Document:

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                                                                    EXHIBIT 10.1

                          SECURITIES PURCHASE AGREEMENT

         SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of
October 25, 2000, by and among Applied Digital Solutions, Inc., a Missouri
corporation, with headquarters located at 400 Royal Palm Way, Suite 410, Palm
Beach, Florida, 33480 (the "COMPANY"), and the investors listed on the Schedule
of Buyers attached hereto (individually, a "BUYER" and collectively, the
"BUYERS").

         WHEREAS:

         A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "1933 ACT");

         B. The Company has authorized the following new series of its preferred
stock, $.001 par value per share: the Series C convertible preferred stock (the
"PREFERRED STOCK"), which series shall be further divided into two subseries,
designated the "Series C-1 convertible preferred stock" (the "SERIES C-1
PREFERRED STOCK") and the "Series C-2 convertible preferred stock" (the "SERIES
C-2 PREFERRED STOCK") which shall be convertible into shares of the Company's
Common Stock, $.001 par value per share (the "COMMON STOCK") (as converted, the
"CONVERSION SHARES"), in accordance with terms of the Company's Certificate of
Designation in the form attached hereto as EXHIBIT A (the "CERTIFICATE OF
DESIGNATION"). The stated value per share of Preferred Stock shall be $1,000.

         C. The Company has authorized the issuance of Common Stock Purchase
Warrants in the form attached hereto as EXHIBIT B (the "WARRANTS"), to acquire
shares of Common Stock (such shares of Common Stock issued upon exercise of the
Warrants are hereinafter referred to as the "WARRANT SHARES");

         D. The Buyers wish to purchase for $20,000,000, upon the terms and
conditions stated in this Agreement, an aggregate of 26,000 shares of Series C-1
Preferred Stock (the "SERIES C-1 PREFERRED STOCK") in the respective amounts set
forth opposite each Buyer's name on the Schedule of Buyers; and to receive, in
consideration for such purchase, the Warrants, to purchase an aggregate of
800,000 shares of Common Stock, subject to adjustment as provided therein;

         E. Subject to the terms and conditions set forth in this Agreement, the
Buyers have the right to purchase up to 26,000 shares of Series C-2 Preferred
Stock for an aggregate of $20,000,000 (the "SERIES C-2 PREFERRED STOCK"). The
Series C-1 Preferred Stock, the Series C-2 Preferred Stock, the Warrants, the
Warrant Shares and the Conversion Shares are collectively referred to in this
Agreement as the "SECURITIES"; and

         F. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
in the form attached hereto as EXHIBIT C (the "REGISTRATION RIGHTS AGREEMENT")
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.

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         NOW, THEREFORE, the Company and the Buyers hereby agree as follows:

         1. PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS.

                  a. PURCHASE OF SERIES C PREFERRED STOCK. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7(a)
below, the Company shall issue and sell to each of the Buyers and the Buyers
shall purchase severally from the Company, in the respective amounts set forth
opposite each Buyer's name on the Schedule of Buyers, for an aggregate of
$20,000,000 an aggregate of 26,000 shares of Series C-1 Preferred Stock (the
"C-1 CLOSING"). Subject to the terms and conditions set forth in Section 1(c)
and satisfaction of the conditions set forth in Sections 6 and 7(b), at the
option of the Buyers, the Company shall issue and sell to the Buyers and the
Buyers shall purchase from the Company up to an aggregate of 26,000 shares of
the Series C-2 Preferred Stock at one or more additional closings (each, a "C-2
CLOSING") for $769.23 per share of Series C-2 Preferred Stock. The C-1 Closing
and the C-2 Closing are referred to in this Agreement as the "CLOSINGS." On each
Closing Date, the Company shall deliver to each Buyer a stock certificate
representing such number of shares of Preferred Stock which such Buyer is then
purchasing, duly executed on behalf of the Company and registered in the name of
such Buyer or its designee (the "STOCK CERTIFICATES").

                  b. C-1 CLOSING DATE. The date and time of the C-1 Closing (the
"C-1 CLOSING Date") shall be 10:00 a.m. Eastern Daylight Time on October 26,
2000, subject to satisfaction (or waiver) of the conditions to the C-1 Closing
set forth in Sections 6 and 7(a) below (or such later date as is mutually agreed
to by the Company and the Buyers). The C-1 Closing shall occur on the C-1
Closing Date at the offices of Schulte Roth & Zabel LLP, 900 Third Avenue, New
York, New York 10022.

                  c. C-2 CLOSING DATES. The date and time of any C-2 Closing
(the "C-2 CLOSING Date") shall be, subject to satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7(b), after five (5) days written notice
to the Company from any Buyer that such Buyer has elected to purchase up to its
pro rata share of the Series C-2 Preferred Stock in an amount requiring payment
by such Buyer of not less than $500,000 (the "SERIES C-2 PREFERRED STOCK
NOTICE"). Each Buyer may deliver only one Series C-2 Preferred Stock Notice to
the Company. The Series C-2 Preferred Stock Notice may only be delivered to the
Company prior to the date ending 10 months from the date the Initial
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective by the United States Securities and Exchange Commission (the
"EFFECTIVE DATE"). The Series C-2 Preferred Stock Notice shall include the
amount and aggregate purchase price of the Series C-2 Preferred Stock to be
purchased by the Buyer and the date selected by the Buyer for the C-2 Closing
Date. The C-2 Closing shall occur on the C-2 Closing Date at the offices of
Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022. The C-1
Closing Date and the C-2 Closing Dates collectively are referred to in this
Agreement as the "CLOSING DATES".

                  d. FORM OF PAYMENT. On each of the Closing Dates, each Buyer
shall pay to the Company the applicable purchase price for the Preferred Stock
to be issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions provided to the Buyers at least two days prior to the Closing Date.

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                  e. WARRANTS. In consideration of the purchase of the Preferred
Stock, the Company shall, on each Closing Date, issue and deliver to the Buyers,
4,000 Warrants for each $100,000 invested by the Buyers, which Warrants shall be
distributed to the Buyers in amounts equal to such Buyer's pro rata portion of
Preferred Stock.

         2. BUYER'S REPRESENTATIONS AND WARRANTIES.

                  Each Buyer represents and warrants with respect to only itself
that:

                  a. INVESTMENT PURPOSE. Such Buyer (i) is acquiring the
Preferred Stock and the Warrants and (ii) upon conversion of the Preferred Stock
and exercise of the Warrants, will acquire the Conversion Shares and Warrant
Shares, respectively, then issuable for its own account for investment only and
not with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act and all applicable state blue sky laws; provided, however, that by
making the representations herein, such Buyer does not agree to hold any
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act and all applicable
state blue sky laws.

                  b. ACCREDITED INVESTOR STATUS. Such Buyer (i) is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the 1933 Act ("REGULATION D") and (ii) was not formed for the specific
purpose of acquiring any of the Securities.

                  c RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Preferred Stock and Warrants are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying in part upon the truth
and accuracy of, and such Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire the Preferred Stock and the Warrants.

                  d. INFORMATION. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Stock and the Warrants which have been requested by such Buyer. Such Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below.

                  e. NO GOVERNMENTAL REVIEW. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Preferred
Stock and the Warrants or the fairness or suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of the
offering of the Preferred Stock and the Warrants.

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                  f. TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) Securities have not been and
are not being registered under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless (A) (i) they
have been subsequently registered thereunder and (ii) they are offered for sale,
sold, assigned and transferred in compliance with the prospectus delivery
requirements of the 1933 Act, (B) such Buyer shall have delivered to the Company
an opinion of counsel, in a generally acceptable form, to the effect that such
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such
Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated
under the 1933 Act (or a successor rule thereto) ("RULE 144"); and (ii) any sale
of such securities made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of such securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder.
Notwithstanding the foregoing, the Securities may be pledged in connection with
a bona fide margin account or other loan secured by the Securities.

                  g. LEGENDS. (i) Such Buyer understands that the certificates
or other instruments representing the Preferred Stock and the Warrants and,
until such time as the sale of the Conversion Shares and the Warrant Shares have
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
         SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
         MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
         ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
         THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
         LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
         REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
         SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
         NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
         CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE
         SECURITIES.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder (other than the Buyer) of any
Securities upon which it is stamped, if (i) upon a resale, any applicable
Security is registered for sale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of any of the Securities may be made without registration under the

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1933 Act, or (iii) such holder provides the Company with reasonable assurances
that any of the Securities can be sold pursuant to Rule 144(k) under the 1933
Act. Each Buyer acknowledges, covenants and agrees to sell any of the Securities
represented by a certificate(s) from which the legend has been removed, only
pursuant to (i) a registration statement effective under the 1933 Act, or (ii)
advice of counsel that such sale is exempt from registration required by Section
5 of the 1933 Act. In the event the above legend is removed from any of the
Securities, the Company may, upon reasonable advance notice to the holder,
require that the above legend be placed on any of the Securities that cannot
then be sold pursuant to an effective registration statement or Rule 144(k)
under the 1933 Act (or any successor rule thereto).

                  (ii) Each certificate for Preferred Stock shall also bear the
following legend:

         ANY TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF
         THE COMPANY'S CERTIFICATE OF DESIGNATIONS RELATING TO THE SERIES C
         PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION
         2(b)(vi) THEREOF. THE NUMBER OF SERIES C PREFERRED SHARES REPRESENTED
         BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SERIES C PREFERRED
         SHARES STATED ON THE FACE HEREOF PURSUANT TO SECTION 2(b)(vi) OF THE
         CERTIFICATE OF DESIGNATIONS RELATING TO THE SERIES C PREFERRED SHARES
         REPRESENTED BY THIS CERTIFICATE.

                  h. AUTHORIZATION; ENFORCEMENT. Each Buyer has the requisite
power and authority, corporate or other, to enter into and perform its
obligations under this Agreement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.

                  i. RESIDENCY. Such Buyer is a resident of that country and/or
state specified in the Schedule of Buyers.

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         3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company represents and warrants to each of the Buyers as set forth
in this Section 3.

                  a. ORGANIZATION AND QUALIFICATION. The Company and its
subsidiaries (a complete list of which as of the date hereof is set forth in
Schedule 3(a)) are duly organized and validly existing in good standing under
the laws of the jurisdiction in which they are organized, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. Each of the Company and its subsidiaries is duly qualified to
do business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse
effect on (i) the business, properties, operations, condition (financial or
otherwise), results of operations or objective prospects of the Company and its
subsidiaries taken as a whole, (ii) on the ability of the Company to perform its
obligations hereunder, under the Certificate of Designation, the Registration
Rights Agreement, the Warrants or under the agreements or instruments to be
entered into or filed in connection herewith or therewith, or (iii) the
Securities.

                  b. AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER
INSTRUMENTS. (i) The Company has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement, the Registration
Rights Agreement and the Warrants, to issue, sell and perform its obligations
with respect to the Preferred Stock and the Warrants in accordance with the
terms hereof, the Certificate of Designation and the Warrants, as applicable,
and to issue the Conversion Shares and the Warrant Shares upon conversion of the
Preferred Stock and the exercise of the Warrants, respectively, in accordance
with the Certificate of Designation and the Warrants, respectively, (ii) the
execution and delivery of this Agreement, the Registration Rights Agreement and
the Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the Preferred Stock and the Warrants and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion of the Preferred
Stock in accordance with the terms of the Certificate of Designation and the
Warrant Shares upon exercise of the Warrants have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its shareholders, (iii) this
Agreement, the Registration Rights Agreement, the certificates for the Preferred
Stock and the Warrants have been duly executed and delivered by the Company,
(iv) this Agreement, the Registration Rights Agreement, the certificates for the
Preferred Stock and the Warrants constitute the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies, and (v) prior to the Closing Date, the Certificate of
Designation will have been filed with the Secretary of State of the State of
Missouri and will be in full force and effect, enforceable against the Company
in accordance with its terms.

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                  c. CAPITALIZATION. As of October 21, 2000, the authorized
capital stock of the Company consists of 245 million shares of Common Stock, of
which as of the date hereof, 86,119,405 shares were issued and outstanding and 5
million shares of preferred stock $10.00 par value, of which as of October 21,
2000, one (1) share was issued and outstanding. All of such outstanding shares
have been validly issued and are fully paid and nonassessable. Except as
disclosed in Schedule 3(c), no shares of Common Stock or Preferred Stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company. Except as disclosed in
Schedule 3(c), as of the date hereof, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities, notes, credit agreements, or other agreements, documents or
instruments evidencing indebtedness of the Company or any of its subsidiaries
and (iii) there are no agreements or arrangements under which the Company or any
of its subsidiaries is obligated to register the sale of any of their securities
under the 1933 Act (except the Registration Rights Agreement). Except as
disclosed in Schedule 3(c), there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
any of the Securities as described in this Agreement. The Company has furnished
to the Buyer true and correct copies of the Company's Articles of Incorporation,
as amended and as in effect on the date hereof (the "ARTICLES OF
INCORPORATION"), and the Company's Bylaws, as in effect on the date hereof (the
"BYLAWS"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.

                  d. ISSUANCE OF SECURITIES. The Securities are duly authorized
and, upon issuance in accordance with the terms hereof, shall be (i) validly
issued, fully paid and non-assessable, (ii) free from all taxes, liens and
charges with respect to the issue thereof and (iii) entitled to the rights and
preferences set forth in the Certificate of Designation and the Warrants,
respectively. As of the date hereof, not less than the aggregate of (i) 200% of
the number of Conversion Shares issuable upon conversion of all of the Series
C-1 Preferred Stock and (ii) the number of Warrant Shares issuable upon exercise
of all of the Warrants to be issued at the C-1 Closing, without regard to
limitations on conversion or exercise, have been duly authorized and reserved
for issuance. Such Conversion Shares and Warrant Shares so reserved shall be
allocated for issuance upon conversion of the Preferred Stock and exercise of
the Warrants pro rata among the Buyers based on the number of Preferred Stock
held by such Buyer relative to the total number of outstanding Preferred Stock.
Subsequent to the date hereof, not less than the aggregate of (i) 150% of the
number of Conversion Shares then issuable upon conversion of all the then
outstanding shares of Preferred Stock and (ii) the number of Warrant Shares
issuable at such time upon exercise of all the then outstanding Warrants,
without regard to limitations on conversion or exercise, shall be duly
authorized and reserved for issuance. Upon conversion or exercise in accordance

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with the Certificate of Designation and the Warrants, as applicable, the
Conversion Shares and Warrant Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock.

                  e. NO CONFLICTS. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of this Agreement, the Registration Rights
Agreement and the Warrants by the Company, the performance by the Company of its
obligations under the Certificate of Designation and the Warrants and the
consummation by the Company of the transactions contemplated hereby and thereby
will not (i) result in a violation of the Articles of Incorporation, any
Certificate of Designation, Preferences and Rights of any outstanding series of
preferred stock of the Company or Bylaws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and regulations
of the principal market or exchange on which the Common Stock is traded or
listed) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected. Except as disclosed in Schedule 3(e), neither the Company nor its
subsidiaries is in violation of any term of or in default under its Articles of
Incorporation, any Certificate of Designation, Preferences and Rights of any
outstanding series of preferred stock of the Company or Bylaws or their
organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order (collectively referred to as the "MATERIAL CONTRACTS") or any statute,
rule or regulation applicable to the Company or its subsidiaries except for
violations and defaults that, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect. A complete and accurate
list of the Material Contracts is set forth on Schedule 3(e) hereto. The
business of the Company and its subsidiaries is not being conducted, and shall
not be conducted, in violation of any material law, ordinance or regulation of
any governmental entity. Except as specifically contemplated by this Agreement
and as required under the 1933 Act and applicable blue sky laws, the Company is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental or regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement, the Registration Rights
Agreement or the Warrants or perform its obligations under the Certificate of
Designation in accordance with the terms hereof or thereof. Except as disclosed
in Schedule 3(e), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company is not in violation of the listing requirements of the Nasdaq National
Market, including, without limitation, the requirements set forth in Rule
4310(c)(25)(G)(i) of The Nasdaq Stock Market's Marketplace Rules. The Company
and its subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing or to delisting or suspension of the Common Stock
by the Nasdaq National Market.

                  f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31,
1999, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included

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therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they are
or were made, not misleading. Neither the Company nor any of its subsidiaries
nor any of their officers, directors, employees or agents have provided the
Buyers with any material, nonpublic information.

                  g. ABSENCE OF CERTAIN CHANGES. Except as expressly set forth
in Schedule 3(g) or the SEC Documents that are filed no later than September 15,
2000, since December 31, 1999, there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, results of operations or objective prospects of the Company and its
subsidiaries taken as a whole. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or its subsidiaries have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings. Except as disclosed in Schedule 3(g) or the SEC Documents that are
filed no later than September 15, 2000, since December 31, 1999, the Company has
not declared or paid any dividends, sold any assets, individually or in the
aggregate, in excess of $2,000,000 outside of the ordinary course of business or
had capital expenditures, individually or in the aggregate, in excess of
$3,000,000.

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                  h. ABSENCE OF LITIGATION. Except as disclosed in Schedule
3(h), there is no action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company or its subsidiaries or their
respective directors or officers, or the Common Stock, which in the reasonable
judgment of the Company's officers has or is expected in the future,
individually or in the aggregate, to (i) have a Material Adverse Effect or (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement, the
Registration Rights Agreement, the Warrants or any of the documents contemplated
herein.

                  i. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF THE PREFERRED
STOCK. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of arm's length purchaser with respect to this Agreement,
the Registration Rights Agreement, the Warrants and the Certificate of
Designation and the transactions contemplated hereby and thereby. The Company
further acknowledges that each Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement, the Registration Rights Agreement, the Warrants and the Certificate
of Designation and the transactions contemplated hereby and thereby and any
advice given by any of the Buyers or any of their respective representatives or
agents in connection with this Agreement, the Registration Rights Agreement, the
Warrants and the Certificate of Designation and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Preferred Stock and Warrants. The Company further represents to each Buyer that
the Company's decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives. The Company has
not provided to any Buyer any nonpublic information that, in the opinion of the
Company, is material to a decision to purchase or sell Common Stock.

                  j. NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of any of
the Securities offered hereby.

                  k. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause the offering of any of the Securities
to be integrated with prior offerings by the Company for purposes of the 1933
Act or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated, nor will the Company or any of its Subsidiaries take any action or
steps that would require registration of the issuance by the Company of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.

                                      -10-
<PAGE>   11

                  l. EMPLOYEE RELATIONS. The Company and its subsidiaries are in
compliance with all federal, state, local, and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours except where failure to be in compliance would
not have a Material Adverse Effect. There are no pending investigations
involving the Company or any of its subsidiaries by the U.S. Department of Labor
or any other governmental agency responsible for the enforcement of such
federal, state, local or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company or any of its subsidiaries
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company or any of its subsidiaries. Except as set forth in
Schedule 3(l), no representation question exists respecting the employees of the
Company or any of its subsidiaries, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company or any of its
subsidiaries. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any of
its subsidiaries. No material labor dispute with the employees of the Company or
any of its subsidiaries exists or, to the knowledge of the Company, is imminent.
Schedule 3(l) sets forth a list of every employee benefit plan (whether or not
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) maintained or contributed to by the Company or any of member of its
controlled group (determined in accordance with Section 4001(a)(14) of ERISA)
(collectively the "PLANS"). Except for such failures that would not,
individually or in the aggregate result in a Material Adverse Effect, each of
the Plans have been maintained and administered in accordance with their terms,
ERISA, the Internal Revenue Code of 1986, as amended (the "CODE") and other
applicable laws. None of the Plans is subject to Title IV of ERISA and no Plan
is a multiemployer plan (within the meaning of Section 3(37) of ERISA). Each
Plan intended to qualify under Section 401(a) or 501(c)(9) of the Code has
received a favorable determination or approval letter from the Internal Revenue
Service regarding its qualification under such section and no event has occurred
which cause any such Plan to lose its qualification.

                  m. INTELLECTUAL PROPERTY RIGHTS. Except as set forth on
Schedule 3(m), the Company and its subsidiaries own or possess adequate rights
or licenses to use all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and rights
(collectively "INTELLECTUAL PROPERTY RIGHTS") necessary to conduct their
respective businesses as now conducted and as presently contemplated to be
operated in the future except for Intellectual Property Rights that,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect. Except as set forth on Schedule 3(m), none of the
Intellectual Property Rights or other intellectual property rights have expired
or terminated, or are expected to expire or terminate within two years from the
date of this Agreement. Except as set forth on Schedule 3(m), the Company and
its subsidiaries do not have any knowledge of any event, fact or circumstance
relating to (i) any infringement by the Company or its subsidiaries of any
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets or other similar rights of others, or
of any such development of similar or identical trade secrets or technical
information by others or (ii) any person or entity now infringing any
Intellectual Property Rights or other similar rights or any such development of

                                      -11-
<PAGE>   12

similar or identical trade secrets or technical information owned or used by the
Company or any of its subsidiaries and, except as set forth on Schedule 3(m),
there is no claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company or its subsidiaries
regarding any trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets or other
infringement; and except as set forth on Schedule 3(m), the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their Intellectual Property Rights.

                  n. ENVIRONMENTAL LAWS. (i) The Company and its subsidiaries
(A) are in compliance with any and all Environmental Laws, (B) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, and (C) are in
compliance with all terms and conditions of any such permit, license or approval
except where the failure to be so in compliance would not have a Material
Adverse Effect. With respect to the Company and/or its subsidiaries (A) there
are no past or present releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental liability or any
liability under any Environmental Law and (B) neither the Company nor any of its
subsidiaries has received any notice with respect to the foregoing, nor is any
action pending, or to the Company's knowledge, threatened in connection with the
foregoing. The term "ENVIRONMENTAL LAWS" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "HAZARDOUS MATERIALS") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

                  (ii) Other than those that are or were stored, used or
disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or used by the
Company or any of its Subsidiaries, and no Hazardous Materials were released on
or about any real property previously owned, leased or used by the Company or
any of its subsidiaries during the period the property was owned, leased or used
by the Company or any of its subsidiaries.

                  o. TITLE. The Company and its subsidiaries have good and valid
title to all real and personal property owned by them which is material to the
business of the Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in Schedule 3(o) or
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries. Any real property and facilities held under lease by the

                                      -12-
<PAGE>   13

Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.

                  p. INSURANCE. Except as set forth on Schedule 3(p), the
Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as is
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not individually or in the aggregate have a Material Adverse Effect.

                  q. REGULATORY PERMITS. The Company and its subsidiaries
possess all material franchises, grants, authorizations, licenses permits,
easements, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to conduct their respective businesses as
currently being conducted (collectively, the "COMPANY PERMITS"). There is no
action pending, or to the knowledge of the Company, threatened regarding the
suspension or cancellation of any of the Company Permits. Neither the Company
nor any of its subsidiaries is in conflict with, or in default or violation of,
any of the Company Permits. Neither the Company nor any of its subsidiaries has
received any notification with respect to possible conflicts, defaults, or
violations of applicable laws.

                  r. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

                  s. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company
nor any of its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
reasonable judgment of the Company's officers has or is expected in the future,
individually or in the aggregate, to have a Material Adverse Effect. Neither the
Company nor any of its subsidiaries is a party to any contract or agreement
which has or is expected to have a Material Adverse Effect.

                                      -13-
<PAGE>   14

                  t. TAX STATUS. Except as set forth on Schedule 3(t), the
Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim. The Company has not executed a waiver with respect to the
statute of limitations relating to the assessment or collection of any foreign,
federal, state or local tax. The Company has not been notified that any of its
tax returns is currently being audited by any taxing authority.

                  u. CERTAIN TRANSACTIONS. Except as set forth on Schedule 3(u)
and except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c) or pursuant to approved stock option plans,
none of the officers, directors or employees of the Company is presently a party
to any transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director
or any such employee has a substantial interest or is an officer, director,
trustee or partner.

                  v. S-3 REGISTRATION. Pursuant to a waiver from the 12 month
timely filing requirement for the use of Form S-3, as specified in General
Instruction I(A)(3) of Form S-3, obtained by the Company from the Office of
Chief Counsel of the SEC on June 23, 2000, as extended on September 22, 2000,
the Company is, and will be for sixty (60) days from September 22, 2000,
eligible to use Form S-3 for registration of the sale by the Buyers and any
other Investor of the Registrable Securities (as such terms are defined in the
Registration Rights Agreement) and, except for the amendment to the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 filed with the
SEC on June 23, 2000, the Company has filed and shall file all reports required
to be filed by the Company with the SEC in a timely manner so as to obtain and
maintain such eligibility for the use of Form S-3.

                  w. DISCLOSURE. All information relating to or concerning the
Company or any of its subsidiaries set forth in this Agreement, the SEC
Documents and provided to the Buyer pursuant to Section 2(d) hereof and
otherwise in connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading. No

                                      -14-
<PAGE>   15

event or circumstance has occurred or information exists with respect to the
Company or any of its subsidiaries or its or their business, properties,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed (assuming for this purpose that
the Company's reports filed under the 1934 Act are being incorporated into an
effective registration statement filed by the Company under the 1933 Act).

                  x. INVESTMENT COMPANY STATUS. The Company is not and upon
consummation of the sale of the Securities will not be an "investment company,"
a company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.

                  y. FOREIGN CORRUPT PRACTICES. Neither the Company nor any of
its subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any subsidiary has, in the course of his
actions for, or on behalf of, the Company used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.

                  z. DILUTIVE EFFECT The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Stock and the Warrant Shares issuable upon exercise of the Warrants will
increase in certain circumstances. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Stock in
accordance with this Agreement and the Certificate of Designation and its
obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants, is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interest of other stockholders of the Company.

         4. COVENANTS AND AGREEMENTS.

                  a. BEST EFFORTS. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.

                  b. BLUE SKY. The Company shall, on or before the Closing Date,
take such action as the Company shall reasonably determine is necessary in order
to obtain an exemption for or to qualify the Securities for, or obtain exemption
for the Securities for, sale to the Buyers at each Closing pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States, and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date. The Company shall make all filings and
reports relating to the offer and sale of the Securities required under
applicable securities or "Blue Sky" laws of the states of the United States
following the Closing Date.

                                      -15-
<PAGE>   16

                  c. REPORTING STATUS. Until the earlier of (i) the date as of
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares, and Warrant Shares (assuming
cashless exercise) without restriction pursuant to Rule 144(k) promulgated under
the 1933 Act (or successor thereto) or (ii) the date on which (A) the Investors
shall have sold all the Conversion Shares and Warrant Shares and (B) none of the
Preferred Stock or Warrants are outstanding (the "REGISTRATION PERIOD"), the
Company (x) shall timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, (y) shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would otherwise permit such termination and (z) the
Company will use its best efforts to maintain its ability and eligibility to
register securities on Form S-3.

                  d. USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Series C-1 Preferred Stock and Warrants for general corporate
purposes, including working capital and acquisitions. The Company shall provide
a Use of Proceeds Schedule prior to each C-2 Closing identifying the use of the
proceeds from the sale of the Series C-2 Preferred Stock.

                  e. FINANCIAL INFORMATION. The Company agrees to file all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the 1934 Act. The
financial statements of the Company will be prepared in accordance with
generally accepted accounting principles, consistently applied, and will fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries and results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). The Company agrees to send
the following to each Investor (as that term is defined in the Registration
Rights Agreement) during the Registration Period: (i) on the same day as the
release thereof, copies of all press releases issued by the Company or any of
its subsidiaries; and (ii) unless otherwise publicly available, copies of any
notices and other information made available or given to the shareholders of the
Company generally, contemporaneously with the making available or giving thereof
to the shareholders.

                  f. RESERVATION OF SHARES. As of the date hereof, the Company
shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, no less than the sum of (i) 200% of the number of
Conversion Shares issuable upon conversion of all of the Series C-1 Preferred
Stock and (ii) the number of Warrant Shares issuable upon exercise of all of the
Warrants to be issued at the C-1 Closing, without regard to limitations on
conversion or exercise, in accordance with the terms of this Agreement, and the
Certificate of Designation and the Warrant. At each C-2 Closing, the Company
shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, no less than the sum of (i) 200% of the number of
Conversion Shares then issuable upon conversion of all of the Series C-2
Preferred Stock to be issued at such C-2 Closing, (ii) 150% of the number of
Conversion Shares then issuable upon conversion of all other then outstanding
Preferred Stock and (ii) the number of Warrant Shares issuable upon exercise of
all of the outstanding Warrants including for such purposes the Warrants to be
issued at such C-2 Closing, without regard to limitations on conversion or
exercise, in accordance with the terms of this Agreement, and the Certificate of

                                      -16-
<PAGE>   17

Designation and the Warrant. Subsequent to the date hereof, the Company shall
take all action necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than the sum of (i) 150% of the number of
Conversion Shares issuable upon conversion of all of the outstanding Preferred
Stock and (ii) the number of Warrant Shares issuable upon exercise of all of the
outstanding Warrants, without regard to limitations on conversion or exercise,
in accordance with the terms of this Agreement, and the Certificate of
Designation and the Warrant. Such Conversion Shares and Warrant Shares so
reserved shall be allocated for issuance upon conversion of the Preferred Stock
and exercise of the Warrants pro rata among the Buyers based on the number of
Preferred Stock held by such Buyer relative to the total number of outstanding
Preferred Stock.

                  g. LISTING. The Company shall promptly use its best efforts to
secure the listing of the Registrable Securities issuable on the date hereof
upon conversion of then outstanding Preferred Stock upon the Nasdaq National
Market ("NASDAQ") (subject to official notice of issuance) and shall maintain or
use its best efforts to promptly obtain, so long as any other shares of Common
Stock shall be so listed, the listing of all Registrable Securities from time to
time then issuable upon conversion of then outstanding Preferred Stock under the
terms of this Agreement, the Certificate of Designation and the Warrants on each
national securities exchange and automated quotation system, if any, upon which
shares of Common Stock are then listed. Neither the Company nor any of its
subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock from the Nasdaq National
Market other than pursuant to the Certificate of Designation. The Company shall
promptly provide to each Buyer copies of any notices it receives from the Nasdaq
regarding the continued eligibility of the Common Stock for listing on the
Nasdaq or other principal exchange or quotation system on which the Common Stock
is listed or traded, except to the extent that such notices would constitute
material non-public information which, according to applicable law, rule or
regulation should have been disclosed publicly by the Company but which has not
been so disclosed as of such date. The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section 4(g).

                  h. EXPENSES. Each of the Company and the Buyers shall each pay
its respective costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution, delivery and performance of
this Agreement or the Certificate of Determination, the Warrants and the
Registration Rights Agreement; provided, that at the Closing as the Buyers may
request, the Company shall reimburse the Buyers for Buyers' attorneys' fees and
expenses in connection with this Agreement or the Certificate of Designation,
the Warrants and the Registration Rights Agreement up to an aggregate of
$40,000. In addition, the Company shall pay a broker's fee to Brad Holt in the
amount of $600,000.

                                      -17-
<PAGE>   18

                  i. FURTHER ISSUANCES OF SECURITIES.

                           (i) RIGHT OF FIRST REFUSAL. If at any time during the
period beginning from the date hereof and ending 180 days after the Effective
Date, the Company shall desire to issue any Common Stock or other equity
security or any other security convertible, exchangeable or exercisable for
Common Stock (including any debt financing with an equity component and equity
line transaction) or any other right to acquire any Common Stock (the
"CONVERTIBLE SECURITIES") pursuant to Section 4(2) of the 1933 Act or an
offering under Regulation D or Regulation S of the 1933 Act or in any other
private placement, other than Excluded Issuances, then the Company shall first
comply with the terms of this Section 4(i). For purposes hereof, "EXCLUDED
Issuances" shall mean: (A) issuances pursuant to Company authorized stock option
plans to employees, consultants, service providers or directors of the Company,
(B) the issuance of warrants as an ancillary part of any bank facility or
borrowing from any financial institution not undertaken to raise or raising,
directly or indirectly, equity capital or (C) issuances in connection with joint
ventures, licensing arrangements or strategic partnerships that the Board of
Directors of the Company believes in good faith to be in the best interests of
the Company, provided that no more than 2 million shares of Common Stock are
issued in the aggregate pursuant to (C) during the three (3) month period
following the C-1 Closing Date, (D) issuances of Common Stock upon the
conversion of the Preferred Stock or exercise of the Warrants and (E) shares of
Common Stock issued pursuant to any right (contingent or otherwise) to purchase
such shares as set forth in Schedule 3(c)(i) hereto and issuances in connection
with acquisitions of the assets or stock of an unaffiliated third-party
consummated on an arms length basis (including any brokerage commissions or
finders fee relating thereto and any shares issuable in respect of rights
granted by an acquired company which were in existence at the time of
acquisition of such company by the Company).

                           (ii) NOTICE REQUIREMENTS. The Company shall notify,
or cause to be notified, the Buyers not less than twenty (20) calendar days
prior to the time the Company intends to consummate such issuance (the "ISSUANCE
NOTICE"). The Issuance Notice shall set forth all of the terms of such proposed
issuance.

                           (iii) EXERCISE OF RIGHT OF FIRST REFUSAL. The Buyers
shall have a right of first refusal to acquire such private-placement
Convertible Securities, which right may be exercised by the Buyers only by
delivery of a written notice to the Company (the "EXERCISE NOTICE"), stating how
much each Buyer is willing to purchase of its pro-rata portion of the proposed
issuance not subscribed for by other Buyers, within ten (10) business days
following receipt of the Issuance Notice (the "REFUSAL PERIOD"). The Exercise
Notice shall state that the Buyers agree to purchase all of the proposed
issuance of such securities on terms economically equal to the terms set forth
in the Issuance Notice. The closing under such right of first refusal shall
occur within ten (10) business days after the last day of the Refusal Period.

                           (iv) RIGHT TO ISSUE SECURITIES. After expiration of
the Refusal Period, if the provisions of this Section 4(i) have been complied
with in all respects by the Company and no Exercise Notice has been given, or if
given, the Buyers have not agreed to purchase all of the securities set forth in
the Issuance Notice, the Company shall have the right for forty-five (45)

                                      -18-
<PAGE>   19

calendar days following the termination of the Refusal Period to issue such
securities, or any portion thereof not being purchased by the Buyers, specified
in the Issuance Notice on the terms described in the Issuance Notice without
further notice to the Buyers, but after such forty-five (45) calendar days, no
such issuance may be made without again giving notice to the Buyers and
complying with all of the requirements of this Section 4(i).

                           (v) The Company will not issue any Preferred Stock
other than to the Buyers as contemplated hereby or as otherwise contemplated in
the Certificate of Determination.

                  j. FILING OF FORM 8-K. Within one business day of each Closing
Date, the Company will file a Form 8-K with the SEC with respect to the issuance
of the Securities at such Closing and the transactions contemplated by this
Agreement. Such filings shall contain appropriate disclosure of the terms and
conditions of the issuance of the Securities and shall include as exhibits forms
of the Agreement, Warrants, Certificate of Designation, Registration Rights
Agreement and, if not previously the subject of a Form 8-K, the Credit Facility
(as such term is defined in the Certificate of Designation), including the
financial covenants contained in the Credit Facility.

                  k. DISCLOSURE. From and after the date hereof, the Company
will not provide to any Buyer any material non-public information which,
according to applicable law, rule or regulation should be disclosed publicly by
the Company but which has not been so disclosed.

                  l. CORPORATE EXISTENCE. So long as any Buyer beneficially owns
any Securities, the Company shall maintain its corporate existence in good
standing under the laws of the jurisdiction in which it is incorporated and
shall not sell all or substantially all of the Company's assets, except in the
event of a merger or consolidation or sale of all or substantially all of the
Company's assets for cash, or, if for securities, where the surviving or
successor entity in such transaction either (i) redeems all of the then
outstanding shares of Preferred Shares in accordance with and subject to the
terms of the Certificate of Designation applicable to such transactions, or
(ii)(A) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (B) is a publicly traded
corporation whose common stock is listed for trading on the American Stock
Exchange, Nasdaq or the New York Stock Exchange.

                  m. SOLVENCY; COMPLIANCE WITH LAW. The Company individually and
together with its subsidiaries on a consolidated basis (both before and after
giving effect to the transactions contemplated by this Agreement) is solvent
(i.e., its assets have a fair market value in excess of the amount required to
pay its probable liabilities on its existing debts as they become absolute and
matured) and currently the Company has no information that would lead it to
reasonably conclude that the Company would not have, nor does it intend to take
any action that would impair, its ability to pay its debts from time to time
incurred in connection therewith as such debts mature. The Company will conduct
its business in compliance with all applicable laws, rules, ordinances and
regulations of the jurisdictions in which it is conducting business, including,
without limitation, all applicable local, state and federal environmental laws
and regulations the failure to comply with which would have a Material Adverse
Effect.

                                      -19-
<PAGE>   20

                  n. INSURANCE. The Company shall maintain liability, casualty
and other insurance (subject to customary deductions and retentions) with
responsible insurance companies against such risk of the types and in the
amounts customarily maintained by companies of comparable size to the Company.

                  o. PROXY STATEMENT. The Company shall provide each stockholder
entitled to vote at the next meeting of stockholders of the Company, which
meeting shall occur on or before the earlier of (A) the date which is 75 days
after the Proxy Statement Triggering Date (as defined below) and (B) the date on
which the Company holds its next annual meeting of stockholders, which date
shall be no later than June 30, 2001 (the "STOCKHOLDER MEETING DEADLINE"), a
proxy statement, which has been previously reviewed by each Buyer and counsel
for the Buyers, soliciting each such stockholder's affirmative vote at such
stockholder meeting for approval of the Company's issuance of all of the
Securities as described in this Agreement (such affirmative vote being referred
to as the "STOCKHOLDER APPROVAL"), and the Company shall use its best efforts to
(i) solicit its stockholders' approval of such issuance of the Securities and
(ii) cause the Board of Directors of the Company to recommend to the
stockholders that they approve such proposal. If the Company fails to hold a
meeting of its stockholders by the Stockholder Meeting Deadline, then, as
partial relief (which remedy shall not be exclusive of any other remedies
available at law or in equity), the Company shall pay to each holder of
Preferred Stock an amount in cash per Preferred Share held by such holder equal
to the product of (i) $1,000, multiplied by (ii) 0.02; multiplied by (iii) the
quotient of (x) the number of days after the Stockholder Meeting Deadline that a
meeting of the Company's stockholders is not held, divided by (y) 30. The
Company shall make the payments referred to in the immediately preceding
sentence within five days of the earlier of (I) the holding of the meeting of
the Company's stockholders, the failure of which resulted in the requirement to
make such payments, and (II) the last day of each 30-day period beginning on the
Stockholder Meeting Deadline. In the event the Company fails to make such
payments in a timely manner, such payments shall bear interest at the rate of
2.0% per month (pro rated for partial months) until paid in full. "PROXY
STATEMENT TRIGGERING DATE" shall mean the first date after the date of this
Agreement on which there are five (5) trading days in any period of seven (7)
consecutive trading days on which the sum of (A) the number of shares of Common
Stock previously issued upon conversion of any Preferred Stock and upon exercise
of any Warrants and (B) the number of shares of Common Stock issuable upon
conversion of all the outstanding Preferred Stock based on the Conversion Price
in effect on the date of such determination (without regard to any limitation
upon the conversion of any Preferred Stock) and upon exercise of all the
outstanding Warrants based on the Warrant Exercise Price in effect on the date
of such determination (without) regard to any limitation upon the exercise of
any Warrants), equals or exceeds 16% of the number of shares of Common Stock
issued and outstanding immediately prior to the C-1 Closing Date or other date
of determination.

                  p. NEW TRANSFER AGENT. The Company shall, as soon as possible
but in any event no later than 90 days from the C-1 Closing Date, retain a
transfer agent (the "NEW TRANSFER AGENT") that participates in The Depository
Trust Company ("DTC") Fast Automated Securities Transfer Program and the
Irrevocable Transfer Agent Instructions (as defined below), substantially
identical to the form of EXHIBIT D attached hereto, shall be delivered to and
acknowledged in writing by the New Transfer Agent.

                                      -20-
<PAGE>   21

         5. TRANSFER AGENT INSTRUCTIONS.

                  For Buyer's conversion requests made within 90 days of the C-1
Closing Date, the Company shall issue irrevocable instructions to its transfer
agent (in the form attached hereto as EXHIBIT D) to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and Warrant Shares in such amounts as specified from time to
time by each Buyer to the Company upon conversion of the Preferred Stock or
exercise of the Warrants, respectively. For Buyer's conversion requests made 90
days after the C-1 Closing Date, the Company shall issue irrevocable
instructions to its transfer agent (in the form attached hereto as EXHIBIT D)
when the legend set forth in Section 2(g) is not required, to electronically
issue such shares (e.g., through DWAC or DTC), or at a Buyer's request or when
the legend set forth in Section 2(g) is required, to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and Warrant Shares in such amounts as specified from time to
time by each Buyer to the Company upon conversion of the Preferred Stock or
exercise of the Warrants, respectively (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"). Prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act and transfer of such shares to a holder other than the
Buyer, such certificates shall bear the restrictive legend specified in Section
2(g) of this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof will be given by the
Company to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, the Certificate
of Designation and the Warrants. Nothing in this Section 5 shall affect in any
way each Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of any of the Securities. If a Buyer provides the
Company with an opinion of reasonably satisfactory counsel, reasonably
satisfactory in form and substance to the Company, that registration of a resale
by such Buyer of any of the Securities is not required under the 1933 Act, the
Company shall permit the transfer, and, in the case of the Conversion Shares or
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.

         6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

                  The obligation of the Company hereunder to issue and sell the
Preferred Stock and Warrants to each Buyer at the Closings is subject to the
satisfaction, at or before each of the Closing Dates, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:

                  a. Such Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.

                                      -21-
<PAGE>   22

                  b. Such Buyer shall have delivered to the Company the
applicable purchase price for the applicable Preferred Stock being purchased by
such Buyer at such Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.

                  c. A Merger Transaction (as defined in the Certificate of
Designation) pursuant to which all of the outstanding Preferred Stock shall have
been converted or redeemed shall not have been consummated.

                  d. The representations and warranties of such Buyer shall be
true and correct in all material respects as of each of the Closing Dates as
though made at that time (except for representations and warranties that speak
as of a specific date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to each of the Closing Dates.

         7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

                  a. C-1 CLOSING DATE. The obligation of each Buyer hereunder to
purchase the Series C-1 Preferred Stock at the C-1 Closing is subject to the
satisfaction, at or before the C-1 Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion:

                           i. The Company shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to such Buyer.

                           ii. The Certificate of Designation shall have been
executed by the Company and filed with the Secretary of the State of Missouri,
and a copy marked as filed shall have been delivered to such Buyer.

                           iii. The Common Stock shall be authorized for trading
on the Nasdaq National Market, New York Stock Exchange or American Stock
Exchange (collectively, the "EXCHANGES"), and trading in the Common Stock on the
applicable Exchange shall not have been suspended by the SEC or the applicable
Exchange and all of the Conversion Shares and Warrant Shares then issuable upon
conversion of the Series C-1 Preferred Stock or exercise of the Warrants to be
sold at the C-1 Closing shall be listed upon the applicable Exchange (subject to
notice of issuance).

                           iv. The representations and warranties of the Company
shall be true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case such representations and
warranties shall be true and correct without further qualification) as of the
C-1 Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied

                                      -22-
<PAGE>   23

or complied with by the Company at or prior to the C-1 Closing Date. Such Buyer
shall have received a certificate, executed by the Chief Executive Officer of
the Company, dated as of the C-1 Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer including,
without limitation, an update as of the C-1 Closing Date regarding the
representation contained in Section 3(c) above.

                           v. Such Buyer shall have received the opinion of the
Company's counsel dated as of the C-1 Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of EXHIBIT E
attached hereto.

                           vi. The Company shall have executed and delivered to
such Buyer the Stock Certificates (in such denominations as such Buyer shall
request) for the Series C-1 Preferred Stock being purchased by such Buyer and
the Warrants being given at the C-1 Closing.

                           vii. The Board of Directors of the Company shall have
adopted the resolutions in substantially the form of EXHIBIT F attached hereto
(the "RESOLUTIONS").

                           viii. As of the C-1 Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Series C-1 Preferred Stock and the
exercise of the Warrants, at least an aggregate of (i) 200% of the number of
Conversion Shares issuable upon conversion of the Series C-1 Preferred Stock,
assuming current conversion; and (ii) the number of Warrant Shares issuable upon
exercise of all of the outstanding Warrants, without regard to limitations on
conversion or exercise.

                           ix. The Irrevocable Transfer Agent Instructions, in
the form of EXHIBIT D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.

                           x. The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each subsidiary representing more than 5% of the 1999 revenue of the Company in
the state of such corporation's state of incorporation issued by the Secretary
of State of such state of incorporation as of a date within 7 days of such
Closing Date.

                           xi. The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (A) the Resolutions, (B) copies of its
Articles of Incorporation and (C) By-laws, each as in effect at the C-1 Closing.

                           xii. The Company shall have delivered to such Buyer a
certified copy of its Articles of Incorporation as certified by the Secretary of
State of the State of Missouri as of a date within 5 business days after the C-1
Closing Date.

                           xiii. The Company shall have delivered to such Buyer
such other documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.

                           xiv. The transactions contemplated hereby shall not
violate any law, regulation or order then in effect and applicable to Buyers or
the Company.

                                      -23-
<PAGE>   24

                           xv. The Company shall not be in default of the Credit
Facility (as such term is defined in the Certificate of Designation).

                           xvi. The Company shall have delivered to such Buyer a
signed copy of the Credit Facility.

                           xvii. The Company shall have delivered written notice
to the Buyers specifying whether dividends shall be paid in cash, additional
Preferred Stock or a specified combination thereof.

                  b. C-2 CLOSING DATES. The obligation of each Buyer hereunder
to purchase the Series C-2 Preferred Stock at the C-2 Closing is subject to the
satisfaction, at or before the C-2 Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion:

                           i. The Certificate of Designation for the Preferred
Stock shall be in full force and effect and such certificate shall not have been
amended since the most recent Closing Date, and a copy of such Certificate
certified by the Secretary of State of the State of Missouri shall have been
delivered to such Buyer.

                           ii. The Common Stock shall be authorized for trading
on one of the Exchanges, trading in the Common Stock shall not have been
suspended by the SEC or such Exchange since the C-1 Closing Date and all of the
Registrable Securities shall be listed upon such Exchange.

                           iii. The representations and warranties of the
Company shall be true and correct in all material respects (except to the extent
that any of such representations and warranties is already qualified as to
materiality in Section 3, in which case such representations and warranties
shall be true and correct without further qualification) as of the date when
made and as of the C-2 Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement, the
Registration Rights Agreement, the Warrant or the Certificate of Designation to
be performed, satisfied or complied with by the Company at or prior to the C-2
Closing Date. Such Buyer shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the C-2 Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Buyer including, without limitation, an update as of the C-2 Closing Date
regarding the representation contained in Section 3(c) above.

                           iv. Such Buyer shall have received the opinion of the
Company's counsel dated as of the C-2 Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of EXHIBIT E
attached hereto.

                           v. The Company shall have executed and delivered to
such Buyer the Stock Certificates (in such denominations as such Buyer shall
request) for the Series C-2 Preferred Stock being purchased by such Buyer and
the Warrants being given at the C-2 Closing.

                                      -24-
<PAGE>   25

                           vi. The Board of Directors of the Company shall not
have amended the Resolutions or shall have delivered updated Resolutions in a
form acceptable to such Buyer.

                           vii. As of the C-2 Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Stock and the exercise of
the Warrants, a number of shares of Common Stock equal, without regard to
limitations on conversion or exercise, to an aggregate of (i) at least 200% of
the number of Conversion Shares then issuable upon conversion of all of the
outstanding Series C-2 Preferred Stock, including for such purposes the Series
C-2 Preferred Stock to be issued at the C-2 Closing; (ii) 150% of the number of
Conversion Shares then issuable upon conversion of the then outstanding
Preferred Stock; and (iii) the number of Warrant Shares issuable upon exercise
of all of the outstanding Warrants including for such purposes the Warrants to
be issued at the C-2 Closing.

                           viii. The Irrevocable Transfer Agent Instructions,
substantially identical to the form of EXHIBIT D, attached hereto, shall have
been delivered to and acknowledged in writing by the Company's transfer agent.

                           ix. The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each subsidiary representing more than 5% of the revenue of the Company for the
most recently completed fiscal year in the state of such corporation's state of
incorporation issued by the Secretary of State of such state of incorporation as
of a date within ten days of the C-2 Closing Date.

                           x. The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (A) the Resolutions, (B) copies of its
Articles of Incorporation and (C) By-laws, each as in effect at the C-2 Closing.

                           xi. The Company shall have delivered to such Buyer a
certified copy of its Articles of Incorporation as certified by the Secretary of
State of the State of Missouri within ten days of the C-2 Closing Date.

                           xii. The Company shall have delivered to such Buyer a
letter from the Company's transfer agent certifying the number of shares of
Common Stock outstanding as of a date within five days of the C-2 Closing Date.

                           xiii. The Company shall have delivered to such Buyer
such other documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.

                           xiv. The transactions contemplated hereby shall not
violate any law, regulation or order then in effect and applicable to Buyers or
the Company.

         8. INDEMNIFICATION.

                  In consideration of each Buyer's execution and delivery of
this Agreement and acquiring the Securities hereunder and in addition to all of
the Company's other obligations under this Agreement, the Company shall defend,

                                      -25-
<PAGE>   26

protect, indemnify and hold harmless each Buyer and each other holder of
Securities and all of their officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "BUYER
Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Buyer Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "BUYER INDEMNIFIED
LIABILITIES"), incurred by any Buyer Indemnitee (and shall advance the same) as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement,
the Certificate of Designation, the Warrants, the Registration Rights Agreement
or any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in this Agreement, the Certificate of Designation, the Warrants or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Buyer Indemnitee and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement or
any other instrument, document or agreement executed pursuant hereto by any of
the Buyer Indemnitees, any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the issuance of the Preferred
Stock and Warrants or the status of such Buyer or holder of any of the
Securities as an investor in the Company. Promptly after receipt by a Buyer
Indemnitee of notice of the commencement of any action or proceeding (including
any governmental action or proceeding) involving the Buyer Indemnified
Liabilities , such Buyer Indemnitee shall deliver to the Company a written
notice of the commencement thereof, and the Company shall have the right to
participate in, and, to the extent it so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel selected by the Company and reasonably satisfactory to the Buyer
Indemnitee; provided, however, that a Buyer Indemnitee shall have the right to
retain its own counsel with the fees and expenses to be paid by the Company, if,
in the reasonable opinion of counsel retained by the Company, the representation
by such counsel of the Buyer Indemnitee and the Company would be inappropriate
due to actual differing interests between such Buyer Indemnitee and any other
party represented by such counsel in such proceeding. The Buyer Indemnitee shall
cooperate fully with the Company in connection with any negotiation or defense
of any such action or claim by the Company and shall furnish to the Company all
information reasonably available to the Buyer Indemnitee which relates to such
action or claim. The Company shall keep the Buyer Indemnitee fully apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto. The Company shall not be liable for any settlement of any
action, claim or proceeding effected without its written consent, provided,
however, that the Company shall not unreasonably withhold, delay or condition
its consent. The Company shall not, without the consent of the Buyer Indemnitee,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Buyer Indemnitee of a release from all
liability in respect to such claim or litigation. Following indemnification as
provided for hereunder, the Company shall be subrogated to all rights of the

                                      -26-
<PAGE>   27

Buyer Indemnitee with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the Company within a reasonable time of the
commencement of any such action shall not relieve it of any liability to the
Buyer Indemnitee, except to the extent that the Company is prejudiced in its
ability to defend such action. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Buyer
Indemnified Liabilities which is permissible under applicable law.

         9. GOVERNING LAW; MISCELLANEOUS.

                  a. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws.

                  b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party, PROVIDED THAT a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

                  c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.

                  d. SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

                  e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
documents referred to herein, supersede all other prior or contemporaneous oral
or written agreements between or among the Buyers, the Company, their affiliates
and persons acting on their behalf with respect to the matters discussed herein,
and this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the Company
and the holders of at least 2/3 of the then outstanding Preferred Stock, but any
such waiver or amendment shall bind all Buyers and holders. No consideration
shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of any of this Agreement, the Registration Rights
Agreement, the Warrants or the Certificate of Designation unless the same
consideration also is offered to all of the parties to this Agreement, the
Registration Rights Agreement, the Warrants or holders of Preferred Stock, as
the case may be.

                  f. NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;

                                      -27-
<PAGE>   28

(iii) three (3) business days after being sent by U.S. certified mail, return
receipt requested, or (iv) one (1) business day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:

                  if to the Company:

                           Applied Digital Solutions, Inc.
                           400 Royal Palm Way, Suite 410
                           Palm Beach, Florida  33480
                           Telephone: (561) 366-4800
                           Facsimile: (561) 366-0002
                           Attention:  David I. Beckett

                           with a copy to:

                           Willkie Farr & Gallagher
                           787 Seventh Avenue
                           New York, New York  10019
                           Telephone: (212) 728-8000
                           Facsimile: (212) 728-8111
                           Attention: Peter J. Hanlon, Esq.

                  if to the Transfer Agent (until a New Transfer Agent,
                  if different, is appointed):

                           Florida Atlantic Stock Transfer, Inc.
                           7130 Nob Hill Road
                           Tamarac, Florida  33321
                           Telephone: (954) 726-4954
                           Facsimile: (954) 726-6305
                           Attention:  Rene Garcia

                  If to a Buyer, to its address and facsimile number on the
Schedule of Buyers, with copies to such Buyer's counsel as set forth on the
Schedule of Buyers. Each party shall provide five (5) days' prior written notice
to the other party of any change in address or facsimile number.

                  g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Securities. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of 2/3 of the Preferred Stock then outstanding. A
Buyer may assign some or all of its rights hereunder without the consent of the
Company, PROVIDED, HOWEVER, that (i) any such assignment shall not release such
Buyer from its obligations hereunder unless such obligations are assumed by such
assignee and the Company has consented to such assignment and assumption, which
consent shall not be unreasonably withheld; (ii) no Buyer may assign its
purchase or other rights hereunder in a manner that would cause the offering of
Securities hereunder to be required to be registered under the 1933 Act; (iii)

                                      -28-
<PAGE>   29

no Buyer may assign its purchase or other rights with respect to the Series C-2
Preferred Stock except for an assignment to (x) an affiliate of such Buyer, (y)
to another Buyer or (z) to an affiliate of another Buyer; and (iv) no Buyer may
assign its rights hereunder to an entity that in the good faith judgment of the
Board of Directors of the Company is competitive with a core business of the
Company; PROVIDED, FURTHER, that the restrictions on assignments included in
clauses (iii) and (iv) herein shall not apply if the Company is in default of
any of its material obligations under this Agreement or any of the other
agreements referred to herein or if a Triggering Event (as defined in the
Certificate of Designation) has occurred.

                  h. NO 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.

                  i. SURVIVAL. The representations and warranties of the Company
and the Buyers contained in Sections 3 and 2, respectively, shall survive the
applicable Closing until three years after the Closing Date, including, without
limitation, all financial statements thereto. The agreements and covenants set
forth in Sections 4, 5 and 9, and the indemnification provisions set forth in
Section 8, shall survive each Closing. Each Buyer shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.

                  j. PUBLICITY. Without the prior written consent of the subject
Buyer or Buyers, the Company will not, and will use reasonable efforts to ensure
that its officers, directors, employees and agents do not disclose the name of
any Buyer; provided, however, that the Company shall be entitled, without the
prior approval of any Buyer, to make any press release or other public
disclosure with respect to such transactions as is required by applicable law
and regulations (although each Buyer shall be consulted by the Company in
connection with any such press release or other public disclosure prior to its
release and shall be provided with a copy thereof), but only to the extent
required by such law or regulation.

                  k. FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

                  l. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.

                  m. GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(other than Section 5-1401 of the New York General Obligations Law and whether
of the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.
Each party hereby irrevocably submits to the non-exclusive jurisdiction of the
state and federal courts sitting in The City of New York, borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably

                                      -29-
<PAGE>   30

waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

                  n. REMEDIES. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in this Agreement, the Registration
Rights Agreement, the Warrants and the Certificate of Designation and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.

                  o. PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to any Buyer hereunder or pursuant to the Registration
Rights Agreement, the Certificate of Designation or the Warrants or the Buyers
enforce or exercise their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

                                      -30-
<PAGE>   31

                  IN WITNESS WHEREOF, the Buyers and the Company have caused
this Securities Purchase Agreement to be duly executed as of the date first
written above.
<TABLE>
<CAPTION>

<S>                                              <C>
COMPANY:                                         BUYERS:

APPLIED DIGITAL SOLUTIONS, INC.                  PECONIC FUND, LTD.

By: /s/ DAVID I. BECKETT                         By: /s/ MARRAN OLGILVIE
   ----------------------------                     ---------------------------------------
     Name:   David I. Beckett                        Name:   Marran Ogilvie
     Title:  Vice President and                      Title:  General Counsel of Ramius
             General Counsel                                 Capital Group, LLC, its
                                                             Investment Advisor

                                                 LEONARDO L.P.

                                                 BY: ANGELO, GORDON & CO., L.P.,
                                                        ITS GENERAL PARTNER

                                                        By: /s/ FRED BERGER
                                                            ---------------------------------
                                                            Name:  Fred Berger
                                                            Title:  Chief Financial Officer

                                                 ELLIOTT ASSOCIATES, L.P.
                                                 BY: ELLIOTT CAPITAL ADVISORS, L.P., AS GENERAL PARTNER
                                                 BY: BRAXTON ASSOCIATES, INC., AS GENERAL PARTNER

                                                        By: /s/ ELLIOT GREENBERG
                                                            ---------------------------------
                                                            Name:  Elliot Greenberg
                                                            Title:  Vice President

                                                 WESTGATE INTERNATIONAL, L.P.
                                                 BY: ELLIOTT INTERNATIONAL CAPITAL ADVISORS INC.,
                                                        AS ATTORNEY-IN-FACT

                                                        By: /s/ ELLIOT GREENBERG
                                                            ---------------------------------
                                                            Name:  Elliot Greenberg
                                                            Title:  Vice President
</TABLE>

                                      -31-
<PAGE>   32
                               SCHEDULE OF BUYERS
<TABLE>
<CAPTION>

                                                          NUMBER OF SHARES OF
                                  INVESTOR ADDRESS AND    PREFERRED STOCK AND      INVESTOR'S ADVISORS AND
        INVESTOR NAME               FACSIMILE NUMBER            WARRANTS            LEGAL COUNSEL ADDRESS
        -------------               ----------------      ---------------------     ---------------------
<S>                              <C>                      <C>                    <C>
Peconic Fund, Ltd.               666 Third Avenue         Preferred Stock:       Eleazer Klein, Esq.
                                 26th Floor               8,666.67               Schulte Roth & Zabel LLP
                                 New York, NY 10017                              900 Third Avenue
                                                          Warrants:              New York, NY  10022
                                 Fax:  (212) 845-7999     266,667                Phone: (212) 756-2376
                                                                                 Fax:  (212) 593-5955

Leonardo L.P.                    245 Park Avenue          Preferred Stock:       Eleazer Klein, Esq.
                                 26th Floor               8,666.67               Schulte Roth & Zabel LLP
                                 New York, NY 10167                              900 Third Avenue
                                 Ph:    (212) 692-2035    Warrants:              New York, NY  10022
                                 Fax:  (212) 867-6499     266,667                Phone: (212) 756-2376
                                                                                 Fax:  (212) 593-5955
                                 Attention:
                                 Ari J. Storch
                                 Adam J. Chill

Elliott Associates, L.P.         712 Fifth Avenue         Preferred Stock:       Eleazer Klein, Esq.
                                 36th Floor               4,333.33               Schulte Roth & Zabel LLP
                                 New York, NY 10019                              900 Third Avenue
                                                          Warrants:              New York, NY  10022
                                 Fax:  (212) 974-2092     133,334                Phone: (212) 756-2376
                                                                                 Fax:  (212) 593-5955

Westgate International, L.P.     712 Fifth Avenue         Preferred Stock:       Eleazer Klein, Esq.
                                 36th Floor               4,333.33               Schulte Roth & Zabel LLP
                                 New York, NY 10019                              900 Third Avenue
                                                          Warrants:              New York, NY  10022
                                 Fax:  (212) 974-2092     133,333                Phone: (212) 756-2376
                                                                                 Fax:  (212) 593-5955

</TABLE>

                                      -32-<PAGE>   1
                                                                    EXHIBIT 10.2

                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
October 25, 2000, by and among Applied Digital Solutions, Inc., a Missouri
corporation, with headquarters located at 400 Royal Palm Way, Suite 410 Palm
Beach, Florida 33480 (the "COMPANY"), and the undersigned buyers (each, a
"BUYER" and collectively, the "BUYERS").

                  WHEREAS:

                  A. In connection with the Securities Purchase Agreement by and
among the parties of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers shares of the
Company's Series C Convertible Preferred Stock (the "PREFERRED STOCK"), which
series shall be further divided into two subseries, designated as the "Series
C-1 convertible preferred stock" (the "SERIES C-1 PREFERRED STOCK") and the
"Series C-2 convertible preferred stock" (the "SERIES C-2 PREFERRED STOCK") and
which issuances may take place from time to time at the Initial Closing or
Additional Closing (as those terms are defined in the Securities Purchase
Agreement), which Preferred Stock will be convertible into shares of the
Company's common stock, $0.001 par value per share (the "COMMON STOCK") (as
converted, the "CONVERSION SHARES") in accordance with the Certificate of
Designation setting forth the rights and preferences of the Company's Series C
Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATION"); and

                  B. In consideration for the Buyers agreeing to purchase the
Preferred Stock, the Company shall issue and deliver to the Buyers common stock
purchase warrants (the "WARRANTS") to purchase additional shares of Common Stock
pursuant to the terms of the Securities Purchase Agreement (the shares of Common
Stock issued or issuable upon exercise of the Warrants are hereinafter referred
to as the "WARRANT SHARES");

                  C. To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws.

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyers hereby agree as follows:

         1. DEFINITIONS.

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

                  (a) "INVESTOR" means a Buyer and any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section
9.

<PAGE>   2

                  (b) "PERSON" means a corporation, a limited liability company,
an association, a partnership, an organization, a business, an individual, an
entity, a governmental or political subdivision thereof or a governmental
agency.

                  (c) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").

                  (d) "REGISTRABLE SECURITIES" means (i) the Conversion Shares
issued or issuable upon conversion of the Preferred Stock, (ii) the Warrant
Shares issued or issuable upon exercise of the Warrants and (iii) any shares of
capital stock issued or issuable with respect to the Conversion Shares, the
Preferred Stock, the Warrant Shares or the Warrants as a result of any stock
split, stock dividend, recapitalization, exchange or similar event whether such
shares are issued at the Initial Closing or at an Additional Closing and without
regard to any limitations on conversion of the Preferred Stock or exercises of
Warrants.

                  (e) "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Registrable Securities.

         Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.

         2. REGISTRATION.

                  (a) MANDATORY REGISTRATION. The Company shall prepare, and, as
soon as practicable, but in no event later than thirty (30) days after the
Initial Closing Date or sixty (60) days after the Initial Closing Date in the
event the Investors elect to sell their Registrable Securities in an
underwritten offering (the "FILING Deadline"), file with the SEC a Registration
Statement or Registration Statements (as is necessary) (the "INITIAL
REGISTRATION STATEMENT") on Form S-3 (or, if such form is unavailable for such a
registration, on such other form as is available for such a registration,
subject to the consent of each Buyer and the provisions of Section 2(c))
covering the resale of all of the Registrable Securities issuable upon
conversion of the Preferred Stock and exercise of the Warrants issued (or to be
issued) at the Initial Closing and all of the Additional Closings, in each case
assuming that shares of Preferred Stock are not to be issued in excess of the
"Initial Conversion Cap", as such term is defined in the Certificate of
Designation (the "INITIAL REGISTRABLE SECURITIES"), which Registration Statement
shall state that, in accordance with Rules 416 promulgated under the 1933 Act,
such Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Preferred

                                      -2-
<PAGE>   3

Stock to prevent dilution resulting from stock splits, stock dividends or
similar transactions. Such Registration Statement shall initially register for
resale at least 200% of the number of Initial Registrable Securities issuable as
of the date immediately preceding the date the Initial Registration Statement is
initially filed with the SEC, subject to adjustment as provided in Section 3(c).
Such registered shares of Common Stock shall be allocated among the Investors
pro rata based on the total number of Initial Registrable Securities issued or
issuable as of each date that the Initial Registration Statement, as amended,
relating to the resale of the Initial Registrable Securities is declared
effective by the SEC. The Company shall use its best efforts to have the Initial
Registration Statement declared effective by the SEC as soon as practicable, but
in no event later than one hundred and twenty (120) days after the Initial
Closing Date (or one hundred and eighty (180) days after the Initial Closing
Date in the case of an underwritten offering) (the "EFFECTIVENESS DEADLINE");
provided, however, that if the SEC does not permit the Company to register all
of the Initial Registrable Securities, including the Registrable Securities
issuable upon conversion of the Additional Preferred Stock, by the Effectiveness
Deadline (after the Company has used its best efforts to effect the registration
of such securities), (i) the Company shall use its best efforts to register for
resale 200% of the Registrable Securities issuable upon conversion of the
Initial Preferred Stock as of the date immediately preceding the filing date or
upon exercise of the initial outstanding Warrants by the Effectiveness Deadline
and (ii) the Company shall prepare, and, as soon as practicable, but in no event
later than thirty (30) days after the date that any Buyer delivers an Additional
Preferred Stock Notice or sixty (60) days after the date that any Buyer delivers
an Additional Preferred Stock Notice in the event that such Buyer elects to sell
such Registrable Securities in an underwritten offering (the "ADDITIONAL FILING
DEADLINE"), file with the SEC a Registration Statement (the "ADDITIONAL
REGISTRATION STATEMENT") or an amendment to the Initial Registration Statement
covering the resale of 200% of the Registrable Securities issuable upon
conversion of all of the Additional Preferred Stock issuable pursuant to the
Securities Purchase Agreement and exercise of Warrants to be issued at the
Additional Closing as of the date immediately preceding the filing date and the
Company shall use its best efforts to have such Additional Registration
Statement (or amendment or supplement) declared effective by the SEC as soon as
practicable, but in no event later than one hundred and twenty (120) days after
the delivery of such Additional Preferred Stock Notice (or one hundred and
eighty (180) days after the delivery of such Additional Preferred Stock Notice
in the case of an underwritten offering) (the "ADDITIONAL EFFECTIVENESS
DEADLINE"). In the event that, in respect of the Registrable Securities to be
registered pursuant to clause (ii) above, the SEC does not permit the
registration of the Registrable Securities issuable upon conversion of
Additional Preferred Stock and exercise of Warrants which preferred stock and
warrants are to be issued pursuant to subsequent Additional Preferred Stock
Notices, then (x) the Company shall use its best efforts to register for resale
200% of the Registrable Securities issuable upon conversion of such Additional
Preferred Stock and Warrants that are subject of the Additional Preferred Stock
Notice referred to in clause (ii) above as of the date immediately preceding the
filing date and the Company shall use its best efforts to have such registration
declared effective by the Additional Effectiveness Deadline and (y) the Company
shall similarly prepare, file and use its best efforts to have declared
effective such number of additional Registration Statements (or amendments to
any Additional Registration Statements) as are necessary in connection with the
delivery by any Buyer, to the Company, of any subsequent Additional Preferred
Stock Notices in accordance with the requirements set forth in clause (ii) above
(with each such additional Registration Statement deemed to be an "ADDITIONAL
REGISTRATION STATEMENT" hereunder, each such Additional Filing Deadline deemed
an "ADDITIONAL FILING DEADLINE" and each such Additional Effectiveness Deadline
deemed an "ADDITIONAL EFFECTIVENESS DEADLINE").

                  (b) COUNSEL AND INVESTMENT BANKERS. Subject to Section 5
hereof, in connection with any offering pursuant to Section 2, the Buyers
holding at least two-thirds of the Registrable Securities shall have the right
to select legal counsel and an investment banker or bankers and manager or
managers to administer their interest in the offering, which investment banker

                                      -3-
<PAGE>   4

or bankers or manager or managers shall be reasonably satisfactory to the
Company. The Company shall reasonably cooperate with any such counsel and
investment bankers.

                  (c) ELIGIBILITY FOR FORM S-3. The Company represents, warrants
and covenants that it will meet the requirements for the use of Form S-3 for
registration of the sale by the Buyers and any other Investor of the Registrable
Securities on and after the thirtieth (30th) day following the date of issuance
of the Preferred Stock and the Company has filed and shall file all reports
required to be filed by the Company with the SEC in a timely manner so as to
obtain and maintain such eligibility for the use of Form S-3. In the event that
Form S-3 is not available for sale by the Investors of the Registrable
Securities, then the Company: (i), shall register the sale of the Registrable
Securities on another appropriate form and (ii) the Company shall undertake to
register the Registrable Securities on Form S-3 as soon as such form is
available, provided that the Company shall maintain the effectiveness of the
Initial Registration Statement, the Additional Registration Statement or any
other Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.

                  (d) SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the
number of shares available under the Initial Registration Statement, the
Additional Registration Statement or any other Registration Statement, as the
case may be, filed pursuant to Section 2(a) is insufficient to cover all of the
Registrable Securities issuable upon conversion of the Initial Preferred Stock
in the case of the Initial Registration Statement and the outstanding Additional
Preferred Stock in the case of the Additional Registration Statement or any
other required Registration Statement, required to be covered by such
Registration Statement or an Investor's allocated portion of the Registrable
Securities pursuant to Section 2(a), the Company shall use its best efforts to
amend such Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover at least
150% of the number of such Registrable Securities as of the trading day
immediately preceding the date of the filing of such amendment or new
Registration Statement, in each case, as soon as practicable, but in any event
not later than fifteen (15) days after the necessity therefor arises. 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. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to cover
all of the Registrable Securities" if at any time the number of Registrable
Securities issued or then issuable upon conversion of the outstanding Preferred
Shares and exercise of the Warrants covered by such Registration Statement is
greater than the quotient determined by dividing (i) the number of shares of
Common Stock available for resale under such Registration Statement by (ii)
1.50. The calculation set forth in the foregoing sentence shall be made without
regard to any limitations on the conversion of the Preferred Stock or exercise
of the Warrants and such calculation shall assume that the Preferred Stock and
the Warrants are then convertible and exercisable, respectively, into shares of
Common Stock at the then prevailing Conversion Rate (as defined in the
Certificate of Designation) and Warrant Exercise Price (as defined in the
Warrants), respectively, if applicable.

                                      -4-
<PAGE>   5

         3. RELATED OBLIGATIONS.

                  At such time as the Company is obligated to file the Initial
Registration Statement, the Additional Registration Statement or any other
Registration Statement with the SEC pursuant to Section 2(a), the Company will
use its best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:

                  (a) The Company shall promptly prepare and file with the SEC
an Initial Registration Statement with respect to the Registrable Securities
required to be registered pursuant to Section 2(a) (but in no event later than
the Filing Deadline) and use its best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing (but in no event later than the Effectiveness
Deadline), and keep such Registration Statement effective pursuant to Rule 415
at all times until the earlier of (i) the date as of which the Investors may
sell all of the Registrable Securities covered thereby without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto)
(assuming cashless exercise of Warrants) or (ii) the date on which (A) the
Investors shall have sold all the Registrable Securities covered thereby and (B)
none of the Preferred Stock covered thereby is outstanding (the "REGISTRATION
PERIOD"), which Initial Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. The term "best efforts"
shall mean among other things, that the Company shall submit to the SEC, within
two (2) Business Days after the Company learns that no review of a particular
Registration Statement will be made by the staff of the SEC or that the staff
has no further comments on the Registration Statement, as the case may be, a
request for acceleration of effectiveness of such Registration to a time and
date not later than 48 hours after the submission of such request. In the event
that the Initial Registration Statement is not filed by the Filing Deadline (the
"REQUIRED FILING DATE") or declared effective by the SEC by the Effectiveness
Deadline (the "REQUIRED FILING PERIOD"), the Company will pay each Investor a
penalty until such time that the Initial Registration Statement is filed with
the SEC or declared effective by the SEC (all such payments shall be made, at
the option of the Company, in cash or in additional shares of Preferred Stock
(valued by dividing $1,000 by the penalty amount), and shall be nonrefundable)
on the first day of each thirty (30) day period after the Required Filing Date
or the Required Filing Period, an amount equal to the product of (A) one and
one-half (1.5%) percent multiplied by (B) the amount paid for the Preferred
Stock plus accrued but unpaid dividends, multiplied by, (C) the number of Shares
held by such Investor. In the event that such Registration Statement is not
declared effective by the SEC within 180 days (or 240 days in the case of an
underwritten offering) after the issuance of the Preferred Stock, the Buyers
shall have the right at any time prior to the effectiveness of the Initial
Registration Statement to demand redemption of any or all of the Preferred Stock
at a price equal to 125% of the Liquidation Value (as defined in the Certificate
of Designation) of such shares being redeemed all in accordance with the
redemption provisions set forth in Section 3 of the Certificate of Designation.

                  (b) If an Additional Registration Statement is required to be
filed pursuant to Section 2(a), the Company shall promptly prepare and file with
the SEC such Registration Statement with respect to the Registrable Securities
issuable upon conversion of the Additional Preferred Stock as required by
Section 2(a) (but in no event later than the Additional Filing Deadline) and use
its best efforts to cause such Registration Statement relating to such

                                      -5-
<PAGE>   6

Registrable Securities to become effective as soon as possible after such filing
(but in no event later than the Additional Effectiveness Deadline), and keep
such Registration Statement effective pursuant to Rule 415 at all times until
the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered thereby issuable upon conversion of the
Additional Preferred Stock without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto) (assuming cashless
exercise of Warrants) or (ii) the date on which (A) the Investors shall have
sold all such Registrable Securities and (B) none of the Preferred Stock is
outstanding (the "ADDITIONAL REGISTRATION PERIOD"), which Additional
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading. In the event that such Registration Statement is
not filed by the Additional Filing Deadline (the "ADDITIONAL REQUIRED FILING
DATE") or declared effective by the SEC by the Additional Effectiveness Deadline
(the "ADDITIONAL REQUIRED FILING PERIOD"), the Company will pay each Investor a
penalty until such time that the Additional Registration Statement is filed with
the SEC or declared effective by the SEC (all such payments shall be made, at
the option of the Company, in cash or in additional shares of Preferred Stock
(valued by dividing $1,000 by the penalty amount), and shall be nonrefundable)
on the first day of each thirty (30) day period after the Additional Required
Filing Date or the Additional Required Filing Period, an amount equal to the
product of (A) one and one-half (1.5%) percent multiplied by (B) the amount paid
for the Preferred Stock plus accrued but unpaid dividends, multiplied by, (C)
the number of Shares held by such Investor. In the event that such Registration
Statement is not declared effective by the SEC within 180 days (or 240 days in
the case of an underwritten offering) after the issuance of the Preferred Stock,
the Buyers shall have the right at any time prior to the effectiveness of the
Additional Registration Statement to demand redemption of any or all of the
Preferred Stock at a price equal to 125% of the Liquidation Value (as defined in
the Certificate of Designation) of such shares being redeemed all in accordance
with the redemption provisions set forth in Section 3 of the Certificate of
Designation.

                  (c) The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the Initial
Registration Statement, the Additional Registration Statement or any other
Registration Statement, as the case may be, and the prospectus(es) used in
connection with any such Registration Statement(s), which prospectus(es) are to
be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep any Registration Statement(s) effective at all times during
any Registration Period or Additional Registration Period, and, during such
period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by any
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in any Registration
Statement. In the case of amendments and supplements to the Initial Registration
Statement, the Additional Registration Statement or any other Registration

                                      -6-
<PAGE>   7

Statement, as the case may be, which are required to be filed pursuant to this
Agreement (including pursuant to this Section 3(c)) by reason of the Company
filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report
under the Securities Exchange Act of 1934, as amended (the "1934 ACT"), the
Company shall have incorporated such report by reference into such Registration
Statement, if applicable, or shall file such amendments or supplements with the
SEC on the same day on which the 1934 Act report is filed which created the
requirement for the company to amend or supplement such Registration Statement.

                  (d) The Company shall furnish to each Investor whose
Registrable Securities are included in the Initial Registration Statement, the
Additional Registration Statement or any other Registration Statement, as the
case may be, and its legal counsel without charge (i) promptly after the same is
prepared and filed with the SEC at least one copy of any Registration Statement
and any amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits, the prospectus(es)
included in any Registration Statement(s) (including each preliminary
prospectus) and, with regards to such Registration Statement, any correspondence
by or on behalf of the Company to the SEC or the staff of the SEC and any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives, (ii) upon the effectiveness of any Registration Statement, ten
(10) copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (iii) such other documents, including any
preliminary prospectus, as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Investor.
The Company will promptly respond to any and all comments received from the SEC,
with a view towards causing any Registration Statement or any amendment thereto
to be declared effective by the SEC as soon as practicable and shall, subject to
Section 3(i), promptly file an acceleration request as soon as practicable
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that such Registration Statement or any
amendment thereto will not be subject to review.

                  (e) The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Initial Registration
Statement, the Additional Registration Statement and any other Registration
Statement, as the case may be, under such other securities or "blue sky" laws of
such jurisdictions in the United States as any Investor reasonably requests,
(ii) prepare and file in those jurisdictions, such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period or the Additional Registration Period, (iii) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period or the
Additional Registration Period, and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (x) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(e), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.

                  (f) In the event Investors who hold two-thirds of the
Registrable Securities being offered in the offering select underwriters for the
offering, which selection shall be made within two (2) business days following

                                      -7-
<PAGE>   8

the Initial Closing Date (or an Additional Closing, if applicable) the Company
shall, subject to Section 2(b) hereof, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering; provided, that, if the Investors who hold
two-thirds of the Registrable Securities being offered in the offering do not
select underwriters for such offering within two (2) business days following the
Initial Closing Date (or an Additional Closing, if applicable) then the
Investors shall have no right to an underwritten offering with respect to such
Registrable Securities.

                  (g) As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor in writing of the happening of any
event as a result of which the prospectus included in the Initial Registration
Statement, the Additional Registration Statement or any other Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state 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, and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor (or such other
number of copies as such Investor may reasonably request). The Company shall
also promptly notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when the
Initial Registration Statement, the Additional Registration Statement or any
other Registration Statement, as the case may be, or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to each Investor by facsimile on the same day of such effectiveness
and by overnight mail), (ii) of any request by the SEC for amendments or
supplements to such Registration Statement or related prospectus or related
information, and (iii) of the Company's reasonable determination that a
post-effective amendment to such Registration Statement would be appropriate.

                  (h) The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of the Initial
Registration Statement, the Additional Registration Statement or any other
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose; provided, however, that if in the good faith judgment of the
majority of the Board of Directors of the Company, after consultation with and
the agreement of the outside counsel for the Company, an undisclosed material
event has occurred and the disclosure of such event is reasonably likely to have
a material adverse effect on the Company or the pending transaction, the Company
shall be permitted to instruct such Investors of Registrable Securities to
suspend sale of Registrable Securities for a period of up to five (5)
consecutive trading days or 30 non-consecutive trading days in any period of 365
consecutive days (a "PERMITTED BLACKOUT PERIOD").

                  (i) The Company shall permit each Investor and a single firm
of counsel, initially Schulte Roth & Zabel LLP or such other counsel as
thereafter designated as selling stockholders' counsel by the Investors who hold

                                      -8-
<PAGE>   9

a majority of the Registrable Securities being sold, to review and comment upon
the Initial Registration Statement, the Additional Registration Statement or any
other Registration Statement, as the case may be, and all amendments and
supplements thereto at least three (3) business days prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects. The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement(s) or any amendment or supplement
thereto without the prior approval of such counsel, which consent shall not be
unreasonably withheld or delayed; and the failure of such counsel to respond to
a request for approval within two (2) business days shall be deemed to be an
approval by such counsel.

                  (j) At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Initial Registration Statement, the Additional Registration
Statement or any other Registration Statement, as the case may be, (i) if
required by an underwriter, a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the underwriters and the
Investors.

                  (k) The Company shall make available for inspection by (i) any
Investor holding 25% of the Registrable Securities, (ii) any underwriter
participating in any disposition pursuant to the Initial Registration Statement,
the Additional Registration Statement or any other Registration Statement, as
the case may be (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Investors, and (iv) one firm of attorneys retained by all
such underwriters (collectively, the "INSPECTORS") all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the "RECORDS"), as shall be reasonably deemed necessary by each
Inspector to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in strict
confidence and shall not make any disclosure (except to an Investor) or use of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent jurisdiction, or
(b) the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement.
Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investors' ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.

                                      -9-
<PAGE>   10

                  (l) The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.

                  (m) The Company shall use its best efforts either to (i) cause
the Registrable Securities covered by the Initial Registration Statement, the
Additional Registration Statement or any other Registration Statement, as the
case may be, to be listed on each securities exchange on which securities of the
same class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of such
exchange, or (ii) secure designation and quotation of the Registrable Securities
covered by such Registration Statement on the Nasdaq National Market or the
Nasdaq SmallCap Market for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc. as such with
respect to such Registrable Securities. The Company shall pay all fees and
expenses in connection with satisfying its obligation under this Section 3(m).

                  (n) The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to the Initial Registration
Statement, the Additional Registration Statement or any other Registration
Statement, as the case may be, and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing underwriter or
underwriters, if any, or, if there is no managing underwriter or underwriters,
the Investors may reasonably request and registered in such names as the
managing underwriter or underwriters, if any, or the Investors may request. Not
later than the date on which any Registration Statement registering the resale
of Registrable Securities is declared effective, the Company shall deliver to
its transfer agent instructions, accompanied by any reasonably required opinion
of counsel, that permit sales of unlegended securities in a timely fashion that
complies with then mandated securities settlement procedures for regular way
market transactions.

                  (o) The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to the Initial Registration Statement, the Additional
Registration Statement or any other Registration Statement, as the case may be.

                                      -10-
<PAGE>   11

                  (p) The Company shall provide a CUSIP number, a transfer agent
and registrar of all such Registrable Securities not later than the effective
date of such Registration Statement.

                  (q) If requested by the managing underwriters or an Investor,
the Company shall immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investors agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and with respect to
any other terms of the underwritten (or best efforts underwritten) offering of
the Registrable Securities to be sold in such offering; make all required
filings of such prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and supplement or make amendments to the Initial
Registration Statement, the Additional Registration Statement or any other
Registration Statement, as the case may be, if requested by a shareholder or any
underwriter of such Registrable Securities relating to information disclosed in
such Registration Statement about any such shareholder or underwriter.

                  (r) The Company shall use its best efforts to cause the
Registrable Securities covered by the Initial Registration Statement, the
Additional Registration Statement or any other Registration Statement, as the
case may be, to be registered with or approved by such other governmental
agencies or authorities as may be necessary to consummate the disposition of
such Registrable Securities.

                  (s) The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.

         4. OBLIGATIONS OF THE INVESTORS.

                  (a) At least four (4) days prior to the first anticipated
filing date of the Initial Registration Statement, the Additional Registration
Statement or any other Registration Statement, as the case may be, the Company
shall notify each Investor or its counsel in writing of the information the
Company requires from each such Investor if such Investor elects to have any of
such Investor's Registrable Securities included in such Registration Statement.
It shall be a condition precedent to the obligations of the Company to complete
the registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information as may be requested in writing by the Company regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request and such information shall be furnished to the Company within
three (3) days of the Company's request therefor.

                  (b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate promptly with the Company as
reasonably requested by the Company in connection with the preparation and
filing of the Initial Registration Statement, the Additional Registration
Statement or any other Registration Statement, as the case may be, hereunder,

                                      -11-
<PAGE>   12

unless such Investor has notified the Company in writing of such Investor's
election to exclude all of such Investor's Registrable Securities from such
Registration Statement.

                  (c) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(h)
or the first sentence of 3(g), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Initial Registration
Statement, the Additional Registration Statement or any other Registration
Statement, as the case may be, covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(h) or the first sentence of 3(g) and, if so directed
by the Company, such Investor shall deliver to the Company (at the expense of
the Company) or destroy all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.

                  (d) No Investor may participate in any underwritten
registration hereunder unless such Investor promptly (i) agrees to sell such
Investor's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions.

         5. EXPENSES OF REGISTRATION.

                  All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company and fees and disbursements of
one counsel for the Investors (which counsel's fees shall not exceed $10,000 or
in the case of an underwritten offering, $20,000), shall be paid by the Company.
In addition, the Company shall pay all of the Investors' reasonable costs
(including legal fees) incurred in connection with the successful enforcement of
the Investors' rights hereunder.

         6. INDEMNIFICATION.

                  In the event any Registrable Securities are included in the
Initial Registration Statement, the Additional Registration Statement or any
other Registration Statement under this Agreement:

                  (a) To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor who holds
such Registrable Securities, the directors, officers, partners, employees,
agents and each Person, if any, who controls any Investor within the meaning of
the 1933 Act or the 1934 Act, and any underwriter (as defined in the 1933 Act)
for the Investors, and the directors and officers of, and each Person, if any,
who controls, any such underwriter within the meaning of the 1933 Act or the
1934 Act (each, an "INDEMNIFIED PERSON"), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, attorneys' fees,
amounts paid in settlement or expenses, joint or several (collectively,
"CLAIMS"), incurred in investigating, preparing or defending any action, claim,

                                      -12-
<PAGE>   13

suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in the
Initial Registration Statement, the Additional Registration Statement or any
other Registration Statement, as the case may be, or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered, or the omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to such Registration Statement
(the matters in the foregoing clauses (i) through (iii) being, collectively,
"VIOLATIONS"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Initial Registration
Statement, the Additional Registration Statement or any other Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section (d);
(ii) with respect to any preliminary prospectus, shall not inure to the benefit
of any such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 3(d), and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use giving
rise to a Violation and such Indemnified Person, notwithstanding such advice,
used it; and (iii) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.

                                      -13-
<PAGE>   14

                  (b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs such Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, in each case
to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement; and,
subject to Section 6(d), such Investor will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.

                  (c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution with respect to information such
persons so furnished in writing expressly for inclusion in the Initial
Registration Statement, the Additional Registration Statement or any other
Registration Statement, as the case may be.

                  (d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, 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 (at its expense) to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that such indemnifying party shall diligently pursue such defense and

                                      -14-
<PAGE>   15

that an Indemnified Person or Indemnified Party shall have the right to retain
its own counsel with the fees and expenses to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the Indemnified Person or
Indemnified Party, as the case may be, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The Company shall pay reasonable fees for only one
separate legal counsel for the Investors, and such legal counsel shall be
selected by the Investors holding a majority in interest of the Registrable
Securities included in the Initial Registration Statement, the Additional
Registration Statement or any other Registration Statement to which the Claim
relates. The Indemnified Party or Indemnified Person shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or claim. The indemnifying party
shall keep the Indemnified Party or Indemnified Person fully apprised at all
times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its written consent, provided,
however, that the indemnifying party shall not unreasonably withhold, delay or
condition its consent. No indemnifying party shall, without the consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.

                  (e) The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.

                  (f) The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

         7. CONTRIBUTION.

                  To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no person involved in the sale of Registrable Securities which

                                      -15-
<PAGE>   16

person is guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act in connection with such sale shall be entitled to
contribution from any person involved in such sale of Registrable Securities who
was not guilty of fraudulent misrepresentation; and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

         8. REPORTS UNDER THE 1934 ACT.

                  With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"), 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 SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

                  (c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.

         9. ASSIGNMENT OF REGISTRATION RIGHTS.

                  The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any Person (a "TRANSFEREE") acquiring all or any portion of Registrable
Securities if: (i) the Investor agrees in writing with the Transferee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within three (3)
business days after such transfer or assignment, furnished with written notice
of (a) the name and address of such Transferee, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition
of such securities by the Transferee is restricted under the 1933 Act and
applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
Transferee agrees in writing with the Company to be bound by all of the
provisions contained herein; (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement; (vi) such Transferee shall be an "accredited investor" as that term
is defined in Rule 501 of Regulation D promulgated under the 1933 Act; (vii) in

                                      -16-
<PAGE>   17

the event the assignment occurs subsequent to the date of effectiveness of the
Initial Registration Statement, the Additional Registration Statement or any
other Registration Statement, as the case may be, required to be filed pursuant
to Section 2(a), the Transferee agrees to pay all reasonable expenses of
amending or supplementing such Registration Statement to reflect such
assignment, (viii) no Investor may assign its purchase or other rights with
respect to the Additional Preferred Stock except for an assignment to (x) an
affiliate of such Investor; (y) to another Investor or (z) to an affiliate of
another Investor; and (ix) no Investor may assign its purchase or other rights
hereunder to an entity that in the good faith judgment of the Board of Directors
of the Company is competitive with a core business of the Company; provided,
further, that the restrictions on assignments included in clauses (viii) and
(ix) herein shall not apply if the Company is in default of any of its materials
obligations under this Agreement or any of the other agreements referred to
herein or if a Triggering Event (as defined in the Certificate of Designation)
has occurred.

         10. AMENDMENT OF REGISTRATION RIGHTS.

                  Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold at least two-thirds of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company. No consideration shall be offered or paid to
any person or entity to amend or consent to a waiver or modification of any
provision of any of this Agreement unless the same consideration also is offered
to all of the parties to this Agreement.

         11. MISCELLANEOUS.

                  (a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record the Preferred Stock,
the Warrants or such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities with
respect to the same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from the registered owner of such
Registrable Securities.

                  (b) Any notices consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided a copy
is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days
after being sent by U.S. certified mail, return receipt requested; or (iv) one
(1) day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:

                                      -17-
<PAGE>   18

                  if to the Company:

                           Applied Digital Solutions, Inc.
                           400 Royal Palm Way, Suite 410
                           Palm Beach, Florida 33480
                           Telephone: (561) 366-4800
                           Facsimile: (561) 366-0002
                           Attention: David I. Beckett

                  with a copy to:

                           Willkie Farr & Gallagher
                           787 Seventh Avenue
                           New York, New York 10019
                           Telephone:  (212) 728-8000
                           Facsimile:  (212) 728-8111
                           Attention:  Peter J. Hanlon, Esq.

                  if to a Buyer, to its address and facsimile number on the
                  Schedule of Buyers attached hereto, with copies to such
                  Buyer's counsel as set forth on the Schedule of Buyers.

         Each party shall provide five (5) days prior notice to the other party
of any change in address, phone number or facsimile number.

                  (c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

                  (d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

                  (e) This Agreement, the Certificate of Designation, the
Warrants and the Securities Purchase Agreement (including all schedules and
exhibits thereto and documents referenced therein) 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. The aforementioned
documents supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.

                  (f) Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.

                                      -18-
<PAGE>   19

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

                  (h) This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.

                  (i) Any legal action, suit or proceeding brought against the
Company with respect to this Agreement may be brought in any federal court of
the Southern District of New York or any state court located in New York County,
State of New York, and by execution and delivery of this Agreement, the Company
hereby irrevocably and unconditionally waives any claim (by way of motion, as a
defense or otherwise) of improper venue, that it is not subject personally to
the jurisdiction of such court, that such courts are an inconvenient forum or
that this Agreement or the subject matter may not be enforced in or by such
court. The Company hereby irrevocably and unconditionally consents to the
service of process of any of the aforementioned courts in any such action, suit
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, at its address set forth or provided for herein, such service
to become effective 10 days after such mailing. Nothing herein contained shall
be deemed to affect the right of any party to serve process in any manner
permitted by law or commence legal proceedings or otherwise proceed against any
other party in any other jurisdiction to enforce judgments obtained in any
action, suit or proceeding brought pursuant to this Section. The Company
irrevocably submits to the executive jurisdiction of the aforementioned courts
in such action, suit or proceeding. THE COMPANY HEREBY IRREVOCABLY WAIVES TRIAL
BY JURY IN ANY ACTION, SUIT, OR PROCEEDING, WHETHER AT LAW OR EQUITY, BROUGHT BY
IT OR THE HOLDER IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

                  (j) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

                                      -19-
<PAGE>   20

         IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.

APPLIED DIGITAL SOLUTIONS, INC.               LEONARDO, L.P.

By: /s/ DAVID I. BECKETT                      By: /s/ FRED BERGER
------------------------------------              -----------------------------
Name: David I. Beckett                        Name: Fred Berger
Its:  Vice President and General              Its:  Chief Financial Officer
      Counsel

PECONIC FUND, LTD.                            WESTGATE INTERNATIONAL, L.P.
                                              By: Elliott International Capital
                                                   Advisors Inc., as
                                                   attorney-in-fact

By: /s/ MARRAN OLGILVIE                       By: /s/ ELLIOT GREENBERG
------------------------------------              -----------------------------
Name: Marran Olgilvie                         Name: Elliott Greenberg
Its:  General Counsel of Ramius Capital       Its:  Vice President
      Group, LLC, its Investment Advisor

ELLIOTT ASSOCIATES, L.P.
By: Elliott International Capital Advisors, L.P.,
    as general partner
By: Braxton Associates, Inc.,
    as general partner

By: /s/ ELLIOT GREENBERG
------------------------------------
Name: Elliott Greenberg
Its:  Vice President

                                      -20-
<PAGE>   21

                               SCHEDULE OF BUYERS
<TABLE>
<CAPTION>

                                  INVESTOR ADDRESS AND                 NUMBER OF       INVESTOR'S ADVISORS AND LEGAL
INVESTOR NAME                     FACSIMILE NUMBER                  PREFERRED STOCK    COUNSEL ADDRESS
--------------                   --------------------              ----------------   --------------------------------
<S>                               <C>                                  <C>             <C>
Peconic Fund, Ltd.                757 Third Avenue, 27th Floor         8,666.67        Eleazer Klein, Esq.
                                  New York, NY 10017                                   Schulte Roth & Zabel LLP
                                  Fax: (212) 845-7999                                  900 Third Avenue
                                                                                       New York, NY 10022
                                                                                       Fax: (212) 593-5955

Leonardo, L.P.                    245 Park Avenue, 26th Floor          8,666.67        Eleazer Klein, Esq.
                                  New York, NY 10167                                   Schultze Roth & Zabel LLP
                                  Fax: (212) 867-6449                                  900 Third Avenue
                                                                                       New York, NY 10022
                                                                                       Fax: (212) 593-5955

Elliott Associates, L.P.          712 Fifth Avenue, 36th Floor         4,333.33        Eleazer Klein, Esq.
                                  New York, NY 10019                                   Schulte Roth & Zabel LLP
                                  Fax: (212) 974-2092                                  900 Third Avenue
                                                                                       New York, NY 10022
                                                                                       Fax: (212) 593-5955

Westgate International, L.P.      712 Fifth Avenue, 36th Floor         4,333.33        Eleazer Klein, Esq.
                                  New York, NY 10019                                   Schulte Roth & Zabel LLP
                                  Fax: (212) 974-2092                                  900 Third Avenue
                                                                                       New York, NY 10022
                                                                                       Fax: (212) 593-5955

</TABLE>

                                      -21-

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