Document:

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                                                                 Exhibit 10.4

                                                            [EXECUTION COPY]

                        REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of April
                                              ---------
13, 2004, by and between APPLIED DIGITAL SOLUTIONS, INC., a Missouri
corporation (the "Company"), and SATELLITE STRATEGIC FINANCE ASSOCIATES,
                  -------
LLC, a Delaware limited liability company (the "Investor").
                                                --------

         The Company has agreed, on the terms and subject to the conditions
set forth in the Securities Purchase Agreement, dated as of April 13, 2004
(the "Securities Purchase Agreement"), to issue and sell to the Investor (i)
      -----------------------------
shares (the "Shares") of the Company's common stock, par value $0.01 per
             ------
share (the "Common Stock"), (ii) a Series A Warrant in the form attached to
            ------------
the Securities Purchase Agreement as Exhibit A (the "Series A Warrant") and
                                     ---------       ----------------
(iii) a Series B Warrant in the form attached to the Securities Purchase
Agreement as Exhibit B (the "Series B Warrant"). The Series A Warrant and
             ---------       ----------------
the Series B Warrant are collectively referred to herein as the "Warrants".
                                                                 --------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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form, covering the greater of (i) the number of shares of Common Stock
covered by the Registration Statement and remaining unsold thereunder and
(ii) the number of Outstanding Registrable Securities. The Company shall not
permit any securities other than Registrable Securities to be included in
any registration statement or amendment to any registration statement
required to be filed hereunder.

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

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

                  (d) Allowed Delay. The Company may delay the disclosure of
                      -------------
material non-public information, and suspend the availability of the
Registration Statement, for a period not to exceed (i) five (5) consecutive
Business Days at any one time (each such five Business Day period to be
separated by at least ten (10) Business Days from the next such period) or
(ii) twenty (20) calendar days in any twelve (12) month period; provided,
                                                                --------
however, that the Company may delay such disclosure only in the event of a
-------
proposed merger, reorganization or similar transaction involving the Company
where its board of directors (A) has determined, upon the advice of counsel,
that such information would be required to be disclosed in an offering
registered under the Securities Act and (B) reasonably deems it in the best
interests of the Company and its shareholders

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not to disclose such information publicly (an "Allowed Delay"). The Company
                                               -------------
shall promptly (i) notify each Holder in writing of the existence of
information giving rise to an Allowed Delay (but in no event, without the
prior written consent of such Holder, shall the Company disclose to such
Holder any material non-public information), (ii) advise each Holder in
writing to cease all sales under the Registration Statement until the
termination of the Allowed Delay and (iii) notify each Holder in writing
immediately upon the termination or expiration of an Allowed Delay.

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

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

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

                                    -4-

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shall be made pro rata among the Holders seeking to include Registrable
Securities in a registration statement, in proportion to the number of
Registrable Securities sought to be included by such Holders; provided,
however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the
holders of which are not entitled to inclusion of such securities in the
registration statement or are not entitled to pro rata inclusion with the
Registrable Securities; and provided, further, that, after giving effect to
the immediately preceding proviso, any exclusion of Registrable Securities
shall be made pro rata with holders of other securities having the right to
include such securities in the registration statement.

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

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

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

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

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

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

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

                  (f) notify each Holder immediately after becoming aware of
the occurrence of any event (but shall not, without the prior written
consent of such Holder, disclose to such Holder

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any facts or circumstances constituting material non-public information) as
a result of which the prospectus included in the Registration Statement, as
then in effect, contains an untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing, and (except during an Allowed Delay) as promptly as practicable
prepare, and file with the Commission and furnish to each Holder a
reasonable number of copies of a supplement or an amendment to such
prospectus as may be necessary so that such prospectus does not contain an
untrue statement of material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;

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

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

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

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

                  (k) in the event that, at any time, the number of shares
available under the Registration Statement is insufficient to cover one
hundred percent (100%) of the number of Outstanding Registrable Securities,
the Company shall promptly amend the Registration Statement or file a new
registration statement, in any event as soon as practicable, but not later
than the

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thirtieth (30th) day following notice from a Holder of the occurrence of
such event, so that the Registration Statement or such new registration
statement, or both, covers no less than (i) one hundred percent (100%) of
the outstanding Shares and issued Warrant Shares that constitute Registrable
Securities, plus (ii) one hundred percent (100%) of the Warrant Shares
issuable upon exercise of the Series A Warrant that constitute Registrable
Securities, plus (iii) one hundred twenty five percent (125%) of the Warrant
Shares issuable upon exercise of the Series B Warrant (without giving effect
to any limitation on such exercise that may be set forth in the Series B
Warrant) that constitute Registrable Securities. The Company shall use its
best efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof. Any
Registration Statement filed pursuant to this paragraph 4(k) shall state
that, to the extent permitted by Rule 416 under the Securities Act, such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon exercise of the Warrants
in order to prevent dilution resulting from stock splits, stock dividends or
similar events. Unless and until such amendment or new Registration
Statement becomes effective, each Holder shall have the rights described in
Section 2(c) above.

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

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

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

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

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

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

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

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

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

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

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

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

                                    -8-

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

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

                  (d) In the event that the indemnity provided in paragraph
(a) or (b) of this Section 6 is unavailable or insufficient to hold harmless
an indemnified party for any reason, the Company and each Holder agree,
severally and not jointly, to contribute to the aggregate Losses to which
the Company or such Holder may be subject in such proportion as is
appropriate to reflect the relative fault of the Company and such Holder in
connection with the statements or omissions which resulted in such Losses;
provided, however, that in no case shall such Holder be responsible for any
amount in excess of the net proceeds resulting from the sale of the
Registrable Securities sold by it

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

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

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

         7. REPORTS.
            -------

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

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

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

                  (c) furnish to such Holder, so long as such Holder owns
any Registrable Securities, promptly upon written request (i) a written
statement by the Company, if true, that it has complied with the reporting
requirements to enable such Holder to rely on Rule 144(c), and that it has
also complied with the reporting requirements of the Securities Act and the
Exchange Act, (ii) to the extent not publicly available through the
Commission's EDGAR database, a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by

                                    -10-

<PAGE>
<PAGE>

the Company, and (iii) such other information as may be reasonably requested
by such Holder in connection with such Holder's compliance with any rule or
regulation of the Commission which permits the selling of any such
securities without registration; and

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

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

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

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

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

                  If to the Company:

                  Applied Digital Solutions Inc
                  400 Royal Palm Way, Suite 410
                  Palm Beach, FL 33480
                  Attn:  Scott R. Silverman
                  Tel:   561-805-8000
                  Fax:   561-805-0002

                                    -11-

<PAGE>
<PAGE>

                  with a copy to:

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

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

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

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

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

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

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

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

                                    -12-

<PAGE>
<PAGE>

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

                         [Signature Pages to Follow]

                                    -13-

<PAGE>
<PAGE>

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

APPLIED DIGITAL SOLUTIONS, INC.

By:      /s/ Scott Silverman
         -----------------------------
         Scott Silverman
         Chief Executive Officer

SATELLITE STRATEGIC FINANCE ASSOCIATES, LLC

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

         By:      /s/ Mark Sonnino
                  --------------------------------
                  Mark Sonnino
                  Principal<PAGE>

                                                                Exhibit 10.4

                             SECOND AMENDMENT TO
                               LOAN AGREEMENT

         This SECOND AMENDMENT TO LOAN AGREEMENT (this "Agreement") is
entered into and, unless otherwise stated herein, effective as of March 8,
2004, by and among Angelica Corporation, a Missouri corporation
("Borrower"), LaSalle Bank National Association ("LaSalle"), as
Administrative Agent ("Administrative Agent"), and LaSalle and the other
lenders listed on the signature page hereto (the "Lenders").

                                  RECITALS:
                                  --------

A.       Borrower, Administrative Agent and Lenders are party to that
         certain Loan Agreement dated as of May 30, 2002, as amended by the
         First Amendment to Loan Agreement dated as of January 24, 2003 (as
         amended, the "Original Loan Agreement").

B.       Administrative Agent, Lenders and Borrower have agreed to the
         provisions set forth herein on the terms and conditions contained
         herein.

                                  AGREEMENT
                                  ---------

         Therefore, in consideration of the mutual agreements herein and
other sufficient consideration, the receipt of which is hereby acknowledged,
Borrower, Administrative Agent and the Lenders hereby agree as follows:

1. DEFINITIONS. All references to the "Agreement" or the "Loan Agreement" in
the Original Loan Agreement and in this Agreement shall be deemed to be
references to the Original Loan Agreement as it may be amended, restated,
extended, renewed, replaced, or otherwise modified from time to time.
Capitalized terms used and not otherwise defined herein have the meanings
given them in the Original Loan Agreement.

2. EFFECTIVENESS OF AGREEMENT. This Agreement shall become effective, unless
otherwise stated herein, as of the date first written above, but only if
this Agreement has been executed by Borrower, Administrative Agent and the
Lenders, and only if all of the documents listed on Exhibit A to this
Agreement have been delivered and, as applicable, executed, sealed,
attested, acknowledged, certified, or authenticated, each in form and
substance satisfactory to Administrative Agent and the Lenders.

3. AMENDMENT FEE. On the date hereof, Borrower shall pay to Administrative
Agent for the benefit of the Lenders, a one-time Second Amendment Fee equal
to the following amount: (i) ten (10) basis points on the first $70,000,000
of the Aggregate Revolving Loan Commitment, as amended by this Agreement
payable to each Lender based on such Lender's pro-rata share of such amount
based on the pro rata shares of the Lenders immediately prior to giving
effect to this Amendment, plus (ii) twenty five (25) basis points on the
remaining $30,000,000 of the Aggregate Revolving Loan Commitment as amended
by this Agreement, payable to each Lender based on such Lender's pro-rata
share that each Lender is committing to of such amount.

4. CONSENT TO DUKE ACQUISITION. Administrative Agent and the Lenders consent
to the Duke Acquisition if, at the closing of the Duke Acquisition, a
Responsible Officer of Borrower delivers to Administrative Agent a
certificate on behalf of Borrower certifying that the requirements in
clauses (v) and (vi) of Section 13.5 of the Loan Agreement have been
satisfied. The consent contained in this

<PAGE>
<PAGE>

Section 4 is specific in intent and is valid only for the specific purpose
for which given. Nothing contained herein obligates Administrative Agent or
any Lender to agree to any additional waivers or consents of any provisions
of any of the Loan Documents.

5. CONSENT TO LIFE UNIFORM SALE.

         5.1. Borrower has advised Administrative Agent and the Lenders that
         it and the other Covered Persons intend to sell substantially all
         of the assets and certain liabilities relating to their Life
         Uniform retail business as an asset sale, sale of capital stock of
         one or more Subsidiaries, or a combination of an asset sale and
         sale of such capital stock. In connection with such sale, Borrower
         and certain of its Subsidiaries may contribute the assets
         comprising the Life Uniform retail business to one or more new
         Subsidiaries, and/or may transfer the capital stock of certain
         Subsidiaries holding such assets to one or more new Subsidiaries.
         The transactions referred to in this Section 5.1 are collectively
         referred to herein as the "Life Uniform Sale."

         5.2. Notwithstanding the terms of the Loan Agreement, including,
         but not limited to, Sections 13.6, 13.8, 13.10, 13.15, and 15.1.4,
         the Administrative Agent and the Lenders hereby consent to the Life
         Uniform Sale if the requirements listed on Exhibit C are met.

         5.3. Notwithstanding the terms of Section 6.3.3.1 of the Loan
         Agreement, Administrative Agent and the Lenders hereby agree that
         Borrower shall not be required to turn over to Administrative Agent
         for the ratable benefit of the Lenders, to be applied to reduce the
         Loan Obligations, proceeds from the Life Uniform Sale to the
         extent, and only to the extent, if to do so would cause Borrower to
         break Borrower's Interest Hedge Obligation existing on the date
         hereof up to the amount hedged thereunder on the date hereof.

         5.4. The consents contained in this Section 5 are specific in
         intent and are valid only for the specific purpose for which given.
         Nothing contained herein obligates Administrative Agent or any
         Lender to agree to any additional waivers or consents of any
         provisions of any of the Loan Documents.

6. AMENDMENTS. The Original Loan Agreement is hereby amended as follows:

         6.1. AGGREGATE AMOUNT; REDUCTION. The first sentence of
Section 3.1.1 of the Original Loan Agreement is deleted and replaced with
the following:

         "Subject to the limitations in Section 3.1.2 and elsewhere herein,
         each Lender commits to make available to Borrower, from the
         Effective Date to the Revolving Loan Maturity Date, such Lender's
         pro-rata share (as listed on Exhibit 3 hereto) of an Aggregate
         Revolving Loan Commitment of One Hundred Million Dollars
         ($100,000,000), by funding such Lender's pro-rata share of
         Revolving Loan Advances made from time to time by Administrative
         Agent as provided herein."

         6.2. MATURITY. Section 6.1.2 of the Original Loan Agreement is
deleted and replaced with the following:

         "6.1.2. PRINCIPAL. Subject to Section 6.1.3, Borrower shall repay
         the entire amount of the Aggregate Revolving Loan as then
         outstanding on May 30, 2007 (the Revolving Loan Maturity Date), and
         Borrower shall repay the entire amount of the Swingline Loan on
         demand, or if no demand is made, on the Revolving Loan Maturity
         Date.

2

<PAGE>
<PAGE>

         6.3. EXTENSION OF MATURITY. Section 6.1.3 of the Original Loan
Agreement is deleted and replaced with the following:

         "6.1.3. EXTENSION OF REVOLVING LOAN MATURITY DATE. If Borrower
         provides written notice to the Administrative Agent and each Lender
         (an "Extension Request") no less then ninety (90) days and no more
         than one hundred and fifty days (150) prior to May 30, 2005 (such
         date being the "Extension Date") that it wishes to extend the
         Revolving Loan Maturity Date (the "First Extension Right"), and
         again, prior to the first annual anniversary of the Extension Date
         that it wishes to extend the Revolving Loan Maturity Date (the
         "Second Extension Right"), in each case by one year, then, if, and
         only if, each of the Lenders affirmatively agree, in each case, in
         writing to an extension in each of their respective sole discretion
         by executing an extension agreement containing such terms and
         conditions as required by the Lenders (signed by Administrative
         Agent, each Lender and Borrower), the Revolving Loan Maturity Date
         shall be so extended by one year. Whether or not Borrower exercises
         the First Extension Right, Borrower may exercise the Second
         Extension Right. The Administrative Agent shall notify the Borrower
         in writing within 30 days of the Lenders' receipt of an Extension
         Request, whether or not the Lenders agree to an extension of the
         Revolving Loan Maturity Date and, if so, under what terms and
         conditions. If a Lender fails to advise the Administrative Agent of
         its decision with respect to an Extension Request within such 30
         day period referred to in the preceding sentence, such Lender shall
         be deemed to have denied such request.

         6.4. MARGINS.
Section 4.6 of the Original Loan Agreement is deleted and replaced with the
following:

                {remainder of page intentionally left blank}

3

<PAGE>
<PAGE>

         "4.6. BASE RATE REVOLVING MARGINS AND EURODOLLAR REVOLVING MARGINS.

<TABLE>
<CAPTION>
         --------------------------------------------------------------------------------------------------------------
             IF THE RATIO OF
             BORROWER FUNDED
          INDEBTEDNESS TO EBITDA
           (FOR THE FOUR FISCAL
            QUARTER PERIOD OF
          BORROWER MOST RECENTLY       EURODOLLAR           BASE RATE
                ENDED) IS           REVOLVING MARGIN     REVOLVING MARGIN       UNUSED FEE RATE       REFERENCE LEVEL
         --------------------------------------------------------------------------------------------------------------
          <S>                            <C>                  <C>                    <C>                    <C>
          greater than or equal
             to 2.25 to 1.00             1.875%               0.00%                  0.40%                   V
         --------------------------------------------------------------------------------------------------------------
          greater than or equal
           to 1.75 to 1.00 but
          less than 2.25 to 1.00         1.625%               0.00%                  0.35%                   IV
         --------------------------------------------------------------------------------------------------------------
          greater than or equal
           to 1.25 to 1.00 but
          less than 1.75 to 1.00         1.375%               0.00%                  0.30%                  III
         --------------------------------------------------------------------------------------------------------------
          greater than or equal          1.125%               0.00%                  0.25%                   II
           to 0.75 to 1.00 but
          less than 1.25 to 1.00
         --------------------------------------------------------------------------------------------------------------
          less than 0.75 to 1.00         0.875%               0.00%                  0.20%                   I
         --------------------------------------------------------------------------------------------------------------
</TABLE>

         On the Second Amendment Effective Date, the pricing level shall be
         Level I. Thereafter, the applicable Increments shall be
         re-determined by Administrative Agent: (A) based on the ratio of
         Borrower's Funded Indebtedness to EBITDA for the four fiscal
         quarter period of Borrower most recently ended, promptly after each
         delivery by Borrower to Administrative Agent of Borrower's
         Financial Statements (and accompanying Compliance Certificate) as
         required in Section 12.11 and will become applicable on the third
         Business Day following the day when Borrower delivers such
         Financial Statements (and accompanying Compliance Certificate) to
         Administrative Agent, and (B) in connection with each Permitted
         Acquisition described in 13.5(xi), based on the ratio of Borrower's
         pro forma Funded Indebtedness to pro forma EBITDA for the four
         fiscal quarter period of Borrower most recently ended, after giving
         effect to each such Permitted Acquisition, based upon the
         Compliance Certificate as required in Section 13.5(xi) delivered by
         Borrower to Administrative Agent, and will become applicable on the
         closing of such Permitted Acquisition."

         6.5. PROJECTIONS. The following language is inserted to the end of
Section 10.13 of the Original Loan Agreement:

         "The projections of Borrower's year end financial condition,
         results of operations, and cash flow for the periods 2005 through
         the end of the 2007 fiscal year, a copy of which have been
         delivered to Administrative Agent and each Lender, represent
         Borrower's good faith best estimate of Borrower's future financial
         performance for the periods set forth therein. Such projections
         have

4

<PAGE>
<PAGE>

         been prepared consistent with GAAP on the basis of the assumptions
         set forth therein, which Borrower believes are fair and reasonable
         in light of current and reasonably foreseeable business conditions."

         6.6. ADDITIONAL REPRESENTATIONS AND WARRANTIES: TAX MATTERS.;
NO IMPROPER PAYMENT OR INFLUENCE; FOREIGN ENEMIES AND REGULATIONS.
New Sections 10.32,10.33, and 10.34 are added to the Original Loan Agreement
as follows:

         "10.32. TAX MATTERS. Borrower does not intend to treat the Loans or
         Letters of Credit and related transactions as being a "reportable
         transaction" (within the meaning of Treasury Regulation Section
         1.6011-4)."

         "10.33 NO IMPROPER PAYMENT OR INFLUENCE. Neither Borrower nor any
         other Covered Person has directly or indirectly paid or delivered
         any fee, commission or other money or property, or engaged in any
         lobbying, influencing or other behavior, however characterized, to
         any agent, government official, regulatory body, governmental
         agency or other Person, in the United States or any other country,
         related to the business or operations of the Borrower or any other
         Covered Person, that the Borrower and each other Covered Person
         knows or has reason to believe to have been illegal under any
         federal, state, or local law of the United States or any other
         country having jurisdiction, or to have been for the purpose of,
         and to have had the effect of, inducing or encouraging the breach
         by the recipient thereof of any legal duties, whether as an
         employee or otherwise to another Person."

         "10.34 FOREIGN ENEMIES AND REGULATIONS. The use of the proceeds of
         the Loans and use of the Letters of Credit as contemplated by this
         Agreement will not violate (A) any regulations promulgated or
         administered by the Office of Foreign Assets Control, United States
         Department of the Treasury, including without limitation, the
         Foreign Assets Control Regulations, the Transaction Control
         Regulations, the Cuban Assets Control Regulations, the Foreign
         Funds Control Regulations, the Iranian Assets Control Regulations,
         the Nicaraguan Trade Control Regulations, the South African
         Transaction Regulations, the Iranian Transactions Regulations, the
         Iraqi Sanctions Regulations, the Soviet Gold Coin Regulations, the
         Panamanian Transaction Regulations or the Libyan Sanctions
         Regulations of the United States Treasury Department, 31 C.F.R.,
         Subtitle B, Chapter V, as amended, (B) the Trading with the Enemy
         Act, as amended, (C) Executive Orders 8389, 9095, 9193, 12543
         (Libya), 12544 (Libya), 12722 or 12724 (Iraq), 12775 or 12779
         (Haiti), or 12959 (Iran), as amended, of the President of the
         United States or (D) any rule, regulation or executive order issued
         or promulgated pursuant to the laws or regulations described in the
         foregoing clauses (A) -(C)."

         6.7. TAX NOTIFICATIONS. A new Section 12.20 is added to the Original
Loan Agreement as follows:

         "12.20. TAX NOTIFICATIONS. If Borrower determines to take any
         action inconsistent with its intention set forth in Section 10.32,
         it will promptly notify Administrative Agent thereof. If Borrower
         so notifies Administrative Agent, Borrower acknowledges that one or
         more of Administrative Agent and the Lenders may treat its Loans or
         its interest in Swingline Loans or Letters of Credit as part of a
         transaction that is subject to Treasury Regulation Section
         301.6112-1, and Administrative Agent and such Lender or Lenders, as
         applicable, will maintain the lists and other records required by
         such Treasury Regulation. Promptly after Borrower has notified
         Administrative Agent of any intention by Borrower to treat Loans or
         Letters of Credit and related

5

<PAGE>
<PAGE>

         transactions as being a "reportable transaction" (within the meaning
         of Treasury Regulation Section 1.6011-4), Borrower will promptly
         provide a duly completed copy of IRS Form 8886 or any successor form."

         6.8. LIFE INSURANCE. A new Section 12.21 is added to the Original Loan
Agreement as follows:

         "12.21. LIFE INSURANCE. Borrower shall pay all premiums and other
         amounts due under the Life Insurance Policies. At all times while
         any Indebtedness permitted by Section 13.2.8 is outstanding,
         Borrower shall at all times keep the Life Insurance Policies
         relating to such Indebtedness in full force and effect, except with
         respect to any such Life Insurance Policies with respect to which
         the insured person under such policy has died.

         6.9. PERMITTED INDEBTEDNESS. New subsections 13.2.8 and 13.2.9 are
added to the Original Loan Agreement as follows:

         "13.2.8. Indebtedness up to the cash value of the Life Insurance
         Policies."

         "13.2.9. Non-interest bearing Indebtedness up to $4,000,000 owing
         to Duke University Health System, Inc., which is (A) incurred in
         connection with the Duke Acquisition, (B) incurred as a deferred
         purchase price payment for the assets being purchased by Borrower
         pursuant to the Duke Acquisition, (C) due and payable in full no
         later than one year following the closing date of the Duke
         Acquisition, (D) not evidenced by a promissory note or other
         Instrument, and (E) not secured by a Security Interest on any asset
         of Borrower or any other Covered Person (although Borrower may, in
         its discretion, provide a Letter of Credit to Duke University
         Health System, Inc to secure the Indebtedness described in this
         Section 13.2.9)."

         6.10. PERMITTED SECURITY INTERESTS. A new subsection 13.4.7 is added
to the Original Loan Agreement as follows:

         "13.4.7. Security Interests in favor of the issuer of the Life
         Insurance Policies on the cash value of the Life Insurance Policies
         to secure the Indebtedness permitted by Section 13.2.8 to such
         issuer of the Life Insurance Policies to the extent of such
         Indebtedness."

         6.11. PERMITTED ACQUISITIONS. Clause (vii) and clause (xi) of
Section 13.5 of the Original Loan Agreement are deleted and replaced with
the following:

         "(vii) excluding the Duke Acquisition, the purchase price
         (including without limitation any deferred purchase price, seller
         notes, assumed Indebtedness, or similar items) together with all
         expenses incurred in connection with such acquisition does not
         exceed $25,000,000 in the aggregate for all Permitted Acquisitions
         (including, without limitation, acquisitions with negative EBITDA
         and Small Permitted Acquisitions) since the Second Amendment
         Effective Date,"

         "(xi) except for any Permitted Acquisition with a gross purchase
         price of less than $2,000,000 including without limitation any
         deferred purchase price, seller notes, assumed Indebtedness, or
         similar items (a "Small Permitted Acquisition"), Borrower has, no
         less than 15 days prior to making such acquisition, prepared and
         furnished to Administrative Agent (and Administrative Agent shall
         use its reasonable efforts to promptly provide such information to
         each Lender) (A) the proforma financial statements described below
         for the Target Company (if such acquisition is structured as
         a purchase of equity) or the Surviving Company (if such acquisition
         is structured as

6

<PAGE>
<PAGE>

         a purchase of assets or a merger), demonstrating to the satisfaction
         of Administrative Agent that the Target Company, all Surviving
         Companies, and Borrower, as the case may be, will be Solvent upon
         consummation of such acquisition and upon the passage of time
         thereafter, and that none of the covenants in Section 14 will be
         violated as a consequence of such acquisition or with the passage of
         time thereafter, (B) a proforma Compliance Certificate showing
         compliance with Section 14 of this Agreement, after giving effect to
         such Permitted Acquisition, and (C) copies of the audited financial
         statements (if available, or unaudited financial statements if no
         audited financial statements exist) for the Target Company for the
         three fiscal years most recently ended (if available) and for each
         of the completed fiscal quarters in the then current fiscal year."

         6.12. FIXED CHARGES, FUNDED INDEBTEDNESS AND INTEREST EXPENSE. The
definitions of "Fixed Charges," "Funded Indebtedness" and "Interest Expense"
in Section 14.1 of the Original Loan Agreement are deleted and replaced with
the following:

         "Fixed Charges means, for any period of calculation, the sum of (i)
         Interest Expense, (ii) the sum of all scheduled principal payments
         on long term Indebtedness of Borrower (including other
         interest-bearing Indebtedness) but excluding Indebtedness permitted
         by Sections 13.2.8 and 13.2.9 of this Agreement, (iii) federal,
         state and local income taxes paid, (iv) Stock Dividends and
         Redemptions/Distributions paid or accrued for, without duplication,
         (v) rental expense, and (vi) $2,000,000 per fiscal quarter, which
         represents a pre-agreed to amount of maintenance capital
         expenditures."

         "Funded Indebtedness means the outstanding principal balance of the
         Loan Obligations, other Indebtedness for borrowed money, and the
         initial capitalized cost of assets subject to Capital Leases at the
         time of calculation, but excluding the outstanding principal amount
         of the Indebtedness permitted by Sections 13.2.8 and 13.2.9 of this
         Agreement."

         "Interest Expense means for any period of calculation, all
         interest, whether paid in cash or accrued as a liability, but
         without duplication, on Indebtedness of Borrower during such
         period, including, without limitation, on Indebtedness permitted by
         Section 13.2.8 and 13.2.9 of this Agreement."

         6.13. FUNDED INDEBTEDNESS TO EBITDA. For all periods after
January 31, 2004, Section 14.3 of the Original Loan Agreement is deleted and
replaced with the following:

         "14.3. MAXIMUM RATIO OF FUNDED INDEBTEDNESS TO EBITDA. Borrower
         shall cause the ratio of Funded Indebtedness to EBITDA for the most
         recently ended four fiscal quarters, for the fiscal quarters ended
         on the dates specified below, calculated as of the last day of each
         such fiscal quarter, to not be greater than the ratio specified for
         such period:

<TABLE>
<CAPTION>
         ===============================================================================================
         FOUR FISCAL QUARTER PERIOD ENDED ON OR                MAXIMUM RATIO OF FUNDED INDEBTEDNESS TO
         MOST RECENTLY BEFORE THE FOLLOWING DATES:             EBITDA
         ----------------------------------------------------- -----------------------------------------
<S>                                                            <C>
         July 31, 2002, October 31, 2002, January 31, 2003,    2.25:1.00
         April 30, 2003, July 31, 2003, October 31, 2003,
         and January 31, 2004,
         ----------------------------------------------------- -----------------------------------------
         April 30, 2004, July 31, 2004, October 31, 2004,      2.50:1.00"
         January 31, 2005, April 30, 2005, and the last day
         of each July, October, January and April thereafter
         ===============================================================================================
</TABLE>

7

<PAGE>
<PAGE>

         6.14. MINIMUM NET WORTH. For all periods after January 31, 2004,
Section 14.4 of the Original Loan Agreement is deleted and replaced with the
following:

         "14.4. MINIMUM NET WORTH. For each completed fiscal quarter of
         Borrower, Borrower's Net Worth as of the last day of such fiscal
         quarter shall not be less than (i) for the fiscal quarter ending on
         or most recently before April 30, 2004, the sum of (A) the greater
         of (x) the Dollar amount of Net Worth that was required under this
         Agreement as of October 31, 2003, or (y) 85% of Borrower's Net
         Worth as of the fiscal year ending January 31, 2004 plus (B) 50% of
         quarterly Net Income for such fiscal quarter, and (ii) as of any
         other fiscal quarter end after April 30, 2004, an amount of not
         less than the sum of (x) Fifty Percent (50%) of Net Income during
         the fiscal quarter then-ended plus (y) the minimum Net Worth
         required as of the prior fiscal quarter after taking into account
         clause (x) above for such prior fiscal quarter, which is cumulative
         from and including the fiscal quarter ending on or most recently
         before April 30, 2004. If Net Income is a negative number for any
         fiscal quarter (e.g. a loss), such amount shall not reduce
         Borrower's Net Worth for that fiscal quarter, and shall be
         disregarded for all future Net Worth calculations so that any such
         negative number shall not reduce the minimum Net Worth required
         hereunder for any subsequent fiscal quarter. If the Life Uniform
         Sale (as defined in the Second Amendment) is consummated in
         accordance with the terms of the Second Amendment, then the Dollar
         amount listed in clause (A) of this Section 14.4 shall be reduced
         by the actual Dollar amount of the Book Loss, if any, from the Life
         Uniform Sale up to the Dollar amount of the Permitted Book Loss for
         purposes of calculating the Borrower's minimum Net Worth required
         under this Section beginning with the fiscal quarter in which the
         Life Uniform Sale closes."

         6.15. CONFIDENTIALITY. A new Section 18.14 is added to the Loan
Agreement as follows:

         "18.14. DISCLOSURES. Notwithstanding anything herein or the other
         Loan Documents to the contrary, Administrative Agent and each
         Lender may disclose to any and all Persons, without limitation of
         any kind, any information with respect to the "tax treatment" and
         "tax structure" (in each case, within the meaning of Treasury
         Regulation Section 1.6011-4) of the transactions contemplated
         hereby and all materials of any kind (including opinions or other
         tax analyses) that are provided to Administrative Agent or such
         Lender relating to such tax treatment and tax structure; provided
         that with respect to any document or similar item that in either
         case contains information concerning the tax treatment or tax
         structure of the transaction as well as other information, this
         sentence shall only apply to such portions of the document or
         similar item that relate to the tax treatment or tax structure of
         the Loans, Letters of Credit and transactions contemplated hereby."

         6.16. EXISTING DEFINITIONS. Clause (i) of the definition of
"Eurodollar Rate" is deleted and replaced with the following:

         "(i) the rate per annum (rounded upwards, if necessary, to the
         nearest 1/16 of 1%), as determined by Administrative Agent as
         appearing in the Bloomberg Financial Markets system (or other
         authoritative source selected by the Administrative Agent in its
         sole discretion) as the London interbank offered rate for deposits
         in Dollars at approximately 11:00 a.m. (London time) two Business
         Days prior to the first day of such Interest Period for a term
         comparable to such Interest Period, or, if the Bloomberg Financial
         Markets system or another authoritative source is not available, as
         such rate is otherwise determined by the Administrative Agent in
         its sole and absolute discretion"

8

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<PAGE>

         6.17. NEW DEFINITIONS. The following new definitions are hereby added
to the Original Loan Agreement in alphabetical order:

         "Duke Acquisition -- means that certain acquisition by Borrower of
         substantially all of the laundry business assets of Duke University
         Health System, Inc."

         "Life Insurance Policies -- those certain life insurance policies
         owned by Borrower on the lives of certain of its present and former
         employees with a current aggregate cash value of approximately
         $30,000,000."

         "Second Amendment" -- means that certain Second Amendment to Loan
         Agreement dated as of March 8, 2004 by and among Borrower,
         Administrative Agent and the Lenders.

         "Second Amendment Effective Date -- means March 8, 2004."

7. NEW EXHIBIT 3; NEW SCHEDULE II TO COMPLIANCE CERTIFICATE. Subject to the
terms and conditions set forth herein, the Lenders hereby agree that,
contemporaneously with this Agreement becoming effective as provided herein,
the Exhibit 3 to the Original Loan Agreement is deleted and replaced with
the Exhibit 3 attached to this Agreement. Subject to the terms and
conditions set forth herein, the Lenders hereby agree that,
contemporaneously with this Agreement becoming effective as provided herein,
the Schedule II to Compliance Certificate to the Original Loan Agreement is
deleted and replaced with the Schedule II to Compliance Certificate attached
to this Agreement.

8. PATRIOT ACT NOTIFICATION. As required by applicable federal Law and
Administrative Agent's and each other Lender's policies and practices,
Administrative Agent and each Lender may need to collect certain customer
identification information and documentation in connection with opening or
maintaining accounts, or establishing or continuing to provide services.

9. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower hereby represents
and warrants to Administrative Agent and the Lenders that (i) Borrower's
execution, delivery and performance of this Agreement has been duly
authorized by all requisite action of Borrower, (ii) no consents are
necessary from any third parties for Borrower's execution, delivery or
performance of this Agreement, (iii) this Agreement, the Loan Agreement, and
each of the other Loan Documents, constitute the legal, valid and binding
obligations of Borrower enforceable against Borrower in accordance with
their terms, except to the extent that the enforceability thereof against
Borrower may be limited by bankruptcy, insolvency or other laws affecting
the enforceability of creditors rights generally or by equity principles of
general application, (iv) except as disclosed on the supplemental disclosure
schedule attached hereto as Exhibit B and the disclosure schedule attached
to the Original Loan Agreement, all of the representations and warranties
contained in Section 10 of the Loan Agreement are true and correct with the
same force and effect as if made on and as of the date of this Agreement,
(v) after giving effect to this Agreement, there is no Existing Default,
(vi) since the Effective Date, there has been no change or modification to
the Charter Documents of Borrower or any other Covered Person, (vii) since
the date of the Initial Financial Statements, there has been no change in
the financial condition or business operations of Borrower or any other
Covered Person which could reasonably be expected to result in a Material
Adverse Effect, (viii) there are no proceedings of any kind, pending or
threatened against Borrower or any other Covered Person, which could
reasonably be expected to result in a Material Adverse Effect, and( ix)
there are no Security Interests with respect to the Borrower or its assets,
except for Permitted Security Interests.

9

<PAGE>
<PAGE>

10. REAFFIRMATION. Borrower hereby represents, warrants, acknowledges and
confirms that (i) the Loan Agreement and the other Loan Documents remain in
full force and effect, (ii) Borrower has no defenses to its obligations
under the Loan Agreement and the other Loan Documents, and (iii) Borrower
has no claim against Administrative Agent or any Lender arising from or in
connection with the Loan Agreement or the other Loan Documents and any such
claim is hereby irrevocably waived and released and discharged forever.

11. GOVERNING LAW. This Agreement has been deemed to be executed and
delivered in Chicago, Illinois, and shall be governed by and construed under
the laws of the State of Illinois without giving effect to choice or
conflicts of law principles thereunder.

12. SECTION TITLES. The section titles in this Agreement are for convenience
of reference only and shall not be construed so as to modify any provisions
of this Agreement.

13. COUNTERPARTS; FACSIMILE TRANSMISSIONS. This Agreement may be executed in
one or more counterparts and on separate counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and
the same instrument. Signatures to this Agreement may be given by facsimile
or other electronic transmission, and such signatures shall be fully binding
on the party sending the same.

14. INCORPORATION BY REFERENCE. Administrative Agent, Lenders and Borrower
hereby agree that all of the terms of the Loan Documents are incorporated in
and made a part of this Agreement by this reference.

15. FEES AND EXPENSES. Borrower shall promptly pay to Administrative Agent
all fees, expenses and other amounts owing to Administrative Agent under the
Loan Agreement and the other Loan Documents, including, without limitation,
all fees, costs and expenses incurred by Administrative Agent in connection
with the preparation, negotiation, execution, and delivery of this
Agreement.

16. NOTICE--ORAL COMMITMENTS NOT ENFORCEABLE. Nothing contained in the
following notice shall be deemed to limit or modify the terms of the Loan
Documents:

         ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
         FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO
         EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU
         (BORROWER) AND US (CREDITOR) FROM MISUNDERSTANDING OR
         DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE
         CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
         STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE
         IN WRITING TO MODIFY IT.

  Borrower acknowledges that there are no other agreements between
  Administrative Agent, Lenders, and Borrower, oral or written, concerning
  the subject matter of the Loan Documents, and that all prior agreements
  concerning the same subject matter, including any proposal or commitment
  letter, are merged into the Loan Documents and thereby extinguished.

17. STATUTORY NOTICE-INSURANCE. The following notice is given pursuant to
Section 10 of the Collateral Protection Act set forth in Chapter 815 Section
180/1 of the Illinois Compiled Statutes (1996); nothing contained in such
notice shall be deemed to limit or modify the terms of the Loan Documents:

10

<PAGE>
<PAGE>

         UNLESS YOU PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY
         YOUR AGREEMENT WITH US, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE
         TO PROTECT OUR INTERESTS IN YOUR COLLATERAL. THIS INSURANCE MAY,
         BUT NEED NOT, PROTECT YOUR INTERESTS. THE COVERAGE THAT WE PURCHASE
         MAY NOT PAY ANY CLAIM THAT YOU MAKE OR ANY CLAIM THAT IS MADE
         AGAINST YOU IN CONNECTION WITH THE COLLATERAL. YOU MAY LATER CANCEL
         ANY INSURANCE PURCHASED BY US, BUT ONLY AFTER PROVIDING EVIDENCE
         THAT YOU HAVE OBTAINED INSURANCE AS REQUIRED BY OUR AGREEMENT. IF
         WE PURCHASE INSURANCE FOR THE COLLATERAL, YOU WILL BE RESPONSIBLE
         FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM,
         INTEREST AND ANY OTHER CHARGES WE MAY IMPOSE IN CONNECTION WITH THE
         PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE
         CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE
         INSURANCE MAY BE ADDED TO YOUR TOTAL OUTSTANDING BALANCE OR
         OBLIGATION. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF
         INSURANCE YOU MAY BE ABLE TO OBTAIN ON YOUR OWN.

{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE IMMEDIATELY FOLLOWS}

11

<PAGE>
<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed as of
the date first above written.

ANGELICA CORPORATION, A MISSOURI CORPORATION, AS BORROWER

By:      /s/ James W. Shaffer
   -------------------------------------
Name:    James W. Shaffer
     -----------------------------------
Title:   Vice President
      ----------------------------------

LASALLE BANK NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT AND A LENDER

By:      /s/ Margaret C. Dierkes
   -------------------------------------
Name:    Margaret C. Dierkes
      ----------------------------------
Title:   Assistant Vice President
       ---------------------------------

UMB BANK, NATIONAL ASSOCIATION, A LENDER

By:      /s/ Cecil G. Wood
   -------------------------------------
Name:    Cecil G. Wood
     -----------------------------------
Title:   Sr. Vice President
      ----------------------------------

WELLS FARGO BANK, N.A., A LENDER

By:      /s/ Tammy R. Stargis
   -------------------------------------
Name:    Tammy R. Stargis
     -----------------------------------
Title:   Vice President
      ----------------------------------

12

<PAGE>
<PAGE>

                                  EXHIBIT A

                         DOCUMENTS AND REQUIREMENTS
                         --------------------------

1.   Second Amendment to Loan Agreement.

2.   $43,000,000.00 Amended and Restated Revolving Note payable to LaSalle
     Bank National Association.

3.   $28,500,000.00 Amended and Restated Revolving Note payable to UMB Bank,
     National Association.

4.   $28,500,000.00 Amended and Restated Revolving Note payable to Wells
     Fargo Bank, N.A.

5.   Reaffirmation of Guaranty executed by Angelica Textile Services, Inc.,
     a New York corporation, Angelica Textile Services, Inc., a California
     corporation, Southern Service Company, a California corporation, and
     Angelica Realty Co., a California corporation.

6.   Solvency Certificate of Borrower.

7.   Legal Opinion of Borrower's and each Guarantors' counsel.

8.   Current Insurance Certificates for Borrower and each Covered Person
     evidencing that Borrower and each Covered Person has in force insurance
     meeting the applicable requirements of the Loan Agreement, showing
     LaSalle Bank National Association, as administrative agent for itself
     and the other lenders, as additional insured on all liability policies.

9.   Compliance Certificate showing proforma as of January 31, 2004 and
     showing proforma after giving effect to the Duke Acquisition.

10.  Borrower's Projections for 2005, 2006 and 2007.

11.  Secretary's Certificate (certifying resolutions, Articles or
     Certificate of Incorporation, Bylaws and Incumbency) for Borrower; such
     certification to include the identity of all Borrowing Officers in both
     the resolutions and incumbency certificate.

12.  Good Standing Certificates for Borrower from the Secretary of State of
     Missouri.

13.  UCC searches for the following:

         a) Angelica Corporation:             Secretary of State of Missouri
         b) Angelica Textile Services, Inc.:  Secretary of State of New York
         c) Angelica Textile Services, Inc.:  Secretary of State of California
         d) Southern Service Company:         Secretary of State of California
         e) Angelica Realty Co.:              Secretary of State of California

13

<PAGE>
<PAGE>

                                  EXHIBIT B
                                  ---------

                            DISCLOSURE SCHEDULE
                            -------------------

                          None, if nothing listed.

14

<PAGE>
<PAGE>

                                  EXHIBIT C
                                  ---------

                         LIFE UNIFORM SALE MATTERS
                         -------------------------

Life Uniform Sale Requirements:

(i) the Life Uniform Sale does not result in a Book Loss greater than the
Permitted Book Loss, (ii) after giving effect to the Life Uniform Sale,
Borrower and the other Covered Persons are no longer conducting a retail
uniform business except incidental to its laundry business and except for up
to 18 months following the closing of the Life Uniform Sale as is necessary
to complete the winding down and liquidation of its Life Uniform business so
long as by the end of such 18 month period Borrower is no longer operating
any retail stores related to its Life Uniform business (although Borrower
may take actions beyond such 18 month period to accomplish any related
ministerial tasks related to winding down its Life Uniform business) or as
may be incidental to its laundry business, (iii) there is, at the time of
the Life Uniform Sale, no existing Default or Event of Default and the
consummation of the Life Uniform Sale would not reasonably give rise to a
Default or Event of Default, (iv) the Life Uniform Sale closes on or before
the fiscal year ending January 29, 2005, and (v) at the closing of the Life
Uniform Sale, Borrower delivers to Administrative Agent a certificate
certifying that the items in clauses (i), (ii) and (iii) of this paragraph
have been met and, after all post-closing adjustments are made with respect
to the Life Uniform Sale, Borrower shall promptly thereafter deliver to
Administrative Agent a new certificate certifying that the item in clauses
(i) and (iii) of this paragraph remain fully complied with.

         "Book Loss" means -- the accounting loss, if any, incurred by
         Borrower and its Subsidiaries in connection with the Life Uniform
         Sale as calculated in accordance with GAAP.

         "Permitted Book Loss" -- means, after giving effect to the Life
         Uniform Sale (as defined in the Second Amendment) and the
         transaction costs incurred in connection therewith, the amount of
         Book Loss arising from the Life Uniform Sale up to but no greater
         than eighty percent (80%) of the Dollar amount of the average daily
         outstanding Aggregate Revolving Loan for the 2003 calendar year, as
         the Dollar amount of the average daily outstanding Aggregate
         Revolving Loan for the 2003 calendar year is reasonably determined
         by Administrative Agent.

15

<PAGE>
<PAGE>

<TABLE>
                                            EXHIBIT 3
                                            ---------

                           LENDERS' COMMITMENTS AND PRO-RATA SHARES

<CAPTION>
   ---------------------------------------------------------------------------------------------
                                     TOTALS              REVOLVING LOAN             PRO-RATA
           LENDER                                          COMMITMENT                SHARES
   ---------------------------------------------------------------------------------------------
<S>                             <C>                     <C>                      <C>
   LaSalle Bank National         $43,000,000.00          $43,000,000.00           43.000000000%
   Association
   ---------------------------------------------------------------------------------------------
   UMB Bank, National
   Association                   $28,500,000.00          $28,500,000.00           28.500000000%
   ---------------------------------------------------------------------------------------------
   Wells Fargo Bank, N.A.        $28,500,000.00          $28,500,000.00           28.500000000%
   ---------------------------------------------------------------------------------------------

   ---------------------------------------------------------------------------------------------
   AGGREGATES                   $100,000,000.00         $100,000,000.00          100.000000000%
   ---------------------------------------------------------------------------------------------
</TABLE>

16

<PAGE>
<PAGE>

                    SCHEDULE II TO COMPLIANCE CERTIFICATE
                    -------------------------------------

               All calculations done in accordance with GAAP on a
consolidated basis, in accordance with the provisions of the Loan Agreement
and based on the period ended                   . Any inconsistencies
                              ------------------
between the descriptions of the items set forth in this Schedule II and the
terms of any of Sections 14.1 through 14.4 shall be resolved in favor of the
terms set forth in Sections 14.1 through 14.4. Reference should be made to
Sections 14.1 through 14.4 of the Loan Agreement for more specific
instructions regarding the calculation periods and how the components of the
financial covenants should be calculated.

NOTE: BORROWER SHALL ALSO INCLUDE THE CALCULATION NECESSARY FOR THE
CALCULATIONS IN SECTION 4.6 AND SECTION 5.2.

<TABLE>
<S>                                                                             <C>
I.       EBITDA AND EBITDAR (for preceding four fiscal quarters):

                  (i)      Net Income                                                                $_________
                  (ii)     Federal, State and Local Income
                           Tax expense accrued for as a liability                                    $_________
                  (iii)    Interest Expense                                                          $_________
                  (iv)     Amortization of goodwill and
                           other intangible assets and depreciation
                           expense taken or accrued for in such period,
                           without duplication                                                       $_________
                  (v)      Extraordinary non-cash losses in such period
                           incurred or accrued for in such period, without
                           duplication                                                               $_________
                  (vi)     Prepayment Penalty on Existing Indebtedness                               $_________
                  (vii)    Losses from Discontinued Operations                                       $_________
                  (viii)   Sum of Items (i), (ii), (iii), (iv), (v), (vi)
                           and (vii)                                                                 $_________
                  (ix)     Extraordinary income/gain in such period incurred
                           or accrued for in such period, without duplication                        $_________
                  (x)      Income from Discontinued Operations                                       $_________
                  (xi)     Item (viii) minus Items (ix) and (x)
                           EBITDA                                                                    $_________
                  (xii)    EBITDAR: sum of Item (viii) plus rental expense
                           minus the sum of Items (ix) and (x)                                       $_________

II.      MINIMUM FIXED CHARGES COVERAGE (SECTION 14.2)

         A.       EBITDAR for preceding four fiscal quarters per Item I                              $_________

         B.       Fixed Charges for preceding four fiscal quarters:

                  1.       Interest Expense                                                          $_________

                  2.       Sum of all scheduled principal payments
                           on long term Indebtedness of Borrower                                     $_________

17

<PAGE>
<PAGE>

                  3.       Federal, State and Local Income Taxes expense paid                        $_________

                  4.       Stock Dividends and Redemptions/Distributions
                           paid or accrued for, without duplication                                  $_________

                  5.       For each fiscal quarter (which represents a
                           pre-agreed to amount of maintenance capital
                           expenditures)                                                 $2,000,000 per quarter
                                                                               (or $8,00,000 for four quarters)

                  6.      Rental expense                                                             $_________

                  7.      FIXED CHARGES (Sum of items 1 through 6)                                   $_________

         C.       Ratio of Item A to Item B.7.                                                          ___:1.0

         D.       Minimum Ratio required by Section 14.2 for such period                                ___:1.0

III.     FUNDED INDEBTEDNESS TO EBITDA (SECTION 14.3)

         A.       Funded Indebtedness as of the calculation date                                     $_________

         B.       EBITDA for preceding four fiscal quarters
                  per Item I                                                                         $_________

         C.       Ratio of Item A to Item B                                                          $_________

         D.       Maximum Ratio of Funded Indebtedness
                  to EBITDA permitted by Section 14.3                                                   ___:1.0

IV.      MINIMUM NET WORTH (SECTION 14.4)

         A.       Actual Net Worth                                                                   $_________

         B.       Minimum Net Worth Required by Section 14.4:

                  (i) for the fiscal quarter ending on or
                  most recently before April 30, 2004, the
                  sum of (A) the greater of (x) the Dollar
                  amount of Net Worth that was required
                  under this Agreement as of October 31,
                  2003, or (y) 85% of Borrower's Net Worth
                  as of fiscal year ending January 31,
                  2004 (B) 50% of quarterly Net Income for
                  such fiscal quarter, and (ii) as of any
                  other fiscal quarter end after April 30,
                  2004, an amount of not less than the sum
                  of (x) Fifty Percent (50%) of Net Income
                  during the fiscal quarter then-ended
                  plus (y) the minimum Net Worth required
                  as of the prior fiscal quarter after
                  taking into account clause (x) above for
                  such prior fiscal quarter, which is
                  cumulative from and including the fiscal
                  quarter ending on or on or most

18

<PAGE>
<PAGE>

                  recently before April 30, 2004. If Net
                  Income is a negative number for any fiscal
                  quarter (e.g. a loss), such amount shall
                  not reduce Borrower's Net Worth for that
                  fiscal quarter, and shall be disregarded
                  for all future Net Worth calculations so
                  that any such negative number shall not
                  reduce the minimum Net Worth required
                  hereunder for any subsequent fiscal
                  quarter.

                                                                                                     $_________

         If the Life Uniform Sale is consummated in accordance with
         the terms of the Second Amendment, then the Dollar amount
         listed in clause (A) of this Section 14.4 shall be reduced by
         the actual Dollar amount of the Book Loss up to the Dollar
         amount of the Permitted Book Loss

19

<PAGE>
<PAGE>

V.       PERMITTED ACQUISITIONS (SECTION 13.5).

         A.       Excluding the Duke Acquisition Aggregate Purchase
                  Price of all Acquisitions since Second Amendment
                  Effective Date                                                                     $_________

         B.       Aggregate Purchase Price of Permitted Acquisitions in
                  current Loan Year with negative EBITDA                                             $_________

"purchase price" includes, without limitation, any deferred purchase price,
seller notes, assumed Indebtedness, or similar items.
</TABLE>

20

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