of the Section 5 Selling Purchaser, the Company shall
have the option to purchase a lesser portion of the shares of capital stock
specified in said notice at the price and upon the terms set forth therein. In
the event of a gift, property settlement or other transfer in which the proposed
transferee is not paying the full price for the shares of capital stock, and
that is not otherwise exempted from the provisions of this Section 5.1, the
price shall be deemed to be the fair market value of the capital stock at such
time as determined in good faith by the Board of Directors. In the event the
Company elects to purchase all of the shares of capital stock or, with consent
of the Section 5 Selling Purchaser, a lesser portion of the shares of capital
stock, it shall give written notice to the Section 5 Selling Purchaser of its
election and settlement for said shares of capital stock shall be made as
provided below in paragraph (d).

                  (c) If the Company does not elect to purchase the shares
specified in the notice, then the Company shall promptly provide written notice
to the Purchasers of such election (which in no event will be later than 20
calendar days following receipt of the notice referred to in Section 5.1(a)) and
the Purchasers may elect to purchase all (but not less than all) of the shares
by delivering written notice to the Company and the Section 5 Selling Purchaser
within ten (10) calendar days after notice is given by the Company.

                  (d) In the event the Company and/or any other Purchasers elect
to acquire any of the shares of capital stock of the Section 5 Selling Purchaser
as specified in said Section 5 Selling Purchaser's notice, the Secretary of the
Company shall so notify the Section 5 Selling Purchaser and settlement thereof
shall be made in cash within forty (40) days after the Secretary of the Company
receives said Section 5 Selling Purchaser's notice; provided that if the terms
of payment set forth in said Section 5 Selling Purchaser's notice were other
than cash against delivery, the Company and/or the other Purchasers shall pay
for said shares on the same terms and conditions set forth in said Section 5
Selling Purchaser's notice.

                  (e) In the event the Company and/or the other Purchasers do
not elect to acquire all of the shares of capital stock specified in the Section
5 Selling Purchaser's notice, said Section 5 Selling Purchaser may, within the
sixty-day period following the expiration of the rights granted to the Company
and/or the other Purchasers' herein, transfer the shares of capital stock
specified in said Section 5 Selling Purchaser's notice which were not acquired
by the Company and/or the other Purchasers as specified in said Section 5
Selling Purchaser's notice.

         5.2 TRANSFER EXEMPT FROM RIGHT OF FIRST REFUSAL. Anything to the
contrary contained herein notwithstanding, the following transactions shall be
exempt from the provisions of this section:

                                       20
<PAGE>

                  (a) A Purchaser's transfer to such Purchaser's Immediate
Family.

                  (b) A transfer to any custodian or trustee for the account of
such Purchaser or such Purchaser's Immediate Family.

                  (c) A Purchaser's bona fide pledge or mortgage with a
commercial lending institution creating a mere security interest.

                  (d) A corporate Purchaser's transfer of any or all of its
shares of capital stock to its stockholders in accordance with their interest in
the corporation.

                  (e) A transfer by a Purchaser which is a partnership to any or
all of its partners or retired partners in accordance with partnership
interests.

                  (f) A transfer by a Purchaser to any Affiliate of that
Purchaser.

                  (g) A transfer by a Purchaser which is a limited liability
company to its members in accordance with their interest in the limited
liability company.

         In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this section, and there
shall be no further transfer of such stock except in accord with this section.

         5.3 RIGHT OF FIRST REFUSAL AFTER A PUBLIC OFFERING. The foregoing right
of first refusal shall be modified after the closing of a Qualifying Public
Offering with respect to "public sales" pursuant to Rule 144 (including Rule
144(k)) under the Securities Act such that the Company shall have twenty-four
(24) hours to decide to exercise its right to purchase the shares specified in
the notice and to notify the Purchasers of its election and the Purchasers only
twenty-four (24) hours after such notice is given to exercise their election.

         5.4 TRANSFER EXEMPT FROM FIRST REFUSAL RIGHT AFTER A PUBLIC OFFERING.
Anything to the contrary contained herein notwithstanding, any Transfer after
the closing of a Qualifying Public Offering by a Purchaser which in the
aggregate, over the term of this Agreement, amounts to no more than 10,000
shares of Series Preferred or Common Stock, shall be exempt from the provisions
of this Section 5.

6.       CO-SALE RIGHT.

         6.1 NOTICE. At any time after the third anniversary of the date of this
Agreement, if a Purchaser holding Series Preferred or Common Stock proposes to
sell or transfer any shares of Series Preferred or Common Stock ("Co-Sale
Stock") then such Purchaser (a "Section 6 Selling Purchaser") shall promptly
give written notice (the "Notice") simultaneously to the Company and to each of
the other Purchasers holding Series Preferred or Common Stock at least thirty
(30) calendar days prior to the closing of such sale or transfer. The Notice
shall describe in reasonable detail the proposed sale or transfer including,
without limitation, the number of shares of Co-Sale Stock to be sold or
transferred, the nature of such sale or transfer, the total consideration to be
paid to the Section 6 Selling Purchaser (including any consideration for the
securities that is paid or to be paid under other arrangements with the Section
6 Selling

                                       21
<PAGE>

Purchaser, including but not limited to, compensation for employment
or services in excess of the reasonable value of the Section 6 Selling
Purchaser's services), and the name and address of each prospective purchaser or
transferee.

         6.2 NOTICE OF PARTICIPATION. Each Purchaser holding Series Preferred or
Common Stock shall have the right, exercisable upon written notice to the
Company within fifteen (15) calendar days after the Notice is given, to
participate in such sale of Co-Sale Stock on the same terms and conditions. Such
notice shall indicate the number of shares of Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock or Common Stock such Purchaser wishes to sell under his or her
right to participate. To the extent one or more Purchasers exercises such right
of participation in accordance with the terms and conditions set forth in this
Section 6, the number of shares of Co-Sale Stock that may be sold in the
transaction shall be computed as set forth below. Each Purchaser desiring to
participate shall be referred to as a "Participant". If one or more Purchasers
become Participants, each Participant shall sell that number of shares of Series
Preferred or Common Stock equal to the product obtained by multiplying (a) the
aggregate number of shares of Co-Sale Stock by (b) a fraction the numerator of
which is the number of shares of Series Preferred or Common Stock owned by the
Participant or the Section 6 Selling Purchaser, as the case may be, at the time
of the sale of the transfer (on an as-converted to Common Stock basis) and the
denominator of which is the total number of shares of Series Preferred or Common
Stock owned by all Participants and the Section 6 Selling Purchaser at the time
of the sale or transfer (on an as-converted to Common Stock basis).

         6.3 TRANSFER. Each Participant shall effect its participation in the
sale by promptly delivering to the Company for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer of the type
and number of shares of Series Preferred or Common Stock which such Participant
elects to sell. In the event the Participant holds the same type of stock as the
Section 6 Selling Purchaser intends to sell the Participant must sell that type
of stock.

         6.4 ADDITIONAL TRANSFER PROVISIONS. The stock certificate or
certificates that the Participant delivers to the Company pursuant to Section
6.3 shall be transferred to the prospective purchaser in consummation of the
sale of the Series Preferred or Common Stock pursuant to the terms and
conditions specified in the Notice, and the Section 6 Selling Purchaser(s) shall
concurrently therewith remit to such Participant that portion of the sale
proceeds to which such Participant is entitled by reason of its participation in
such sale. To the extent that any prospective purchaser or purchasers prohibits
such assignment or otherwise refuses to purchase shares or other securities from
a Participant exercising its rights of co-sale hereunder, such Section 6 Selling
Purchaser(s) shall not sell to such prospective purchaser or purchasers any
Co-Sale Stock unless and until, simultaneously with such sale, such Section 6
Selling Purchaser(s) shall purchase such shares or other securities from such
Participant on the same terms and conditions specified in the Notice.

         6.5 NO ELECTION TO PARTICIPATE. If none of the other Purchasers
holding Series Preferred or Common Stock to participate in the sale of the
Co-Sale Stock subject to the Notice, such Section 6 Selling Purchaser(s) may,
not later than sixty (60) calendar days following delivery to the Company of
the Notice, enter into an agreement providing for the closing of the

                                       22
<PAGE>

transfer of the Co-Sale Stock covered by the Notice within thirty (30) days
of such agreement on terms and conditions not more favorable to the
transferor than those described in the Notice. Any proposed transfer on terms
and conditions more favorable than those described in the Notice, as well as
any subsequent proposed transfer of any of the Co-Sale Stock by a Section 6
Selling Purchaser(s), shall again be subject to the co-sale rights of the
Purchaser and shall require compliance by such Section 6 Selling Purchaser(s)
with the procedures described in this Section 6.

         6.6 TRANSFERS EXEMPT FROM CO-SALE RIGHT.

                  (a) Notwithstanding the foregoing, the co-sale rights of the
Purchaser shall not apply to (i) any transfer or transfers by a Section 6
Selling Purchaser(s) which in the aggregate, over the term of this Agreement,
amount to no more than 10,000 shares of Co-Sale Stock held by such holder, (ii)
any bona fide pledge or mortgage of Co-Sale Stock with a commercial lending
institution that creates a mere security interest, (iii) any transfer to the
Immediate Family of the holders of Co-Sale Stock, (iv) any transfer to a
custodian or trustee for the account of the holder of Co-Sale Stock or such
holder's Immediate Family, (v) any transfer or transfers by a holder of Co-Sale
Stock to another holder of Co-Sale Stock (the "Transferee-Holder") so long as
the Transferee-Holder is, at the time of the transfer, employed by, or acting as
a consultant or director of, the Company, (vi) any bona fide gift or (vii) any
transfer by any Purchaser to an Affiliate of such Purchaser; provided that in
the event of any transfer made pursuant to one of the exemptions provided by
clauses (ii), (iii), (iv), (v), (vi) and (vii), (A) the holder of Co-Sale Stock
shall inform the Purchasers of such pledge, transfer or gift prior to effecting
it and (B) the pledgee, transferee or donee shall furnish the Purchasers with a
written agreement to be bound by and comply with all provisions of Sections 6 of
this Agreement. Such transferred Co-Sale Stock shall remain "Restricted Stock"
hereunder.

                  (b) The co-sale rights of the Purchasers are subject to, and
shall in no manner limit the right which the Company may have to repurchase
securities from the holder of Co-Sale Stock pursuant to (i) a stock restriction
agreement or other agreement between the Company and the holder of Co-Sale Stock
and (ii) the Pre-Emptive Right set forth in Section 5 hereto.

         6.7 TERMINATION OF CO-SALE RIGHTS. The provisions of Section 6 of this
Agreement shall not apply to sales pursuant to a registered public offering or
"public" sales pursuant to Rule 144 under the Securities Act after an initial
public offering.

7.       DRAG ALONG RIGHTS.

         7.1 DRAG ALONG RIGHT. If BTI or its Affiliates (the "Initiating
Securityholder"), agree to sell or transfer (whether in a stock sale, merger or
other transaction) all or substantially all of their securities of the Company
or agree to the sale of all or substantially all of the assets of the Company to
a third party (whether for cash, securities or a combination of both), then all
Purchasers (including the holders of the Option Shares) ("Selling
Securityholders") will be required to sell all of their securities of the
Company held by them (and may be required to convert their Series Preferred into
Common Stock in connection with such sale) or acquiesce to the sale of the
assets of the Company.

                                       23
<PAGE>

         7.2 CONSIDERATION. The consideration to be received by the Selling
Securityholders shall be the same consideration per share to be received by the
Initiating Securityholder for the corresponding class or series of stock (on an
as-converted basis, if applicable), or type of security, and the terms and
conditions of such sale shall be the same as those upon which the Initiating
Securityholder sells its securities; provided however, that any general
indemnity given by the Selling Securityholder, applicable to liabilities not
specific to a particular Selling Securityholder, to the purchaser in connection
with such sale shall be apportioned among the Selling Securityholder according
to the consideration received by each Selling Securityholder.

         7.3 EXPENSES. The fees and expenses incurred in connection with a sale
under this Section 7 shall be shared by all the Purchasers on a pro rata basis.

         7.4 NOTICE. The Initiating Securityholder shall provide written notice
to the other Selling Securityholder setting forth the consideration to be paid
by the purchaser for the securities and the material terms of the sale within
ten (10) business days after such Initiating Securityholder exercises the Drag
Along Rights pursuant to Section 7.1 ("Drag Along Notice").

         7.5 DELIVERY OF SECURITIES. Within ten (10) business days after the
date of the Drag Along Notice, each Selling Securityholder shall deliver to the
Company, the duly endorsed certificate or certificates representing the
securities held by such Selling Securityholder to be sold, and a limited
power-of-attorney authorizing the Company to take all actions necessary to sell
or otherwise dispose of such securities. In the event that a Selling
Securityholder should fail to deliver the securities, the Company shall cause
the books and records of the Company to show that such securities are bound by
the provisions of this Section 7 and that such securities may only be
transferred to the purchaser in such sale.

         7.6 REMITTANCE OF CONSIDERATION. Promptly after the consummation of the
sale, the Purchaser shall remit directly to the Selling Securityholder the
consideration for the securities sold pursuant thereto.

         7.7 TERMINATION OF DRAG-ALONG RIGHTS. Nothwithstanding any other
provision in this Article 7, if at any time BTI and its Affiliates shall no
longer beneficially own more that 20% of the Company's outstanding Common Stock
(assuming conversion of all Series Preferred), BTI and its Affiliates shall no
longer have any Drag-Along Rights under this Agreement.

8.       BOARD OF DIRECTORS.

         8.1 NOMINATION AND ELECTION OF DIRECTORS.

                  (a) SIZE. Commencing on March 23, 2000, the Company and the
Purchasers agree to take any actions necessary so that the Board will be
comprised of eleven (11) directors. The Company and the Purchasers agree to
take any actions necessary so that, as of March 23, 2000, the Series F
Directors shall consist of Adam H. Clammer, James H. Greene, Jr., Henry R.
Kravis, Alexander Navab, Jr. and George R. Roberts, the Other Series
Preferred Directors shall consist of Henry H. Bradley and Thomas R. Palmer,
the Common Director shall be David E. Scott, the Other Directors shall be
Mory Ejabat and Richard A. Jalkut, and there shall be one vacancy. The
Company and the Purchasers also agree to take any actions necessary so that,
as

                                       24
<PAGE>

soon as practicable, an independent director nominated by Mr. Scott and
approved by the Series F Directors (such approval not to be unreasonably
withheld) is appointed or elected to the Board. Notwithstanding the
foregoing, upon the effectiveness of the Company's first registration
statement on Form 8-A with respect to its Common Stock (the "8-A
Effectiveness Event"), no Purchaser shall have any rights or obligations,
voting or otherwise, under this Section 8.1(a).

                  (b) SERIES F AND BTI DIRECTORS.

                           (i) For so long at least 6,666,667 shares of Series F
Preferred Stock remain outstanding (subject to adjustment for any stock split,
reverse stock split and the like), the holders of Series F Preferred Stock shall
be entitled to elect and remove directors of the Company (the "Series F
Directors") pursuant to the Company's Restated Certificate.

                           (ii) In the event that less than 6,666,667 shares of
Series F Preferred Stock remain outstanding (subject to adjustment for any stock
split, reverse stock split and the like), as a result of conversion or
otherwise, but BTI and its Affiliates beneficially own at least ten percent
(10%) of the outstanding Common Stock of the Company (assuming conversion of all
Series Preferred), BTI shall have the right to nominate the number of persons to
serve as members of the Board of Directors (each a "BTI Nominee" and together,
the "BTI Nominees") equal to (A) the authorized size of the Board of Directors,
multiplied by (B) (1) the total number of shares of Common Stock beneficially
owned by BTI and its Affiliates (assuming conversion of all Series Preferred),
divided by (2) the total number of shares of Common Stock then outstanding
(assuming conversion of all Series Preferred), rounding up so that the BTI
Nominees will not represent less than such proportionate interest in the Company
calculated above; provided, however, that for purposes of this Section
8.1(b)(ii) only, the calculation of the total number of shares outstanding shall
exclude any equity securities issued by the Company after August 5, 1999 (other
than the shares issued pursuant to the Option) if at such time BTI and its
Affiliates beneficially own twenty-five percent (25%) or more of the outstanding
Common Stock of the Company (assuming conversion of all Series Preferred and
including (i) all equity securities issued by the Company after August 5, 1999
and (ii) any vested Option Shares and all shares of Common Stock issuable upon
exercise of the Company's Warrants). The Company agrees to cause the BTI
Nominees to be nominated for election to the Board of Directors (the "BTI
Directors"). A BTI Director may be removed without cause by the Company or its
Board of Directors only with the approval of BTI.

                  (c) OTHER SERIES PREFERRED DIRECTORS. For so long as at
least 8,532,394 shares of Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock remain outstanding
(subject to adjustment for any stock split, reverse stock split and the
like), the holders of Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock, voting together as a
single class, shall be entitled to elect and remove directors of the Company
(the "Other Series Preferred Directors") pursuant to the Company's Restated
Certificate. The Purchasers of Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock agree that for
so long as the Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock remain outstanding and for such
time as Henry H. Bradley and Thomas R. Palmer are (i) employees of News-Press
& Gazette Company and Kansas City Equity Partners, respectively, (ii) are
willing to continue to serve on the Board of Directors, and (iii) do not

                                       25
<PAGE>

violate their fiduciary duties to the stockholders of the Company or
otherwise demonstrate that they are unfit to serve as members of the Board of
Directors, that they will continue to nominate and elect Mr. Bradley and Mr.
Palmer as their representatives on the Board of Directors of the Company.

                  (d) COMMON AND CEO DIRECTOR.

                           (i) For so long as the conditions set forth in
Sections 8.1(b)(i) and 8.1(c) are satisfied, the holders of Common Stock shall
be entitled to elect and remove a director of the Company (the "Common
Director") pursuant to the Company's Restated Certificate and the holders of the
Common Stock agree, that until such time as David E. Scott ceases to hold the
position of Chief Executive Officer of the Company, that they will nominate and
elect Mr. Scott as their representative on the Board of Directors, and if Mr.
Scott ceases to function as the Chief Executive Officer of the Company, the
holders of the Common Stock will nominate and elect another member of senior
management of the Company to replace Mr. Scott. Notwithstanding the foregoing,
after the 8-A Effectiveness Event, the holders of the Common Stock shall have no
rights or obligations, voting or otherwise, under this Section 8.1(d)(i).

                           (ii) In the event the conditions set forth in either
Section 8.1(b)(i) or 8.1(c) cease to be satisfied or the 8-A Effectiveness Event
has occurred, the Company, for so long as Mr. Scott holds the position of Chief
Executive Officer of the Company, shall nominate Mr. Scott for election to the
Board of Directors (the "CEO Director").

                  (e) OTHER DIRECTORS. The Board of Directors shall nominate the
other members of the Board of Directors, if any, for election to the Board of
Directors (the "Other Directors").

                  (f) VOTING. Each Purchaser and any Affiliate of such Purchaser
owning shares of Series Preferred or Common Stock agree to cast the votes to
which they are entitled (whether at an annual or special meeting of stockholders
or by written consent in lieu of a meeting or otherwise) in such a manner as to
cause the BTI Nominees to be elected to the Board of Directors. Notwithstanding
the foregoing, after the 8-A Effectiveness Event, no Purchaser or any Affiliate
of a Purchaser shall have any rights or obligations, voting or otherwise, under
this Section 8.1(f).

                  (g) EFFECTIVENESS. The Company and the Purchasers hereby
represent and warrant that the procedures established in this Section 8.1
relating to the size of the Board of Directors and for the designation,
nomination and election of the BTI Nominees is effective, under the terms of
Company's Restated Certificate and Bylaws, to ensure that at all times
subsequent to the date hereof and until the earlier of the 8-A Effectiveness
Event or the termination of this Agreement, the BTI Nominees shall be members
of the Board of Directors. The Company and Purchasers covenant that if, at
some point in the future, these procedures shall prove to be ineffective in
so providing, the Company and the Purchasers shall take all steps within
their respective power to provide for the designation, nomination and
election of the BTI Nominees to the Board of Directors; PROVIDED that after
the 8-A Effectiveness Event, no Purchaser shall have any obligation, voting
or otherwise, with respect to the designation, nomination and election of the
BTI Nominees. Upon the request of BTI, the Company agrees

                                       26
<PAGE>

that it shall take all actions necessary to cause the Board of Directors to
appoint nominees of the Series F Preferred Stock or BTI, as applicable, to
the Boards of Directors of one or more Subsidiaries in proportion to the
representation of the Series F Preferred Stock or BTI, as applicable, on the
Company's Board of Directors.

                  (h) PUBLIC SOLICITATION. After a registered offering to the
general public of the Company's equity securities, the Company shall use its
reasonable best efforts to solicit from the stockholders of the Company eligible
to vote for the election of directors proxies in favor of the nominees
designated in accordance with this Section 8.1. For purposes of this Section 8.1
and all other purposes of this Agreement, "beneficial ownership" or to
"beneficially own" shall be determined in a manner consistent with the meanings
assigned to such terms in Rule 13d-3 and Rule 13d-5 of the Securities Act.

         8.2      BOARD COMMITTEES.

                  (a) The Company agrees that so long as BTI and its Affiliates
beneficially own at least ten percent (10%) of the outstanding Common Stock of
the Company (assuming conversion of all Series Preferred), the Company shall
take all actions necessary to cause the Board of Directors to appoint no less
than two of the Series F Directors or BTI Directors to any committees of the
Board of Directors other than the Audit Committee, as requested by (i) the
Purchasers holding a majority of the votes of the Series F Preferred Stock (if
the condition set forth in Sections 8.1(b)(i) is satisfied and the 8-A
Effectiveness Event has not occurred), or (ii) BTI (if the condition set forth
in Sections 8.1(b)(i) is not satisfied or the 8-A Effectiveness Event has
occurred).

                  (b) [Intentionally Omitted.]

                  (c) The Company agrees that so long as BTI and its Affiliates
beneficially own at least ten percent (10%) of the outstanding Common Stock of
the Company (assuming conversion of all Series Preferred), the Company shall
create a Compensation Committee of the Board of Directors consisting of four (4)
members. Two members of such Compensation Committee shall not be employees of
the Company and one member shall be either the Chief Executive Officer, the
President, the Chief Operating Officer or a Senior Vice President of the
Company. The Company agrees that no fewer than two of the Series F Directors or
BTI Directors shall serve on the Compensation Committee.

                  (d) Notwithstanding the foregoing, the Company agrees that in
the event BTI exercises its Option, BTI's representation on, and the size of,
such committees of the Board of Directors shall be increased as appropriate to
reflect BTI's proportionate equity interest in the Company.

         8.3 VETO RIGHTS. So long as BTI or its Affiliates beneficially owns at
least 10% of the outstanding Common Stock of the Company (assuming conversion of
all Series Preferred) or shares of Series F Preferred Stock representing such
number of shares of Common Stock on an as-converted basis (subject to adjustment
for any stock split, reverse stock split and the like), the approval of at least
one of the BTI Nominees shall be required for the Board of Directors of the

                                       27
<PAGE>

Company or any Subsidiary to approve and authorize any of the following with
respect to the Company or any Subsidiary:

                  (a) Any increase or decrease in the total authorized shares
of, or issuance, sale, pledge or other disposition of, capital stock or any
security exchangeable or exerciseable for or convertible into capital stock;

                  (b) Any payment of any cash or non-cash dividends or other
distributions with respect to any capital stock;

                  (c) Any reclassification, combination, split, subdivision,
redemption, repurchase or other acquisition of any shares of capital stock
(excluding repurchases upon termination of services, the Company's exercise of
its rights under Section 5 hereof where BTI or its Affiliate is the Section 5
Selling Purchaser, the redemption of the Series E Preferred Stock, and the
redemption by the Company of up to 2,222,222 shares of Series C Preferred Stock
from Stephen L. Sauder pursuant to the Stock Purchase Agreement dated July 12,
1999);

                  (d) Any individual incurrence or guarantee of indebtedness
(excluding draw downs on credit facilities) or the individual issuance of any
debt securities in excess of $25,000,000;

                  (e) Any change in the size or composition of the Board of
Directors or any committee of the Board of Directors or create any new committee
of the Board of Directors;

                  (f) Any transaction with an Affiliate or any entity in which
an Affiliate has an interest as a director, officer, employee or greater than 5%
stockholder or interest through a family relationship (excluding repurchases
upon termination of services, the Company's exercise of its rights under Section
5 hereof where BTI or its Affiliate is the Section 5 Selling Purchaser, the
redemption of the Series E Preferred Stock, and the redemption by the Company of
up to 2,222,222 shares of Series C Preferred Stock from Stephen L. Sauder
pursuant to the Stock Repurchase Agreement dated July 12, 1999);

                  (g) Any hiring or termination of a chief executive officer;

                  (h) Any adoption or modification of the annual budget and
business plan;

                  (i) Any amendment or modification of any material provision of
the Indenture for the Company's Senior Notes, or the Company's main credit
facility or any other material contract;

                  (j) Any adoption, renewal or material modification of any
material compensation or benefit plan or arrangement;

                  (k) Any authorization of entering into a new line of business
provided as of the date hereof;

                  (l) Any consolidation, reorganization, share exchange,
recapitalization, business combination, merger or similar transaction other than
intra-Company transactions;

                                       28
<PAGE>

                  (m) Any sale, pledge, grant of security interest, lease,
transfer or other disposition of assets in excess of twenty-five million dollars
($25,000,000);

                  (n) Any acquisition of assets or securities of any other
person or entity, except for acquisitions involving cash with an aggregate value
of less than twenty-five million dollars ($25,000,000) for any single
acquisition or series of related transactions;

                  (o) Any amendment to the Company's Restated Certificate or
Bylaws;

                  (p) Any voting or similar agreement concerning the Company's
capital stock;

                  (q) Any payment, discharge or satisfaction of any material
claim, liability or obligation or the commencement of any material suit or
proceeding;

                  (r) Any joint venture or similar profit sharing arrangement
involving material assets or the payment or receipt of more than twenty-five
million dollars ($25,000,000);

                  (s) Any material license, contract or agreement; or

                  (t) Any liquidation, dissolution or winding up of the Company.

         8.4 OBSERVER RIGHTS. Subject to the provisions of this Section 8.4,
so long as Stephen L. Sauder holds at least an aggregate of 2,054,678 shares
of the Company's Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock (subject to adjustment for any stock split, reverse
stock split and the like), he shall have the right to attend all meetings of
the Company's Board of Directors (other than Board committee meetings) in a
nonvoting observer capacity, to receive notice of such meetings and to
receive all minutes, consents and other materials, financial or otherwise,
which the Company provides to its Board of Directors ("Observer Rights").
Subject to the provisions of this Section 8.4, so long as Advantage Capital
Missouri Partners I, L.P., Advantage Capital Missouri Partners II, L.P. and
their Affiliates hold at least an aggregate of 940,875 shares the Company's
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock (subject to adjustment for any stock split, reverse stock split and the
like), they shall have the right to appoint a total of one representative who
shall have Observer Rights. Subject to the provisions of this Section 8.4, so
long as White Pines Limited Partnership I and Pacific Capital, L.P. hold at
least an aggregate of 1,104,526 shares the Company's Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock (subject to
adjustment for any stock split, reverse stock split and the like), they shall
have the right to appoint a total of one representative who shall have
Observer Rights. The Company may require as a condition precedent to granting
Observer Rights under this Section 8.4 that each person proposing to attend
any meeting of the Company's Board of Directors and each person to have
access to any of the information provided by the Company to the Board of
Directors shall agree to hold in confidence and trust and to act in a
fiduciary manner with respect to all information so received during such
meetings or otherwise. The Company also reserves the right not to provide
information and to exclude persons having Observer Rights from any meeting or
portion thereof (a) if the Company believes upon advice of counsel and with
reasonable notice to the persons having Observer Rights that attendance at
such meeting by such persons would adversely affect the attorney-client
privilege or the Board's fiduciary duties, or (b) to protect confidential or
competitively sensitive information. The Observer Rights set forth in this
Section

                                       29
<PAGE>

8.4 shall terminate upon the closing of a Qualifying Public Offering, unless
terminated sooner pursuant to the terms of this Section 8.4.

9.       MISCELLANEOUS.

         9.1 GOVERNING LAW; PROCEEDINGS AND WAIVER OF JURY TRIAL. This Agreement
shall be governed in all respects by the laws of the State of New York. All
actions and proceedings arising our of or relating to this Agreement shall be
heard and determined in New York state or federal court located in New York.
Each party irrevocably waives all right to trial by jury in any action or
proceeding (including counterclaims) arising out of or relating to this
Agreement.

         9.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto. References to BTI in this Agreement shall be deemed to refer to
BTI and its Affiliates, including any affiliate of Kohlberg Kravis Roberts & Co.
L.P.

         9.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER.

                  (a) This Agreement (including the Exhibits hereto) constitutes
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof; provided, that the parties to this Agreement
acknowledge and agree that the rights, restrictions and obligations set forth in
this Agreement are in addition to, and not in replacement of, the rights,
restrictions and obligations set forth in the Purchase Agreement, Restated
Certificate and the Management Stockholder Agreements.

                  (b) This Agreement may be amended or modified only upon the
written consent of the Company and Purchasers holding: (i) at least fifty
percent (50%) of the Common Stock, voting together as a single class; (ii) at
least fifty percent (50%) of the Series B Preferred, voting together as a single
class; (iii) at least fifty percent (50%) of the Series C Preferred Stock,
voting together as a single class; and (iv) at least fifty percent (50%) of the
Series D Preferred Stock, voting together as a single class; (v) at least fifty
percent (50%) of the Series E Preferred Stock, voting together as a single
class; and (vi) at least fifty percent (50%) of the Series F Preferred Stock,
voting together as a single class.

                  (c) The obligations of the Company and the rights of the
holders of any series of the Series Preferred or of the Common Stock under this
Agreement may be waived only with the written consent of Purchasers holding the
following percentage of that series of the Series Preferred or of the Common
Stock, as applicable: (i) at least fifty percent (50%) of the Common Shares,
voting together as a single class; (ii) at least fifty percent (50%) of the
Series B Preferred, voting together as a single class; (iii) at least fifty
percent (50%) of the Series C Preferred Stock, voting together as a single
class; (iv) at least fifty percent (50%) of the Series D Preferred Stock, voting
together as a single class; (v) at least fifty percent (50%) of the Series E
Preferred Stock, voting together as a single class; and (vi) at least fifty
percent (50%) of the Series F Preferred Stock, voting together as a single
class.

         9.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage

                                       30
<PAGE>

prepaid, sent by facsimile or delivered personally by hand or nationally
recognized courier addressed (a) if to a Holder, as indicated on the list of
Holders attached hereto as Exhibit A, or at such other address as such holder
or permitted assignee shall have furnished to the Company in writing, or (b)
if to the Company, at such address or facsimile number as the Company shall
have furnished to each Holder in writing. All such notices and other written
communications shall be effective on the date of mailing, facsimile transfer
or delivery.

         9.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative and
not alternative.

         9.6 RIGHTS; SEPARABILITY. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

         9.7 INFORMATION CONFIDENTIAL. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its use
only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any other
person (other than its employees or agents having a need to know the contents of
such information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Holder is required to disclose such
information by a governmental body.

         9.8 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing or interpreting this Agreement.

         9.9 COUNTERPARTS; EXECUTION BY FACSIMILE SIGNATURE. This Agreement may
be executed in any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument. This Agreement may be
executed by facsimile signature(s).

         9.10 BOARD MEETINGS/INFORMATION. The Board of Directors of the
Company shall meet at least quarterly at all times during the term of this
Agreement. In addition to the information rights set forth in the Purchase
Agreement, the Company shall provide the Directors as soon as available after
the end of each calendar month, copies of the unaudited interim

                                       31
<PAGE>

financial statements of the Company and its consolidated Subsidiaries as at
the end of such month or fiscal quarter, as the case may be, in each case in
a form customarily distributed to the officers of the Company.

         9.11 RESTATED CERTIFICATE AND BYLAWS. The Company and the Purchasers
shall take or cause to be taken all lawful action necessary to ensure at all
times that the Company's Restated Certificate and Bylaws do not, at any time,
contradict the provisions of this Agreement.

         9.12 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.

                                       32
<PAGE>

         IN WITNESS WHEREOF, the Company has executed this Consent on the 30th
day of March, 2000.

                                            BIRCH TELECOM, INC.

                                            By: /s/ Gregory C. Lawhon
                                                ----------------------------
                                                Gregory C. Lawhon
                                                Senior Vice President
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                        BTI VENTURES L.L.C.

                                        By: /s/ Alexandar Navab
                                            ------------------------------
                                        Name:  Alexandar Navab
                                        Title: [Authoirzed Signatory]

Number of shares held:

Common Stock:                          -0-
Series B Preferred Stock:              -0-
Series C Preferred Stock:              -0-
Series D Preferred Stock:              -0-
Series F Preferred Stock            13,333,334
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                               /s/ GREGORY C. LAWHON
                                               ---------------------------------
                                               Gregory C. Lawhon

Number of shares held:

Common Stock:                       682,345
Series B Preferred Stock:              -0-
Series C Preferred Stock:              -0-
Series D Preferred Stock:              -0-
Series F Preferred Stock:              -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                              LBI Group Inc.

                                              By: /s/ STEPHEN BERKENFELD
                                                  ------------------------------
                                              Name:  STEPHEN BERKENFELD
                                              Title: SENIOR VICE PRESIDENT

Number of shares held:

Common Stock:                            -0-
Series B Preferred Stock:                -0-
Series C Preferred Stock:                -0-
Series D Preferred Stock:              340,001
Series F Preferred Stock:                -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                                  /s/ BRADLEY A. MOLINE
                                                  ------------------------------
                                                  Bradley A. Moline

Number of shares held:

Common Stock:                        534,787
Series B Preferred Stock:             55,234
Series C Preferred Stock:              -0-
Series D Preferred Stock:              -0-
Series F Preferred Stock:              -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                                    /s/ DAVID E. SCOTT
                                                    ----------------------------
                                                    David E. Scott

Number of shares held:

Common Stock:                         2,137,428
Series B Preferred Stock:                -0-
Series C Preferred Stock:              189,900
Series D Preferred Stock:                -0-
Series F Preferred Stock:                -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                                  /s/ JEFFREY D. SHACKELFORD
                                                  ------------------------------
                                                  Jeffrey D. Shackelford

Number of shares held:

Common Stock:                       1,425,520
Series B Preferred Stock:              -0-
Series C Preferred Stock:            126,600
Series D Preferred Stock:              -0-
Series F Preferred Stock:              -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                                /s/ DAVID W. VRANICAR
                                                -------------------------------
                                                David W. Vranicar

Number of shares held:

Common Stock:                        568,620
Series B Preferred Stock:             36,266
Series C Preferred Stock:              -0-
Series D Preferred Stock:              -0-
Series F Preferred Stock:              -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                             ADVANTAGE CAPITAL MISSOURI
                                             PARTNERS I, L.P.

                                             By: Advantage Capital MO GPI LLC,
                                                 its general partner

                                             By: /s/ DAVID W. BERGMANN
                                                 -------------------------------
                                             Name:  DAVID W. BERGMANN
                                             Title: MEMBER/MANAGER/VP

Number of shares held:

Common Stock:                          -0-
Series B Preferred Stock:           1,318,750
Series C Preferred Stock:              -0-
Series D Preferred Stock:            145,550
Series F Preferred Stock:              -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                             ADVANTAGE CAPITAL MISSOURI
                                             PARTNERS II, L.P.

                                             By: Advantage Capital MO GPII LLC,
                                                 its general partner

                                             By: /s/ DAVID W. BERGMANN
                                                 -------------------------------
                                             Name:  DAVID W. BERGMANN
                                             Title: MEMBER/MANAGER/VP

Number of shares held:

Common Stock:                          -0-
Series B Preferred Stock:              -0-
Series C Preferred Stock:              -0-
Series D Preferred Stock:            417,450
Series F Preferred Stock:              -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                               NEWS-PRESS & GAZETTE COMPANY

                                               By: /s/ HENRY H. BRADLEY
                                                   -----------------------------
                                               Name:  HENRY H. BRADLEY
                                               Title: [Authorized Signatory]

Number of shares held:

Common Stock:                          -0-
Series B Preferred Stock:           1,648,438
Series C Preferred Stock:           1,582,500
Series D Preferred Stock:             222,222
Series F Preferred Stock:              -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                        /s/ HENRY H. BRADLEY
                                        ----------------------------------------
                                        Henry H. Bradley, as custodian for
                                        Katherine Elizabeth Bradley under the
                                        Missouri Uniform Transfers to Minors Act

Number of shares held:

Common Stock:                         -0-
Series B Preferred Stock:           32,969
Series C Preferred Stock:             -0-
Series D Preferred Stock:           11,111
Series F Preferred Stock:             -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                     /s/ HENRY H. BRADLEY
                                     ----------------------------------------
                                     Henry H. Bradley, as custodian for Stephane
                                     Suzanne Bradley under the Missouri Uniform
                                     Transfers to Minors Act.

Number of shares held:

Common Stock:                         -0-
Series B Preferred Stock:           32,969
Series C Preferred Stock:             -0-
Series D Preferred Stock:           11,111
Series F Preferred Stock:             -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                        /s/ HENRY H. BRADLEY
                                        ----------------------------------------
                                        Henry H. Bradley, as custodian for David
                                        Bradley, III under the Missouri Uniform
                                        Transfers to Minors Act.

Number of shares held:

Common Stock:                         -0-
Series B Preferred Stock:           32,969
Series C Preferred Stock:             -0-
Series D Preferred Stock:           11,111
Series F Preferred Stock:             -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                            WHITE PINES LIMITED PARTNERSHIP I

                                            By: WHITE PINES MANAGEMENT, LLC
                                                --------------------------------
                                                its Manager

                                            By: /s/ IAN BUND
                                                --------------------------------
                                            Name:  IAN BUND
                                            Title: PRESIDENT

Number of shares held:

Common Stock:                         -0-
Series B Preferred Stock:           989,128
Series C Preferred Stock:             -0-
Series D Preferred Stock:             -0-
Series F Preferred Stock:             -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                                 PACIFIC CAPITAL, L.P.

                                                 By: WHITE PINES MANAGEMENT, LLC
                                                     ---------------------------
                                                     its Manager

                                                 By: /s/ IAN BUND
                                                     ---------------------------
                                                 Name:  IAN BUND
                                                 Title: PRESIDENT

Number of shares held:

Common Stock:                          -0-
Series B Preferred Stock:           1,219,925
Series C Preferred Stock:              -0-
Series D Preferred Stock:              -0-
Series F Preferred Stock:              -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                        KCEP I, L.P.

                                        By: /s/ THOMAS PALMER
                                            ------------------------------------
                                        Name:  THOMAS PALMER
                                        Title: VICE PRESIDENT, KCEP I, LC
                                               (general partner to KCEP I, L.P.)

Number of shares held:

Common Stock:                         -0-
Series B Preferred Stock:           945,108
Series C Preferred Stock:             -0-
Series D Preferred Stock:           111,111
Series F Preferred Stock:             -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                        KCEP VENTURES II, L.P.

                                        By: /s/ THOMAS PALMER
                                            ------------------------------------
                                        Name:  THOMAS PALMER
                                        Title: VICE PRESIDENT, KCEP II, LC
                                               (general partner to KCEP II, LLC)

Number of shares held:

Common Stock:                          -0-
Series B Preferred Stock:              -0-
Series C Preferred Stock:              -0-
Series D Preferred Stock:            555,556
Series F Preferred Stock:              -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                               KANSAS VENTURE CAPITAL, INC.

                                               By: /s/ MARSHALL PALMER
                                                   -----------------------------
                                               Name:  MARSHALL PALMER
                                               Title: EXECUTIVE VICE PRESIDENT

Number of shares held:

Common Stock:                         -0-
Series B Preferred Stock:           164,844
Series C Preferred Stock:             -0-
Series D Preferred Stock:           166,666
Series F Preferred Stock:             -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                          STEPHEN LOCKWOOD SAUDER REVOCABLE
                                          TRUST DTD MARCH 1, 1976

                                          /s/ STEPHEN L. SAUDER
                                          --------------------------------------
                                          Stephen L. Sauder, Trustee

                                          /s/ PAULA KAY FRIESEN SAUDER
                                          --------------------------------------
                                          Paula Kay Friesen Sauder, Trustee

Number of shares held:

Common Stock:                          -0-
Series B Preferred Stock:              -0-
Series C Preferred Stock:           1,544,788
Series D Preferred Stock:              -0-
Series F Preferred Stock:              -0-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Action by Written
Consent as of this 30th day of March, 2000.

                                             PAULA KAY FRIESEN SAUDER REVOCABLE
                                             TRUST DTD MARCH 1, 1976

                                             /s/ STEPHEN L. SAUDER
                                             -----------------------------------
                                             Stephen L. Sauder, Trustee

                                             /s/ PAULA KAY FRIESEN SAUDER
                                             -----------------------------------
                                             Paula Kay Friesen Sauder, Trustee

Number of shares held:

Common Stock:                          -0-
Series B Preferred Stock:              -0-
Series C Preferred Stock:           1,544,787
Series D Preferred Stock:              -0-
Series F Preferred Stock:              -0-
<PAGE>

                                    EXHIBIT A
                                   PURCHASERS

SERIES B PURCHASERS

Advantage Capital Missouri Partners I, L.P.
KCEP I, L.P.
News-Press & Gazette Company
Henry H. Bradley and Vickie A. Bradley, Trustees of the Henry H. Bradley Trust
dtd 1/9/98
Henry H. Bradley and Vickie A. Bradley, Trustees of the Vickie A. Bradley Trust
dtd 1/9/98
Brian A. Bradley
Eric A. Bradley
David R. Bradley, Jr. and Katherine Suzanne Bradley, Trustees of the David R.
Bradley, Jr. Trust dated March 1, 1983
Katherine Suzanne Bradley
Henry H. Bradley, as custodian for Katherine Elizabeth Bradley under the
Missouri Uniform Transfers to Minors Act
Henry H. Bradley, as custodian for Stephane Suzanne Bradley under the Missouri
Uniform Transfers to Minors Act
Henry H. Bradley, as custodian for David R. Bradley, III under the Missouri
Uniform Transfers to Minors Act
Gregory C. Lawhon
Gary L. Chesser
David W. Vranicar
Bradley A. Moline
Gwen C. Fox
Earl W. Sauder
Stephen L. Sauder
Bobbie L. Agler
Dale McCabe
Citruck & Co., as Trustee for Emily Modeer
Samuel Allen & Maurine Ruth Agron as Trustees of the Samuel Agron Trust
Dorothy H. Ammon, Trustee of the Dororthy H. Ammon Trust dated 12/15/97
Charles G. & Val Jean Adams, Joint Tenants with Rights of Survivorship
Richard A. Bauman, Trustee of Richard A. Bauman Living Trust dated 5/16/97
Marsha L. Broomfield, Trustee of Marsha L. Broomfield Trust dated 12/7/90
Charles S. Broomfeld, Trustee of Charles S. Broomfield Trust dated 11/12/96
Steven R. & Nancy A. Cobb, Tenants in the entirety
Joseph M. Crowe, Sr.
Joseph M. Crowe, Jr.
Jeffrey M. Crowe
Martin J. Crowe, III & Frances C. Crowe, Trustee of the Martin J. Crowe III
Trust dated 3/26/92
Martin J. Crowe, III & Frances C. Crowe, Trustee of the Francis C. Crowe Trust
dated 3/26/92
<PAGE>

SERIES B PURCHASERS CONTINUED

GJA, LLC
Edward D. Jones & Co. as Custodian FBO Michael Griess, IRS #159-90586-1-5
Michael D. & Linda Griess, Joint Tenants with Rights of Survivorship
James & Kathryn Healy, Joint Tenants with Rights of Survivorship
H. David Heumann
Jerry M. & Mary S. Huffman, Joint Tenants with Rights of Survivorship
Kansas Venture Capital, Inc.
KCEP I, L.P.
Thomas E. Keller
Charles H. Koslowsky, Jr.
Kathryn K. Koslowsky
Charles H. Koslowsky, III
Ronald L. Langstaff
John Mark Legg
Suzanne S. McCann Revocable Trust u/t/a dated 12/5/88 as amended
George J. McLiney, Jr. & Laurie M. McLiney, Trustees of the Revocable Living
Trust Agreement of George J. McLiney, Jr. dated October 12, 1992
Kevin C. McLiney
Frederick P. & Lisa S. Mahler, Joint Tenants with Rights of Survivorship
UMB Bank, n.a. Trustee for Robert Modeer #523585008
Roger A. Moline SEP IRA
Jerry Moyes
Pamela J. Perilstein
Jeff A. Poe
Edward D. Jones & Co. Custodian FBO Sean F. Pyle IRA #639-90603-1-5
Sean F. Pyle
Michael A. & Anne Marie C. Russell, Joint Tenants with Rights of Survivorship
Timothy R. & Roselee C. Saracini, Joint Tentants with Rights of Survivorship
Theodore H. Schell
Dain Rauscher Inc., Custodian for Christine S. Schroff IRA
Dain Rauscher Inc., Custodian for Earl H. Scudder, Jr., IRA
Mark A. Scudder & Alison Armstrong, Joint Tenants with Rights of Survivorship
Smith Barney Inc., IRA Custodian for Mark A. Scudder IRA
Don Simpson
Ron Simpson
Jane E. Snowden, Trustee for the Jane E. Snowden Trust dated 12/23/94
Philip L. Spartis
Wayne & Judy Widener
Carolyn J. Crowe
Elizabeth E. Crowe
Martin C. Crowe
Michael P. Crowe
<PAGE>

SERIES B PURCHASERS CONTINUED

Thomas K. Crowe
Daniel B. Bauman
Ellen C. Ganey
Mary & Steve Gaarder, JTWROS
Eileen & Doug Johnson, JTWROS
Lawrence K & Melinda Crowe, JTWROS
Pacific Capital, L.P.
White Pines Limited Partnership I
Ian R. N. Bund
Herbert S. Amster, Trustee of the Herbert S. Amster Amended Trust dated January
23, 1989
Ronald G. Kalish, as Trustee of the Ronald G. Kalish Trust dated September 9,
1997
Volunteer Healthcare Associates, L.L.C.
Yocum Consulting Associates, Inc.
Michael & Julie McCann
Robert & Karen McCann
Christopher McCann
Dean Griess
Lori Ann Greenberg
Gerri Lyn Greenberg
Daniel J. Boyle
Lois F. Marler
Michael G. Williams
John P. Crowe
Frances C. Lester, Trustee UAD 10-30-92 for Frances C. Lester
Brenda Lou Bartels
Beth Denise Karnopp
Kim Rachelle Jaeger
Charles G. Adams
Roger A. Moline
Jill Moline, as custodian for Ryan A. Moline
Jill Moline, as custodian for Adam M. Moline

SERIES C PURCHASERS

News-Press & Gazette Company
David E. Scott
Jeffrey D. Shackelford
Richard L. Tidwell
Stormy C. Supiran
S. L. Sauder Family Limited Partnership, LLP
Stephen Lockwood Sauder Revocable Trust dtd March 1, 1976
Paula Kay Friesen Sauder Revocable Trust dtd March 1, 1976
Hubert Shackelford
<PAGE>

Marge Shackelford
Albert Miller
Bernice Miller
Steven Shackelford
Constance Shackelford
Margie Ann Shackelford
Wallace and Janet Whitney
Gregory Shackelford
David Taylor
Stephen Miller
Jeannie Miller
Kent Hydeman
Diane Hydeman
Joe Miller
David Miller
Phillip Lee Tidwell
Christopher William Tidwell

COMMON STOCK PURCHASERS

David E. Scott
Jeffrey D. Shackelford
Gregory C. Lawhon
Gary L. Chesser
David W. Vranicar
Bradley A. Moline
Michael D. Griess
Sean F. Pyle
Gwen C. Fox
Steven R. Cobb
Paul D. Rowlett
Anne M. Krinsky
Michelle Mulik
James R. Pyle
Carolyn S. Pyle
Amy K. Pyle
Sylvia M. Scott
Gary W. Widener
Judith S. Widener
<PAGE>

SERIES D PURCHASERS

KCEP Ventures II, L.P.
KCEP I, L.P.
Advantage Capital Missouri Partners I, L.P.
Advantage Capital Missouri Partners II, L.P.
News-Press & Gazette Company
Henry H. Bradley and Vickie A. Bradley Trustees of the Henry H. Bradley Trust
dated 1/9/98
Henry H. Bradley and Vickie A. Bradley Trustees of the Vickie A. Bradley Trust
dated 1/9/98
Brian A. Bradley
Eric A. Bradley
David R. Bradley, Jr. and Katherine Suzanne Bradley, Trustees of the David R.
Bradley, Jr. Trust dated March 1, 1983
Katherine Suzanne Bradley
Henry H. Bradley, as custodian for Katherine Elizabeth Bradley under the
Missouri Uniform Transfer to Minors Act
Henry H. Bradley, as custodian for Stephane Suzanne Bradley under the Missouri
Uniform Transfers to Minors Act
Henry H. Bradley, as custodian for David R. Bradley, III under the Missouri
Uniform Transfers to Minors Act
Kansas Venture Capital, Inc.
Douglas B. Fuller
Lyle Leimkuhler
Lee Sawyer
GJA, Inc.
Tim R. & Roselee Saracini, JTWROS
Richard A. Bauman, Trustee of Richard A. Bauman Living Trust dated 5/16/97
Jeffrey M. Crowe
Frederick P. & Lisa S. Mahler, JTWROS
Pamela J. Perilstein
John Mark Legg
Thomas E. Keller
Martin J. Crowe, III & Frances C. Crowe Trustees of the Frances C. Crowe Trust
dated 3/26/92
Martin J. Crowe, III & Frances C. Crowe Trustees of the Martin J. Crowe Trust
dated 3/26/92
Charles H. Koslowsky, III
Kevin C. McLiney
George J. McLiney, Jr. & Lauri M. McLiney, Trustees of the Revocable Living
Trust Agreement of George J. McLiney, Jr. dated October 12, 1992
James & Kathryn Healy, JTWROS
Michael A. & Anne Marie C. Russell, JTWROS
Jerry M. & Mary S. Huffman, JTWROS
Charles S. Broomfield, Trustee of Charles S. Broomfield Trust dated November 12,
1996
Marsha L. Broomfield, Trustee of Marsha L. Broomfield Trust dated December 7,
1990
Jane E. Snowden, Trustee of the Jane E. Snowden Trust dated December 23, 1994
<PAGE>

SERIES D PURCHASERS CONTINUED

Ian R. N. Bund
Herbert S. Amster IRA
Ronald G. Kalish, Trustee of the Ronald G. Kalish Living Trust dated September
9, 1997
Volunteer Healthcare Associates, L.L.C.
Daniel J. Boyle, IRA
Daniel J. Boyle
Michael Williams
S. Sterling McMillan, III
Mark A. Scudder & Alison Armstrong, JTWROS
Wayne & Judy Widener, Community Property
Suzanne S. McCann Revocable Trust u/t/a dated 12/5/88 as amended
Anthony Grover
H. David Heumann
Jerry Moyes c/o Swift Transportation Co., Inc.
Dain Rauscher Inc., Custodian for Christine S. Schroff IRA
Smith Barney Inc., IRA Custodian for Mark A. Scudder, IRA
Dain Rauscher Inc., Custodian for Earl H. Scudder, Jr., IRA
Don Simpson
Ron Simpson
GC&H Investments
LBI Group Inc.
George H. Young III
Philip A. Dougall
Ros L'Esperance
Peter J. Toal
John S. Zuckerman
Stephen J. Jeselson, Jr.
David Zwick
Eileen Johnson, custodian for George Crowe Lester UTMA/MO
Eileen Johnson, custodian for Joseph Andrew Lester UTMA/MO
Eileen Johnson, custodian for Amelia Claire Lester UTMA/MO
John P. Crowe
Frances C. Lester, Trustee UAD 10-30-92 for Frances C. Lester
<PAGE>

SERIES E PURCHASERS

Advantage Capital Missouri Partners I, L.P.
KCEP I, L.P.
News-Press & Gazette Company
Henry H. Bradley and Vickie A. Bradley, Trustees of the Henry H. Bradley Trust
dtd 1/9/98
Henry H. Bradley and Vickie A. Bradley, Trustees of the Vickie A. Bradley Trust
dtd 1/9/98
Brian A. Bradley
Eric A. Bradley
David R. Bradley, Jr. and Katherine Suzanne Bradley, Trustees of the David R.
Bradley, Jr. Trust dated March 1, 1983
Katherine Suzanne Bradley
Henry H. Bradley, as custodian for Katherine Elizabeth Bradley under the
Missouri Uniform Transfers to Minors Act
Henry H. Bradley, as custodian for Stephane Suzanne Bradley under the Missouri
Uniform Transfers to Minors Act
Henry H. Bradley, as custodian for David R. Bradley, III under the Missouri
Uniform Transfers to Minors Act
Gregory C. Lawhon
Gary L. Chesser
David W. Vranicar
Bradley A. Moline
Gwen C. Fox
Earl W. Sauder
Stephen L. Sauder
Bobbie L. Agler
Dale McCabe
Citruck & Co., as Trustee for Emily Modeer
Samuel Allen & Maurine Ruth Agron as Trustees of the Samuel Agron Trust
Dorothy H. Ammon, Trustee of the Dororthy H. Ammon Trust dated 12/15/97
Charles G. & Val Jean Adams, Joint Tenants with Rights of Survivorship
Richard A. Bauman, Trustee of Richard A. Bauman Living Trust dated 5/16/97
Marsha L. Broomfield, Trustee of Marsha L. Broomfield Trust dated 12/7/90
Charles S. Broomfeld, Trustee of Charles S. Broomfield Trust dated 11/12/96
Steven R. & Nancy A. Cobb, Tenants in the entirety
Joseph M. Crowe, Sr.
Joseph M. Crowe, Jr.
Jeffrey M. Crowe
Martin J. Crowe, III & Frances C. Crowe, Trustee of the Martin J. Crowe III
Trust dated 3/26/92
Martin J. Crowe, III & Frances C. Crowe, Trustee of the Francis C. Crowe Trust
dated 3/26/92
GJA, LLC
Edward D. Jones & Co. as Custodian FBO Michael Griess, IRS #159-90586-1-5
Michael D. & Linda Griess, Joint Tenants with Rights of Survivorship
James & Kathryn Healy, Joint Tenants with Rights of Survivorship
<PAGE>

SERIES E PURCHASERS CONTINUED

H. David Heumann
Jerry M. & Mary S. Huffman, Joint Tenants with Rights of Survivorship
Kansas Venture Capital, Inc.
KCEP I, L.P.
Thomas E. Keller
Charles H. Koslowsky, Jr.
Kathryn K. Koslowsky
Charles H. Koslowsky, III
Ronald L. Langstaff
John Mark Legg
Suzanne S. McCann Revocable Trust u/t/a dated 12/5/88 as amended
George J. McLiney, Jr. & Laurie M. McLiney, Trustees of the Revocable Living
Trust Agreement of George J. McLiney, Jr. dated October 12, 1992
Kevin C. McLiney
Frederick P. & Lisa S. Mahler, Joint Tenants with Rights of Survivorship
UMB Bank, n.a. Trustee for Robert Modeer #523585008
Roger A. Moline SEP IRA
Jerry Moyes
Pamela J. Perilstein
Jeff A. Poe
Edward D. Jones & Co. Custodian FBO Sean F. Pyle IRA #639-90603-1-5
Sean F. Pyle
Michael A. & Anne Marie C. Russell, Joint Tenants with Rights of Survivorship
Timothy R. & Roselee C. Saracini, Joint Tentants with Rights of Survivorship
Theodore H. Schell
Dain Rauscher Inc., Custodian for Christine S. Schroff IRA
Dain Rauscher Inc., Custodian for Earl H. Scudder, Jr., IRA
Mark A. Scudder & Alison Armstrong, Joint Tenants with Rights of Survivorship
Smith Barney Inc., IRA Custodian for Mark A. Scudder IRA
Don Simpson
Ron Simpson
Jane E. Snowden, Trustee for the Jane E. Snowden Trust dated 12/23/94
Philip L. Spartis
Wayne & Judy Widener
Carolyn J. Crowe
Elizabeth E. Crowe
Martin C. Crowe
Michael P. Crowe
Thomas K. Crowe
Daniel B. Bauman
Ellen C. Ganey
Mary & Steve Gaarder, JTWROS
<PAGE>

SERIES E PURCHASERS CONTINUED

Eileen & Doug Johnson, JTWROS
Lawrence K & Melinda Crowe, JTWROS
Pacific Capital, L.P.
White Pines Limited Partnership I
Ian R. N. Bund
Herbert S. Amster, Trustee of the Herbert S. Amster Amended Trust dated January
23, 1989
Ronald G. Kalish, as Trustee of the Ronald G. Kalish Trust dated September 9,
1997
Volunteer Healthcare Associates, LLC
Yocum Consulting Associates, Inc.
Michael & Julie McCann
Robert & Karen McCann
Christopher McCann
Dean Griess

SERIES F PURCHASER

BTI Ventures L.L.C.

OPTION SHARE PURCHASERS

David E. Scott
Jeffrey D. Shackelford
Gregory C. Lawhon
Gary L. Chesser
David W. Vranicar
Bradley A. Moline
Richard L. Tidwell
Stormy C. Supiran
Gwen C. Fox
Bobbie L. Agler
Dale McCabe
Sean F. Pyle
Michael D. Griess
Steven R. Cobb
Paul D. Rowlett
Anne M. Krinsky
Michelle Mulik
Donald H. Goldman
<PAGE>

                                    EXHIBIT B

                               RESTRICTED HOLDERS

BTI Ventures LLC

News-Press & Gazette Company
Henry H. Bradley and Vickie A. Bradley, Trustees of the Henry H. Bradley Trust
dtd 1/9/98
Henry H. Bradley and Vickie A. Bradley, Trustees of the Vickie A. Bradley Trust
dtd 1/9/98
Brian A. Bradley
Eric A. Bradley
David R. Bradley, Jr. and Katherine Suzanne Bradley, Trustees of the David R.
Bradley, Jr. Trust dated March 1, 1983
Katherine Suzanne Bradley
Henry H. Bradley, as custodian for Katherine Elizabeth Bradley under the
Missouri Uniform Transfers to Minors Act
Henry H. Bradley, as custodian for Stephane Suzanne Bradley under the Missouri
Uniform Transfers to Minors Act
Henry H. Bradley, as custodian for David R. Bradley, III under the Missouri
Uniform Transfers to Minors Act
Douglas B. Fuller Trust dated March 31, 1988
Rhonda K. Fuller Trust dated December 5, 1997
Lyle Leimkuhler
Lee M. Sawyer and Toni J. Sawyer, JTWROS

Stephen L. Sauder
S. L. Sauder Family Limited Partnership, LLP
Stephen Lockwood Sauder Revocable Trust dtd March 1, 1976
Paula Kay Friesen Sauder Revocable Trust dtd March 1, 1976
Earl W. Sauder

Advantage Capital Missouri Partners I, L.P.
Advantage Capital Missouri Partners II, L.P.

KCEP I, L.P.
KCEP Ventures II, L.P.

Pacific Capital, L.P.
White Pines Limited Partnership I
Ian R. N. Bund
Herbert S. Amster, Trustee of the Herbert S. Amster Amended Trust dated January
23, 1989
Ronald G. Kalish, as Trustee of the Ronald G. Kalish Trust dated September 9,
1997
Volunteer Healthcare Associates, LLC
Yocum Consulting Associates, Inc.
Daniel J. Boyle, IRA
Daniel J. Boyle
Michael Williams
<PAGE>

S. Sterling McMillan, III
Anthony Grover
Lois F. Marler

Kansas Venture Capital, Inc.

David E. Scott
Jeffrey D. Shackelford
Gregory C. Lawhon
Gregory C. Lawhon IRA
Gary L. Chesser
David W. Vranicar
Bradley A. Moline
Michael D. Griess
Edward D. Jones & Co. as Custodian FBO Michael Griess, IRS #159-90586-1-5
Michael D. & Linda Griess, Joint Tenants with Rights of Survivorship
Dean W. Griess
Sean F. Pyle
Edward D. Jones & Co. Custodian FBO Sean F. Pyle IRA #639-90603-1-5
Gwen C. Bortner
Steven R. Cobb
Steven R. & Nancy A. Cobb, Tenants in the entirety
Paul D. Rowlett
Michelle Mulik
Richard L. Tidwell
Stormy C. Supiran
Bobbie L. Agler
Dale McCabe
Brenda Lou Bartels
Beth Denise Karnopp
Kim Rachelle Jaeger
Charles G. Adams
Roger A. Moline
Jill Moline, as custodian for Ryan A. Moline
Jill Moline, as custodian for Adam M. Moline
Hubert Shackelford
Marge Shackelford
Albert Miller
Bernice Miller
Steven Shackelford
Constance Shackelford
Margie Ann Shackelford
Wallace and Janet Whitney
Gregory Shackelford
David Taylor
Stephen Miller

<PAGE>

Jeannie Miller
Kent Hydeman
Diane Hydeman
Joe Miller
David Miller
Phillip Lee Tidwell
Christopher William Tidwell
James R. Pyle
Carolyn S. Pyle
Amy K. Pyle
Sylvia M. Scott
Gary W. Widener
Judith S. Widener

LBI Group Inc.
George H. Young III
Philip A. Dougall
Ros L'Esperance
Peter J. Toal
John S. Zuckerman
Stephen J. Jeselson, Jr.
David Zwick<PAGE>

                                                                EXHIBIT 10.10

                                  SUBLEASE

     This Sublease (hereinafter referred to as the "Sublease") is made as of
the 12th day of February, 1998, by and between University of Florida
Orthopaedic Tissue Bank, Inc., a Florida not-for-profit corporation, doing
business as University of Florida Tissue Bank, Inc. (hereinafter referred to
as "Sublandlord") and Regeneration Technologies, Inc., a Florida corporation
(hereinafter referred to as "Subtenant").

                             W I T N E S S E T H:
                             - - - - - - - - - -

     1.  PREMISES. The parties hereby acknowledge that certain lease
(hereinafter referred to as the "Lease") dated November 8, 1996 by and
between Talquin Development Company, a Florida corporation (hereinafter
referred to as the "Landlord") and Sublandlord, as "Tenant". Sublandlord
hereby leases to Subtenant a portion of the premises described in the Lease,
consisting of a portion thereof for the exclusive use and possession of
Subtenant and a portion thereof for the shared use and possession of
Sublandlord and Subtenant, all as more particularly depicted on Exhibit "A",
attached hereto and made a part hereof and hereinafter referred to as the
"Premises". In addition, it is understood and agreed that the hallways and
other common areas within the Premises shall be jointly used, by necessity,
for access to the various areas within the Premises by both parties hereto.
The Premises shall be deemed to consist of approximately 18,617 rentable
square feet for purposes of the calculation of rent, additional rent and the
like.

     2.  TERM.  The term of this Sublease shall commence upon the date first
above written (hereinafter referred to as the "Commencement Date") and shall
terminate simultaneously with the expiration of the term of the Lease. If for
any reason whatsoever the Lease shall be terminated prior to its stated
expiration date, this Sublease shall thereupon be terminated and Sublandlord
shall not be liable to Subtenant by reason thereof, except in the event
caused by a default by Sublandlord.

         Sublandlord and Subtenant hereby acknowledge that Sublandlord has
provided written notice in accordance with the provisions of section 12.02(b)
of the Lease concerning this Sublease and has received no response from
Landlord. Accordingly, without limiting the provisions of this paragraph 2
hereinabove, it is understood and agreed that should Landlord exercise any
option which results in the cancellation of the Lease as to the Premises or
the refusal to consent to this Sublease, this Sublease shall thereupon be
terminated and Sublandlord shall not be liable to Subtenant by reason thereof.

     3.  RENT.  Subtenant shall pay to Sublandlord rent, additional rent and
any other sums or charges as are required to be paid by Sublandlord under the
Lease attributable to the Premises, whether such rent, additional rent or
other sums or charges are called "Rent", "Additional Rent" or the like under
the Lease. Such Rent, Additional Rent and any other sums or charges shall be
paid in such amounts, at such times and in accordance with all provisions of
applicable thereto set forth in the Lease.

     4.  LATE CHARGE. Subtenant recognizes that late payment of any rent or
other sum due hereunder from Subtenant to Sublandlord will result in an
expense to Sublandlord, the extent of which additional expense is extremely
difficult and economically impractical to ascertain. Accordingly, Subtenant
hereby agrees that if rent or any other payment due hereunder from Subtenant
to Sublandlord is not paid on the due date thereof, such payment shall be
increased by a late charge equal to five percent (5%) of such payment.

<PAGE>

     5.  INCORPORATION OF LEASE. The terms, covenants and conditions of the
Lease are incorporated herein by reference so that, except to the extent that
they are inapplicable to, inconsistent with, modified by or excluded by the
provisions of this Sublease, each and every term, covenant and condition of
the Lease binding on or inuring to the benefit of the Landlord shall, in
respect to this Sublease, bind or inure to the benefit of Sublandlord, and
each and every term, covenant and condition of the Lease binding on or
inuring to the benefit of the Tenant thereunder shall, in respect to this
Sublease, bind or inure to the benefit of the Subtenant, with the
same force and effect as if such terms, covenants and conditions were
completely set forth in this Sublease, and as if the words "Landlord" and
"Tenant", or words of similar import, wherever the same appear in the Lease,
were construed to mean, respectively "Sublandlord" and "Subtenant" in this
Sublease. With respect to the foregoing, the parties do hereby further agree
as follows:

          (a) Subtenant hereby agrees to perform and be bound by the same
responsibilities, rights, privileges and duties to and in favor of
Sublandlord that Sublandlord has to and in favor of Landlord, except as
otherwise provided by the terms of this Sublease. Such agreement shall apply
to the responsibilities, rights, privileges and duties accruing as of, and
after, the date hereof, but not before. Subtenant hereby agrees to
indemnify, hold harmless and defend Sublandlord from and against any loss,
cost, damage, expense, responsibility, liability, claim or injury that
Sublandlord may incur by virtue of Subtenant's breach of this Sublease or the
occupancy of Subtenant of the Premises.

          (b) In any case where Landlord reserves certain rights with respect
to the Premises, including, without limitation, the right to enter the
Premises, said rights shall likewise inure to the benefit of Sublandlord as
well as the Landlord.

          (c) With respect to work, services, repairs or restoration or the
performance of other obligations required of Landlord under the Lease,
Sublandlord's sole obligation with respect thereto shall be to request the
same from Landlord, upon receipt of a request in writing by Subtenant, and to
use its reasonable efforts to obtain the same from Landlord.

          (d) Subtenant hereby agrees to perform and comply with the terms,
provisions, covenants and conditions of the Lease, including, without
limitation, the Rules and Regulations attached in the Lease as the same may
be changed from time to time, and not to do or suffer or permit anything to
be done which would result in a default by Sublandlord under the Lease.

          (e) In connection with any activity, undertaking or condition
requiring the consent of Landlord under the Lease, Subtenant agrees that
Subtenant must obtain the consent of Sublandlord as well as a condition
thereto, which consent shall not be unreasonably withheld by Sublandlord.
Sublandlord's sole obligation with respect thereto shall be to request the
same from Landlord. In the event that Landlord does not give its written
consent, such failure shall be a reasonable basis, but not the only
reasonable basis, upon which Sublandlord may withhold its written consent.

          (f) It is expressly understood and agreed that at no time shall
Subtenant contact, communicate, negotiate or meet with Landlord directly
without the presence and participation of Sublandlord, without Sublandlord's
prior written consent, which shall not be unreasonably withheld by
Sublandlord.

          (g)  Subtenant shall have no right to assign, sublet or permit the
use of the Premises to or by any other person or entity.

                                     -2-

<PAGE>

          (h) This Sublease and all of the rights of Subtenant hereunder
shall be subject and subordinate to the Lease, and to all the interests,
matters and instruments to which the Lease is subordinate. Subtenant shall
comply with all of the obligations imposed upon Sublandlord, as "Tenant"
under the Lease, with respect to such subordination and with respect to any
assignment of the Lease by Landlord.

          (i) Subtenant hereby agrees to obtain and maintain, at Subtenant's
expense, all insurance required to be carried by Sublandlord under the Lease
and to name Landlord and Sublandlord as additional insureds and to otherwise
comply with all of the insurance provisions of the Lease. Evidence of the
insurance required hereunder of Subtenant must be delivered to Sublandlord
prior to the Commencement Date hereof.

          (j) Subtenant hereby acknowledges the provisions of Section 19.11
of the Lease which enable Landlord to relocate the premises described in the
Lease, including the Premises. In the event Landlord exercises such right,
Sublandlord shall remit to Subtenant such portion of the expenses of
relocation which Landlord pays to Sublandlord as are allocable to the
Premises, but Sublandlord shall have no obligation to pay any additional
out-of-pocket expenses, or other expenses, to Subtenant, in connection with
such relocation.

          (k) Sublandlord hereby acknowledges the provisions of the
section 4.02 of the Lease regarding signage, including the provision by which
Landlord disclaims any obligation to list any assignees or subtenants in the
lobby directory which lists all building tenants. Sublandlord shall have no
obligation to provide any signage of any kind. If Subtenant desires any
signage, Subtenant shall request same, in writing, describing the signage
requested and Sublandlord shall relay such request to Landlord. Any such
requested signage shall be subject to the prior written consent of
Sublandlord and Landlord which, in the case of Sublandlord, shall not be
unreasonably withheld.

          (l) Subtenant hereby acknowledges and agrees that there shall be no
tenant improvement allowance, cost or other expense given by Sublandlord with
respect to any improvements and any provisions of the Lease relating to the
Landlord's payment of same shall not apply to this Sublease. Any proposed
alternation or improvement to the Premises shall be subject to the provisions
of Article 7 of the Lease.

     6.  DEFAULT BY SUBTENANT.

          (a) The occurrence of any of the following shall constitute an
event of default hereunder by Subtenant:

               (i) Any installment of rent, additional rent or any other sum
or charge due hereunder from Subtenant to Sublandlord is not paid within five
(5) days from the due date thereof.

              (ii) Subtenant fails to observe, perform and keep each and
every of the covenants, agreements, provisions, stipulations and conditions
herein contained or contained in the Lease to be observed, performed or kept
by Subtenant, and persists in such failure for more than five (5) days after
written notice thereof as received by Subtenant.

          (b) Upon the occurrence of an event of default hereunder,
Sublandlord shall have all rights and remedies afforded to it by law or by
this Sublease, and this Sublease does hereby provide that Sublandlord shall
have all of the rights and remedies with respect to the Sublease that
Landlord has with respect to the Lease as are set forth therein.

                                      -3-

<PAGE>

    7.  SECURITY DEPOSIT. Subtenant shall not be required to deposit a
security deposit with Sublandlord.

    8.  ADDITIONAL AGREEMENTS OF SUBTENANT. Without limiting anything
contained elsewhere in this Sublease, the parties do hereby further agree as
follows:

        (a) Subtenant hereby agrees to indemnify, defend and hold Sublandlord
harmless from any loss, cost, damage, injury, expense, claim or liability
imposed upon Sublandlord by any person whomsoever, whether due to damage to
the Premises or the premises described in the Lease, claims for injuries to
the person or property of another, administrative or other action by any
governmental authority or claim by Landlord, where such injury, expense,
damage, liability or claim results from the act, omission, negligence,
misconduct or breach of any provision of this Sublease, or of the Lease by
Subtenant, or the agents, servants, employees, invitees or independent
contractors of Subtenant, or any other person entering the Premises upon
express or implied invitation or consent of Subtenant. Such indemnification
shall include, without limitation, reasonable attorneys' fees or other legal
expenses whether incurred at or before the trial level or in any appellate,
bankruptcy or administrative proceeding, and shall survive the expiration of
the term hereof or the earlier termination of the Lease.

        (b) Subtenant hereby agrees to report immediately in writing to
Sublandlord any defective condition on or about the Premises known to
Subtenant.

        (c) Subtenant will not do anything to or on the Premises which will
increase the rate of insurance on the Premises.

        (d) Sublandlord reserves the right to require that Subtenant remove
any improvements or additions made to the Premises by Subtenant and to repair
and restore the Premises to their condition prior to such alteration,
addition or improvement if Sublandlord has not waived in writing its right to
require Subtenant to remove any improvements or additions made to the Premises
by Subtenant at the time such improvements or additions are proposed.
Subtenant further agrees to so remove any improvements and restore the
Premises.

        (e) Subtenant hereby agrees to use and occupy the Premises only for
the uses and purposes permitted by the Lease.

        (f) Upon occupancy of the Premises, Subtenant shall be deemed to have
accepted the Premises as being in the condition in which Sublandlord is
obligated to deliver the Premises to Subtenant.

        (g) Subtenant agrees that personal property brought onto the Premises
by Subtenant, its agents, employees, licensees and invitees shall be at the
sole risk of Subtenant and Sublandlord shall not be liable for theft thereof
or for any damages thereto, unless caused by Sublandlord's gross negligence
or willful intent.

        (i) Not later than the last day of the term hereof, Subtenant shall
remove all of Subtenant's property and repair all injury done by or in
connection with installation or removal of said property and surrender the
Premises in as good as a condition as the Premises were at the beginning of
the term of the Sublease, reasonable wear and tear by normal occupancy only
excepted. All property of Subtenant remaining on the Premises after the
expiration of the term shall be deemed conclusively abandoned and may be
removed by Sublandlord.

                                    -4-

<PAGE>

        (j) Subtenant shall be responsible, and shall pay for, all utilities
services allocable to the Premises. The Premises shall not be separately
metered from the premises described in the Lease. Accordingly, Sublandlord
shall present an invoice for the utility services allocable to the Premises
to Subtenant on a monthly basis, together with copies of the utilities
services bills, and Subtenant shall pay such invoice within five (5) days
from the date of receipt of such invoice. The parties hereby agree that the
portion of the overall utilities services expenses allocable to the Premises
shall be Eighty percent (80%) of the total utilities services expenses.

        (k) Subtenant shall be responsible, and shall pay for, all personal
property taxes levied or assessed against any personal property owned by
Subtenant and located in, on or about the Premises.

     9. MISCELLANEOUS.

        (a) PERSONS BOUND. All of the provisions hereof shall bind and inure
to the benefit of the parties hereto and their respective successors and
permitted sublessees and assigns.

        (b) TIME OF THE ESSENCE. It is understood and agreed between the
parties hereto that time is of the essence of this Sublease and that this
provision applies to all of the terms and conditions hereof.

        (c) WAIVERS. Failure by the Sublandlord to insist on the strict
performance of any of the terms and conditions hereof shall be deemed a
waiver of the rights and remedies that Sublandlord may have regarding that
specific instance only and shall not be deemed a waiver of any subsequent
breach or default of any of the terms, provisions or conditions hereof.

        (d) CONSTRUCTION OF AGREEMENT. The fact that a party may be deemed to
have drafted or structured any provision hereof shall not be considered in
construing the particular provision either in favor of or against such party.

        (e) CAPTIONS. The captions at the beginning of the paragraphs of this
Sublease are for convenience of reference only and shall be ignored in
construing this Sublease.

        (f) ATTORNEY'S FEES. In the event of any litigation arising out of or
resulting from this Sublease or the occupancy by Subtenant of the Premises,
the prevailing party in such litigation shall be entitled to be reimbursed
for the attorney's fees and costs which it incurs, whether at the trial level
or in any appellate or bankruptcy proceeding.

        (g) NOTICE. Any notices or other communications which may be required
or desired to be given under the terms of this Agreement shall be in writing
and shall be deemed to have been given if personally delivered, if sent by
overnight courier service (e.g., Federal Express), if sent by telefax or if
made by United States certified mail, return receipt requested, postage
prepaid, addressed to the respective parties at the addresses set forth below:

        If to Sublandlord:   University of Florida Tissue Bank, Inc.
                             One Innovation Drive
                             Alachua, Florida 32615
                             Attn: President
                             Telephone: (904) 462-3097
                             Facsimile: (904) 462-5131

                                     -5-

<PAGE>
       If to Subtenant:  Regeneration Technologies, Inc.
                         One Innovation Drive
                         Alachua, Florida 32615
                         Attn: President
                         Telephone: (904) 462-3097
                         Facsimile: (904) 462-5131

     Any notice so given, delivered or made shall be deemed to have been duly
given, delivered or made (i) on the date the same is actually received if
sent by personal delivery or telefax, (ii) the date of actual receipt if sent
by overnight courier service as evidenced by the courier service airbill, or
(iii) the date of actual receipt if sent by certified mail as evidenced by
the return receipt. Either party may change the address to which notices are
to be sent to such party by written notice to the other party specifying such
change of address.

<TABLE>
<S>                                      <C>
WITNESSES:                               "SUBLANDLORD"

                                         UNIVERSITY OF FLORIDA TISSUE
                                         BANK, INC., a Florida not-for-profit
                                         corporation

/s/ Jane D. Callahan                     By: /s/ F.P. Glowczewskie Jr.
-------------------------                    ------------------------------
Name: Jane D. Callahan                   Name: F.P. Glowczewskie Jr.
      -------------------                    ------------------------------
                                         Title: Chairman of the Board
                                                ---------------------------

/s/ Kathleen M. Davis
-------------------------
Name: Kathleen M. Davis
     --------------------

                                         "SUBTENANT"

                                         REGENERATION TECHNOLOGIES,
                                         INC., a Florida corporation

/s/ Kay B. Lopez                         By: /s/ Peter F. Gearen
-------------------------                    ------------------------------
Name: Kay B. Lopez                       Name: Peter F. Gearen
      -------------------                      ----------------------------
                                         Title: President
                                                ---------------------------
/s/ James S. Ganther
-------------------------
Name: James S. Ganther
      -------------------
</TABLE>

                                     -6-

<PAGE>

                            [Graphic of Floor Plan]

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