APPLIED CELLULAR TECHNOLOGY INC
PRE 14A, 1999-04-21
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                                  SCHEDULE 14A
                                 (RULE 14A-101)

                     INFORMATION REQUIRED IN PROXY STATEMENT

                            SCHEDULE 14A INFORMATION
           PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

Filed by the Registrant [X]
Filed by a party other than the Registrant [__]

Check the appropriate box:

[X] Preliminary Proxy Statement

[_] Confidential.  For use of the Commission only (as permitted
    by Rule 14a-6(e)(2))

[ ] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12


                        APPLIED CELLULAR TECHNOLOGY, INC.
                  --------------------------------------------
                (Name of Registrant as specified in its charter)


                  --------------------------------------------
    (Name of person(s) filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (check the appropriate box):

[X]  No fee required.

[_]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

[_]  Fee paid previously with preliminary materials:


[_]  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2)  and identify the filing for which the  offsetting  fee was paid
     previously.  Identify the previous filing by registration statement number,
     or the form or schedule and the date of its filing.


<PAGE>

                                [GRAPHIC OMITTED]
                                                                   Draft 4/19/99
Richard J. Sullivan
Chairman of The Board and
     Chief Executive Officer

                                  May __, 1999

Dear Shareholder:

     You are  cordially  invited to attend the  Annual  Meeting of  Shareholders
which will be held on June 5, 1999, at 9:00 a.m.  Eastern  Daylight Time, at the
Ritz Carlton Hotel, 100 South Ocean Boulevard, Manalapan, Florida 33462.

     The  enclosed  notice of meeting  identifies  each  business  item for your
action. These items and the vote the Board of Directors recommends are:

                                                                     Recommended
                            Item                                         Vote
         ---------------------------------------------               -----------
    1.   Election of three Directors,                                    FOR
    2.   Ratification of PricewaterhouseCoopers LLP
         as independent auditors,                                        FOR
    3.   Approval to change the Company's name to 
         Applied Digital Solutions, Inc.,                                FOR
    4.   Approval for amendment and restatement of the
         Articles of Incorporation of the Company to                     FOR
         Company to reflect the name change,
    5.   Approval and adoption of the Company's 1999 
         Flexible Stock Plan,                                            FOR
    6.   Approval and adoption of the Company's 1999
         Employees Stock Purchase Plan, and                              FOR
    7.   Ratification of options granted under the 
         Company's 1996  Non-Qualified  Stock Option Plan.               FOR
         

     We have also included a Proxy  Statement  that  contains  more  information
about these items and the meeting.

     If you plan to attend the meeting,  please mark the appropriate box on your
proxy card to help us plan for the meeting.  You will need an admission  card to
attend the meeting, which you can obtain as follows:

     o   If your shares are  registered in your name,  you are a shareholder  of
         record.  Your  admission  card is attached to your proxy card,  and you
         will need to bring it with you to the meeting.

     o   If your shares are in the name of your broker or bank,  your shares are
         held in street  name.  You will need to check the box on the proxy card
         stating that you will be attending  the meeting,  or ask your broker or
         bank for an  admission  card in the form of a legal proxy to bring with
         you to the  meeting.  If you do not  receive  the legal  proxy in time,
         bring your most recent  brokerage  statement with you to the meeting so
         that we can verify your ownership of Company stock and admit you to the
         meeting.  However,  you will  not be able to vote  your  shares  at the
         meeting without a legal proxy.

     Your vote is  important,  regardless  of the number of shares  you own.  We
encourage you to vote by proxy so that your shares will be represented and voted
at the meeting even if you cannot attend.  All  shareholders can vote by written
proxy card. Many  shareholders  also can vote by proxy via touch-tone  telephone
from the U.S. and Canada,  using the toll-free number on your proxy card, or via
the internet using the  instructions  on your proxy card. And  shareholders  may
vote in person at the meeting, as described above.

                                                     Sincerely,


                                                     Richard J. Sullivan


<PAGE>


                                [GRAPHIC OMITTED]
                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO THE SHAREHOLDERS
OF APPLIED CELLULAR TECHNOLOGY, INC.:

     The 1999 Annual Meeting of  Shareholders  of Applied  Cellular  Technology,
Inc., a Missouri  corporation (the "Company"),  will be held at the Ritz Carlton
Hotel,  Manalapan,  Florida on June 5, 1999, at 9:00 a.m. Eastern Daylight Time,
for the following purposes:

     1.  To elect two Directors to hold office until the 2002 Annual  Meeting of
         Shareholders,  and one  Director to hold  office  until the 2000 Annual
         Meeting of Shareholders, or until their respective successors have been
         elected or appointed,

     2.  To ratify the appointment of PricewaterhouseCoopers  LLP as independent
         auditors of the Company to serve for the 1999 fiscal year,

     3.  To  approve  the  change  in the  Company's  name  to  Applied  Digital
         Solutions, Inc.,

     4.  To  approve an amendment  and restatement of the Company's Articles  of
         Incorporation to reflect the name change,  

     5.  To approve and adopt the Company's 1999 Flexible Stock Plan,
     
     6.  To approve and adopt the Company's 1999 Employees  Stock Purchase Plan,

     7.  To ratify options granted under the Company's 1996  Non-Qualified Stock
         Option Plan, and

     8.  To transact such other business as may properly come before the meeting
         and at any adjournments or postponements of the meeting.

     The Board of  Directors  set March 29,  1999,  as the  record  date for the
meeting.  This means that owners of the Company's Common Stock and owners of the
exchangeable  shares of  TigerTel  Services  Limited  ("TigerTel")  and  ACT-GFX
Canada,  Inc.  ("ACT-GFX") at the close of business on that date are entitled to
(1)  receive  notice of the  meeting and (2) vote,  or  exercise  voting  rights
through a voting trust, as the case may be, at the meeting and any  adjournments
or  postponements  of the meeting.  We will make  available a list of holders of
record of the Company's  Common Stock and holders of record of the  exchangeable
of shares of TigerTel and ACT-GFX as of the close of business on March 29, 1999,
for inspection  during normal business hours at the offices of the Company,  400
Royal Palm Way, Suite 410, Palm Beach, Florida 33480 for ten business days prior
to the meeting. This list will also be available at the meeting.

                                              By Order of the Board of Directors

                                              Richard J. Sullivan
                                              Secretary
Palm Beach Florida
May __, 1999

EACH SHAREHOLDER IS URGED TO VOTE PROMPTLY BY SIGNING AND RETURNING THE ENCLOSED
PROXY CARD, USING THE TELEPHONE  VOTING SYSTEM,  OR ACCESSING THE WORLD WIDE WEB
SITE  INDICATED ON YOUR PROXY CARD TO VOTE VIA THE  INTERNET.  IF A  SHAREHOLDER
DECIDES  TO ATTEND  THE  MEETING,  HE OR SHE MAY  REVOKE  THE PROXY AND VOTE THE
SHARES IN PERSON.


<PAGE>

                                [GRAPHIC OMITTED]
                          400 Royal Palm Way, Suite 410
                            Palm Beach, Florida 33480
                                                                    May __, 1999
                                 PROXY STATEMENT
                   FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS
                           TO BE HELD ON JUNE 5, 1999



     The Board of Directors  of Applied  Cellular  Technology,  Inc., a Missouri
corporation  (the "Company")  furnishes you with this Proxy Statement to solicit
proxies on its behalf to be voted at the 1999 Annual Meeting of  Shareholders of
the  Company.  The meeting will be held at the Ritz  Carlton  Hotel,  Manalapan,
Florida,  on June 5,  1999,  at 9:00  a.m.  Eastern  Daylight  Time,  and at any
adjournments or postponements  thereof (the "Meeting").  The proxies also may be
voted at any adjournments or postponements of the Meeting.  This Proxy Statement
and the accompanying  form of proxy were first mailed to the shareholders of the
Company on or about May __,  1999.  This Annual  Meeting is the first to be held
subsequent to the acquisition of the Company's Canadian  subsidiaries,  TigerTel
Services  Limited  (formerly   Commstar  Ltd.,  and  hereafter  referred  to  as
"TigerTel")  and  ACT-GFX  Canada,   Inc.   ("ACT-GFX").   The  holders  of  the
exchangeable  shares (the  "Exchangeable  Shares")  of TigerTel  and ACT-GFX are
entitled, through a voting trust, to vote at the Annual Meeting.

Voting and Revocability of Proxies

     All properly  executed written proxies and all properly  completed  proxies
voted  by  telephone  or  via  the  internet  and  delivered  pursuant  to  this
solicitation  (and not revoked later) will be voted at the Meeting in accordance
with the instructions of the shareholder. Below is a list of the different votes
shareholders may cast at the meeting pursuant to this solicitation.

     o    In voting on the election of the two directors to serve until the 2002
          Annual Meeting of Shareholders and the one director to serve until the
          2000 Annual Meeting of  Shareholders,  shareholders may vote in one of
          the three following ways:

          1.   in favor of all nominees,
          2.   withhold votes as to all nominees, or
          3.   withhold votes as to specific nominees.

     o    In   voting   on   the    ratification    of   the    appointment   of
          PricewaterhouseCoopers  LLP as independent  auditors of the Company to
          serve for the 1999  fiscal  year,  the  approval  of the change in the
          Company's name to Applied Digital Solutions,  Inc., the approval to an
          amendment and restatement of the Company's  Articles of  Incorporation
          to reflect the name change, the approval and adoption of the Company's
          1999 Flexible Stock Plan, the approval and adoption the Company's 1999
          Employees Stock Purchase Plan, and the ratification of options granted
          under the Company's 1996 Non-Qualified Stock Option Plan, shareholders
          may vote in one of the three following ways:

                                       1
<PAGE>

          1.   in favor of the item,
          2.   against the item, or
          3.   abstain from voting on the item.

     Shareholders  should  specify  their choice for each matter on the enclosed
form of proxy. If no specific  instructions are given,  proxies which are signed
and  returned  will be voted  FOR the  election  of the  directors  as set forth
herein, FOR ratification of the appointment of  PricewaterhouseCoopers  LLP, FOR
the change in the Company's name, FOR amendment and restatement of the Company's
Articles of Incorporation to reflect the name change,  FOR approval and adoption
of the  Company's  1999  Flexible  Stock Plan,  FOR approval and adoption of the
Company's 1999 Employees  Stock Purchase Plan, and FOR  ratification  of options
granted under the Company's 1996 Non-Qualified  Stock Option Plan since the 1997
Annual Meeting of Shareholders.

     In addition, if other matters come before the Meeting, the persons named in
the accompanying  form of Proxy will vote in accordance with their best judgment
with respect to such matters. A shareholder  submitting a proxy has the power to
revoke it at any time prior to its  exercise by voting in person at the Meeting,
by giving  written notice to the Company's  Secretary  bearing a later date than
the proxy or by giving a later dated proxy.  Any written notice revoking a proxy
should be sent to: ADP Investor  Communication  Services,  Inc., P. O. Box 9079,
Farmingdale, NY 11735-9769. Proxies signed by brokers with no further statements
indicated on the proxy and shares as to which proxy  authority has been withheld
with  respect  to any  matter  are  counted  for  quorum  and  for  purposes  of
determining the number of shares entitled to vote on a matter.  Broker non-votes
(proxies where the broker has added  statements such as "non-vote," "no vote" or
"do not vote") are not counted for quorum or for  purposes  of  determining  the
number of shares entitled to vote on a metter.  Approval of items 1, 2, 5, 6 and
7 will require the favorable  vote of a majority of the shares  represented  and
entitled to vote at the  Meeting.  Items 3 and 4  regarding  the  amendment  and
restatement of the Company's Restated Articles of Incorporation,  as amended, to
change the Company's  name will require the favorable  vote of a majority of the
outstanding shares entitled to vote at the Annual Meeting.

     The telephone and internet  voting  procedures are designed to authenticate
shareholders'  identities,  to allow  shareholders  to vote their  shares and to
confirm their instructions have been properly recorded. Specific instructions to
be  followed  by  shareholders  interested  in voting via the  telephone  or the
internet  are set forth on the proxy  card.  If the proxy card does not  contain
these instructions, these options are not available.

Record Date and Share Ownership

     Owners of record of shares of the  Company's  Common  Stock at the close of
business on March 29, 1999 (the  "Record  Date") will be entitled to vote at the
Meeting or adjournments or  postponements  thereof.  Each owner of record of the
Company's Common Stock on the Record Date is entitled to one vote for each share
of Common Stock so held.

     The  Exchangeable  Shares entitle the holders thereof to dividend and other
rights  economically  equivalent  to the Company's  Common Stock,  including the
right, pursuant to voting trust agreements, to vote at the Company's shareholder
meetings.  The  trustee of all the  Exchangeable  Shares is The  Montreal  Trust
Company of Canada,  a trust company  incorporated  under the laws of Canada (the
"Trustee").  The  Trustee  holds  one  share  of the  Company's  Special  Voting
Preferred Stock,  par value $10 per share (the "Special Voting Stock"),  that is
entitled to the number of votes at meetings of holders of the  Company's  Common
Stock equal to the number of exchangeable  shares of TigerTel  outstanding as of
the Record Date for such meeting held by persons other than the Company,  any of
its  subsidiaries  or any person  directly or indirectly  controlled by or under
common  control  with the Company (an  "Affiliate").  The Trustee also holds one
share of the Company's Class B Special Voting Preferred Stock, par value $10 per
share (the "Class B Voting  Stock"),  that is entitled to the number of votes at
meetings  of  holders  of the  Company's  Common  Stock  equal to the  number of

                                       2
<PAGE>

exchangeable  shares  of  ACT-GFX  outstanding  as of the  Record  Date for such
meeting held by persons other than the Company and its Affiliates.

     Pursuant to the voting trust agreements, each holder of Exchangeable Shares
is  entitled  to  instruct  the  Trustee as to the voting of the number of votes
attached to the Special  Voting Stock or Class B Special  Voting  Stock,  as the
case may be, represented by such holder's  Exchangeable Shares. The Trustee will
exercise  each vote  attached  to the  Special  Voting  Stock or Class B Special
Voting Stock, as the case may be, only as directed by the relevant  holder,  and
in the absence of instructions from a holder as to voting will not exercise such
votes.  A  holder  may  instruct  the  Trustee  to give a proxy  to such  holder
entitling the holder to vote personally  such holder's  relevant number of votes
or to grant to the Company's  management a proxy to vote such votes. The Trustee
has  furnished  (or caused the  Company to  furnish)  this Proxy  Statement  and
certain related materials to the holders of Exchangeable Shares.

     As of the close of business on March 29, 1999, there were 37,610,289 shares
of Common Stock outstanding entitled to vote at the Annual Meeting and 1,392,877
Exchangeable  Shares outstanding  entitled to vote at the Annual Meeting through
the  exercise  by the  Trustee  of the  voting  rights  under the  voting  trust
agreements  (all such shares  being  referred to herein as the  "shares" and all
holders  thereof being  referred to as the  "shareholders"  of the  Company).  A
majority  of the  shares  must be  present,  in person or by proxy,  to  conduct
business at the meeting.

     The Common Stock,  the Special  Voting Stock and the Class B Special Voting
Stock vote together as a single class.

                              ELECTION OF DIRECTORS
                                    (Item 1)

Board of Directors

     The Directors are divided into three classes,  each serving for a period of
three years, which has been the practice of the Company since 1998. The class to
which each Director has been assigned is designated as Group A, Group B or Group
C. The shareholders elect approximately one-third of the members of the Board of
Directors  annually.  The Company's basic  philosophy  mandates the inclusion of
directors who will be representative  of management,  employees and the minority
shareholders  of the  Company.  Directors  may only be removed for  "cause." The
terms of Daniel E. Penni and Angela M.  Sullivan  will expire at the 1999 Annual
Meeting,  and each has been  nominated to stand for reelection at the meeting to
hold office until the 2002 Annual Meeting of  Shareholders  and until his or her
successor  is elected and  qualified.  Additionally,  the term of  Constance  K.
Weaver, who was elected to the Board in June 1998, will expire, and she has been
nominated to stand for  reelection  at the meeting to hold office until the 2000
Annual Meeting of Shareholders and until her successor is elected and qualified.

     Cumulative  voting  does not apply in the  election  of  Directors.  Unless
otherwise indicated, the shares represented by this proxy will be voted for each
nominee named below.  Should any one or more of these nominees  become unable to
serve  for  any  reason,  or  for  good  cause  will  not  serve,  which  is not
anticipated, the Board of Directors may, unless the Board by resolution provides
for a lesser number of Directors,  designate substitute nominees, in which event
the persons named in the enclosed  proxy will vote proxies that would  otherwise
be voted for all named nominees for the election of such  substitute  nominee or
nominees.

                                       3
<PAGE>

Recommendation of the Board of Directors Concerning the Election of Directors

     The Board of Directors of the Company recommends a vote FOR Daniel E. Penni
and  Angela  M.  Sullivan  to hold  office  until  the 2002  Annual  Meeting  of
Shareholders and until their successors are elected and qualified.  The Board of
Directors  of the  Company  recommends  a vote FOR  Constance  K. Weaver to hold
office until the 2000 Annual Meeting of Shareholders  and until her successor is
elected and qualified.  Proxies received by the Board of Directors will be voted
FOR all of the nominees unless  shareholders  specify a contrary choice in their
proxy.

NOMINEES FOR ELECTION TO TERM EXPIRING 2002

     Daniel E. Penni:  Mr. Penni,  age 51, has served as a Director  since March
1995 and serves on the Executive, Compensation and Audit Committees of the Board
of  Directors of the Company.  Since March 1998,  he has been an Area  Executive
Vice President for Arthur J. Gallagher & Co., an insurance agency. He has worked
in many sales and administrative  roles in the insurance business since 1969. He
was President of the Boston  Insurance  Center,  Inc., an insurance agency until
1988. Mr. Penni was founder and President of BIC Equities, Inc., a broker/dealer
registered  with the NASD. Mr. Penni graduated with a Bachelor of Science degree
in 1969 from the School of Management at Boston College.

     Angela M. Sullivan:  Ms.  Sullivan,  age 39, has served as a Director since
April 1996 and serves on the Executive and Compensation  Committees of the Board
of Directors of the Company.  From 1988 to the present,  Ms. Sullivan has been a
partner in the Bay Group, a private merger and  acquisition  firm,  President of
Great Bay  Technology,  Inc., and President of Spirit Saver,  Inc. Ms.  Sullivan
received a Bachelor of Science  degree in Business  Administration  in 1980 from
Salem State College. Ms. Sullivan is married to Richard J. Sullivan.

NOMINEE FOR ELECTION TO TERM EXPIRING 2000

     Constance  K.  Weaver:  Ms.  Weaver,  age 46,  was  elected to the Board of
Directors in June 1998 and serves on the Executive  and Audit  Committees of the
Board of Directors of the Company. From 1996 to the present, Ms. Weaver has been
Vice  President,  Investor  Relations  and  Financial  Communications  for AT& T
Corporation.  From 1995 through 1996 she was Senior Director, Investor Relations
and Financial  Communications for Microsoft  Corporation.  From 1993 to 1995 she
was Vice President,  Investor Relations,  and from 1991 to 1993 she was Director
of Investor Relations, for MCI Communications,  Inc. Ms. Weaver is a director of
Primark  Corporation and the National Investor  Relations  Institute (NIRI). Ms.
Weaver  received a Bachelor of Science degree from the University of Maryland in
1975.

INCUMBENT DIRECTORS - TERM EXPIRING 2001

     Richard J.  Sullivan:  Mr.  Sullivan,  age 60, was  elected to the Board of
Directors, and named Chief Executive Officer, in May 1993. He is Chairman of the
Executive and Compensation  Committees of the Board of Directors of the Company.
He was appointed  Secretary in March 1996. Mr. Sullivan is currently Chairman of
Great Bay  Technology,  Inc. From August 1989 to December 1992, Mr. Sullivan was
Chairman of the Board of Directors of Consolidated Convenience Systems, Inc., in
Springfield,  Missouri.  He has been the  Managing  General  Partner  of The Bay
Group, a merger and  acquisition  firm in New Hampshire since February 1985. Mr.
Sullivan was  formerly  Chairman and Chief  Executive  Officer of  Manufacturing
Resources,  Inc., an MRP II software  company in Boston,  Massachusetts  and was


                                       4
<PAGE>

Chairman and CEO of Encode Technology, a "Computer-Aided Manufacturing" Company,
in Nashua,  New Hampshire  from February  1984 to August 1986.  Mr.  Sullivan is
married to Angela M. Sullivan.

     Garrett  A.  Sullivan:  Mr.  Sullivan,  age 64, has been  President  of the
Company  since March 1995.  He was elected to the Board of  Directors  in August
1995 and serves on the Executive and Audit  Committees of the Board of Directors
of the Company.  He was acting secretary of the Company from March 1995 to March
1996 and acting Chief  Financial  Officer from March 1995 to February 1997. From
1993 to 1994 he was an Executive  Vice  President of  Envirobusiness,  Inc. From
1988 to 1993, he served as president and chief  operating  officer of two medium
sized companies in the electronics and chemical  industries  which were owned by
Philips North  America.  He was  previously a partner in the Bay Group, a merger
and acquisition  firm in New Hampshire from 1988 to 1993. From 1981 to 1988, Mr.
Sullivan was President of Granada Hospital Group, Burlington, Massachusetts. Mr.
Sullivan  received a Bachelor of Arts degree from Boston  University in 1960 and
obtained an MBA from Harvard  University in 1962. Mr. Sullivan is not related to
Richard J. Sullivan.

INCUMBENT DIRECTOR - TERM EXPIRING 2000

     Arthur F. Noterman: Mr. Noterman, age 57, a Chartered Life Underwriter, has
served as a Director since February 1997, and is Chairman of the Audit Committee
and a  member  of the  Executive  Committee  of the  Board of  Directors  of the
Company.  An operator of his own insurance agency,  Mr. Noterman is a registered
NASD broker affiliated with a Chicago, IL registered broker/dealer. Mr. Noterman
attended  Northeastern  University  from 1965 to 1975 and obtained the Chartered
Life Underwriters  Professional  degree in 1979 from The American College,  Bryn
Mawr, Pennsylvania.

Directorships

     Constance K. Weaver is a director of Primark Corporation. No other director
holds a  directorship  in any  other  company  which  has a class of  securities
registered  pursuant to Section 12 of the  Securities  Exchange Act of 1934,  as
amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of
such Act or any company registered as an investment company under the Investment
Company Act of 1940.

Board Committees and Meetings

     The Company has standing  Executive,  Audit and Compensation  Committees of
the Board of Directors.  The members of the committees  are identified  with the
list of Board nominees on the preceding pages.

     The Audit  Committee  recommends  for  approval by the Board of Directors a
firm of certified public  accountants whose duty it is to audit the consolidated
financial  statements  of the  Company  for the  fiscal  year in which  they are
appointed,  and monitors the  effectiveness  of the audit effort,  the Company's
internal and  financial  accounting  organization  and  controls  and  financial
reporting. The audit committee held 4 meetings during 1998.

     The  Compensation  Committee  administers the Company's 1996  Non-Qualified
Stock Option Plan,  including  the review and grant of stock options to officers
and other  employees  under such plan, and recommends the adoption of new plans.
The  Compensation  Committee  also reviews and approves  various  other  Company
compensation  policies and matters and reviews and  approves  salaries and other
matters  relating to the  executive  officers of the Company.  The  Compensation
Committee  reviews all senior  corporate  employees after the end of each fiscal

                                       5
<PAGE>

year to determine  compensation for the subsequent year. Particular attention is
paid to each employee's  contributions  to the current and future success of the
Company  along with  their  salary  level as  compared  to the  market  value of
personnel with similar skills and responsibilities.  The Compensation  Committee
also looks at  accomplishments  which are above and beyond  management's  normal
expectations for their positions.  The Compensation Committee met 7 times during
1998.

     Prior to 1996,  Richard  J.  Sullivan,  the  Company's  Chairman  and Chief
Executive  Officer,  did not  receive  direct  compensation  from  the  Company.
Starting in 1996, Mr.  Sullivan's  compensation has been determined  taking into
account the factors identified in the preceding  paragraph.  See also "Executive
Compensation-Compensation Committee Report on Executive Compensation."

     The Board of  Directors  held 58 meetings  during 1998 and acted by written
consent 25 times during 1998.  During the year,  all  Directors  attended 75% or
more of the Board of Directors'  meetings and the Board Committees to which they
were assigned.

Ownership of Equity Securities in the Company

     The following table sets forth information  regarding  beneficial ownership
of the  Company's  Common Stock by each director and by each  executive  officer
named in the Summary  Compensation  Table and by all the directors and executive
officers as a group as of December 31, 1998:
<TABLE>
<CAPTION>

                                     Aggregate Number Of           Percent of
                                     Shares Beneficially          Outstanding
               Name                       Owned (1)                  Shares
- --------------------------------     -------------------------    -------------
<S>                                        <C>                       <C>    

Daniel E. Penni                              310,065                   *
Arthur F. Noterman                            65,000                   *
Angela M. Sullivan                           742,775 (2)              2.1%
Constance K. Weaver                              --                    *
Richard J. Sullivan                        2,522,024 (2)              7.1%
Garrett A. Sullivan                          500,000                  1.4%
Andrew J. Hidalgo                              1,000                   *
Scott R. Silverman                           110,434                   *
David A. Loppert                             250,000                   *

All Directors and Executive
  Officers as a Group
(13 Persons)                               4,330,634                 12.2%

     -----------
</TABLE>

* Represents less than 1% of the issued and  outstanding  shares of Common Stock
  of the Company.

(1)  This table includes  presently  exercisable  stock  options.  The following
     directors and executive officers hold the number of exercisable options set
     forth following their respective names: Daniel E. Penni - 60,000; Arthur F.
     Noterman  - 60,000;  Angela M.  Sullivan - 60,000;  Richard  J.  Sullivan -
     1,685,000;  Garrett A.  Sullivan - 500,000;  Scott R.  Silverman  - 50,000;
     David A. Loppert - 150,000;  and all directors and executive  officers as a
     group - 2,665,000.
 
                                        6
<PAGE>

(2)  Includes  310,598 shares owned by The Bay Group and 367,177 shares owned by
     Great Bay  Technology,  Inc.  The Bay Group is  controlled  by  Richard  J.
     Sullivan and Angela M. Sullivan.  Great Bay Technology,  Inc. is controlled
     Richard J. Sullivan, Angela M. Sullivan and Stephanie Sullivan.

     The following table sets forth information  concerning warrants to purchase
shares of the Company's  Common Stock which are owned  beneficially by directors
and the named executive  officers of the Company  individually and as a group as
of December 31, 1998:

<TABLE>
<CAPTION>

                                         Class of       Number of    Percent of    Exercise Price
                     Name                 Warrants    Warrants (1)      Class        Per Share
- ----------------------------------------------------------------------------------------------------
<S>                                      <C>          <C>           <C>            <C>   

Richard J. Sullivan (2)                  Class K        250,000      100.0%          $   5.31
                                         Class S        600,000      100.0%          $   3.00
Garrett A. Sullivan                      Class H        100,000       22.2%          $   2.00
                                         Class N        100,000       12.5%          $   3.00
Daniel E. Penni                             --            --            --                --
Angela M. Sullivan (2)                   Class K        250,000      100.0%          $   5.31
                                         Class S        600,000      100.0%          $   3.00
Arthur F. Noterman                          --            --            --                --
Constance K. Weaver                         --            --            --                --
Andrew J. Hidalgo                           --            --            --                --
Scott R. Silverman                          --            --            --                --
David A. Loppert                            --            --            --                --

All Directors and Executive              Class F         40,000       13.3%          $   2.50
   Officers as a Group (13 Persons)      Class H        100,000       22.2%          $   2.00
                                         Class K        250,000      100.0%          $   5.31
                                         Class N        200,000       25.0%          $   3.00
                                         Class S        600,000      100.0%          $   2.00
     -----------

</TABLE>


     (1) Pursuant to Rule 13d-3 under the Exchange Act, beneficial  ownership of
         a security consists of sole or shared voting power (including the power
         to vote or direct the voting)  and/or sole or shared  investment  power
         (including the power to dispose or direct a  disposition)  with respect
         to a security whether through a contract,  arrangement,  understanding,
         relationship  or otherwise.  Unless  otherwise  indicated,  each person
         indicated  above has sole  power to vote,  or  dispose  or  direct  the
         disposition  of all shares  beneficially  owned,  subject to applicable
         community property laws.
     (2) Represents   warrants   owned by Great Bay  Technology,  Inc. Great Bay
         Technology,  Inc. is controlled by Richard J. Sullivan,
         Angela M. Sullivan and Stephanie Sullivan.


Principal Shareholders

     Set forth in the table below is  information  as of December  31, 1998 with
respect to persons known to the Company  (other than the directors and executive
officers shown in the preceding table) to be the beneficial  owners of more than
five percent of the Company's issued and outstanding Common Stock:

                                          Number of Shares             Percent
              Name and Address           Beneficially Owned           of Class
       -------------------------------------------------------------------------
       James M. Shaver (1)                    1,923,509                  5.4%
       1811 Center Point Circle #111
       Naperville, Illinois 60563
       -----------

       (1) Mr. Shaver is President of the Company's Telecommunications Division.


                                       7
<PAGE>
<TABLE>

                             EXECUTIVE COMPENSATION

     The following table sets forth certain summary  information  concerning the
total  remuneration paid in 1998 and the two prior fiscal years to the Company's
Chief  Executive  Officer and the Company's  four other most highly  compensated
executive officers.

<CAPTION>

                                            Summary Compensation Table
                                                                             Long-Term Compensation
                                                                      -------------------------------
                                        Annual Compensation                  Awards           Payouts
                                -----------------------------------   ----------------------  -------
                                                          Other
                                                          Annual      Restricted                      All Other
       Name and                                           Compensa-   Stock       Options/     LTIP      Compen-
Principal Position (1)    Year     Salary     Bonus (2)   tion (3)    Awards      SAR's (4)    Payouts   sation
- -----------------------   ----    ---------   ---------   ---------   ----------  ---------    ------- ---------
<S>                       <C>     <C>          <C>        <C>         <C>         <C>          <C>       <C>
 

Richard J. Sullivan       1998    $ 345,833   $ 180,000   $  79,882      --       1,500,000    $  --     $  --
Chairman, CEO and         1997    $  16,669   $ 140,000   $   3,623      --       1,000,000    $  --     $  --
Secretary                 1996    $     --    $    --     $  68,816      --       1,130,000    $  --     $  --

Garrett A. Sullivan (5)   1998    $ 144,165   $  90,000   $   8,842      --         475,000    $  --     $  --
Director, President       1997    $ 105,499   $  75,000   $     811      --         350,000    $  --     $  --
and COO                   1996    $ 113,966   $  25,000   $     --       --         150,000    $  --     $  --

Andrew J. Hidalgo (6)     1998    $ 122,326   $  25,000   $     --       --          80,000    $  --     $  --
Senior Vice President     1997         N/A    $    --     $     --       --            --      $  --     $  --
                          1996         N/A    $    --     $     --       --            --      $  --     $  --

Scott R. Silverman (7)    1998    $ 204,000   $  10,000   $     --       --          50,000    $  --     $  --
Senior Vice President,    1997    $ 197,000   $    --     $     --       --                    $  --     $  --
Corporate Development     1996    $ 128,000   $    --     $     --       --          50,000    $  --     $  --
  and Legal Affairs

David A. Loppert (8)      1998    $ 123,537   $  40,000   $ 15,925      --          285,000    $  --     $  --
Vice President,           1997    $  64,423   $  25,000   $     --      --          150,000    $  --     $  --
Treasurer and Chief       1996     N/A        $      --   $     --      --             --      $  --     $  --
  Financial Officer 
     -----------
</TABLE>

     (1)  No executive officer served pursuant to an employment contract through
          the 1996 fiscal year.  See  "Employment  Contracts and  Termination of
          Employment and  Change-In-Control  Arrangements"  below for agreements
          entered into subsequent to December 31, 1996.
     (2)  The amounts in the Bonus column were  discretionary  awards granted by
          the compensation  committee in  consideration of the  contributions of
          the respective named executive officers.
     (3)  Includes, in 1998 for Richard J. Sullivan,  $73,394 reimbursed for the
          payment of taxes.  Prior to June 1997, Mr.  Sullivan did not receive a
          salary from the Company.
     (4)  Indicates number of securities underlying options.
     (5)  Mr. Sullivan was Secretary until March 1996 and Acting Chief Financial
          Officer until February 1997.
     (6)  Mr.  Hidalgo  began his  employment  with the Company in January  1998
          as  the  Vice  President  of  Strategic   Relations  and was appointed
          Senior Vice President of the Company in March 1999.

                                       8
<PAGE>

     (7)  Mr. Silverman was Vice President and Corporate Counsel of a subsidiary
          of the Company until November 1996, when he was appointed President of
          that  subsidiary.  In December 1997, Mr.  Silverman was appointed Vice
          President of Business Development of the Company, and in March 1999 he
          was appointed Senior Vice President of the Company.
     (8)  Mr.  Loppert was  employed  as Vice  President,  Treasurer,  and Chief
          Financial Officer of the Company in February 1997.

Option Grants in Last Fiscal Year

     The following table contains information  concerning the Company's grant of
Stock Options under the Company's  1996  Non-Qualified  Stock Option Plan to the
named executive officers during 1998:
<TABLE>
<CAPTION>

                                     Option Grants In Last Fiscal Year
                                                      Individual Grants
                                 -------------------------------------------------------------
                                    Number of      % of Total
                                   Securities        Options
                                   Underlying      Granted to     Exercise                       Grant Date
                                     Options      Employees in      Price    Expiration Date   Present Value
            Name (1)               Granted (#)        1998         ($/Sh)                         (2) ($)
- -------------------------------------------------------------------------------------------------------------
<S>                                  <C>          <C>             <C>        <C>               <C>

Richard J. Sullivan                    500,000        9.3%        $ 3.51         April-04       $ 635,000
                                       500,000        9.3%        $ 3.03          June-04       $ 635,000
                                       500,000        9.3%        $ 2.19      December-04       $ 635,000
Garrett A. Sullivan                    150,000        2.8%        $ 3.51         April-04       $ 190,500
                                       150,000        2.8%        $ 3.03          June-04       $ 190,500
                                       175,000        3.3%        $ 2.19      December-04       $ 222,250
Andrew J. Hidalgo                       30,000        0.6%        $ 3.03          June-04       $  38,100
                                        50,000        0.9%        $ 2.19      December-04       $  63,500
Scott R. Silverman                      50,000        0.9%        $ 2.19      December-04       $  63,500
David A. Loppert                        35,000        0.7%        $ 3.51         April-04       $  44,450
                                       125,000        2.3%        $ 3.03          June-04       $ 158,750
                                       125,000        2.3%        $ 2.19      December-04       $ 158,750
     -----------
</TABLE>

(1)      Options  granted  under the 1996  Non-Qualified  Stock Option Plan were
         granted at an exercise  price equal to 85% of the fair market  value of
         the  Company's  common  shares on the grant  date.  These  options  are
         exercisable   over  a  five-year   period   beginning  with  the  first
         anniversary of the grant date.
(2)      Based on the grant date  present  value of $1.27 per option share which
         was derived using the Black-Scholes  option pricing model in accordance
         with rules and regulations of the Securities Exchange Commission and is
         not intended to forecast future  appreciation  of the Company's  common
         share  price.  The  Black-Scholes  model  was used  with the  following
         assumptions:  dividend  yield of 0%;  expected  volatility  of  43.69%;
         risk-free interest rate of 8.5%; and expected lives of 5 years.

                                       9
<PAGE>

Option Exercises and Fiscal Year-End Values

     The  following  table  sets  forth  information  with  respect to the named
executive   officers   concerning  the  exercise  of  options  during  1998  and
unexercised options held on December 31, 1998:

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

<TABLE>
<CAPTION>

                                                             Number of Securities          Value of Unexercised In-
                                                             Underlying Unexercised        The-Money Options at Year
                                                             Options at Year End 1998(#)   End 1998 ($) (1)
                                                          ------------------------------   -------------------------
          Name                Shares
                            Acquired on        Value
                           Exercise (#)    Realized ($)    Exercisable    Unexercisable    Exercisable     Unexercisable
 -----------------------   ------------    ------------    -----------    -------------    -----------     -------------
 <S>                       <C>             <C>             <C>             <C>             <C>             <C>

 Richard J. Sullivan           --          $   --          1,685,000       1,500,000       $    --         $  5,343,750
 Garrett A. Sullivan           --          $   --            500,000         475,000       $    --         $  1,692,188
 Andrew J. Hidalgo             --          $   --               --            80,000       $    --         $    285,000
 Scott R. Silverman            --          $   --             50,000          50,000       $    --         $    178,125
 David A. Loppert              --          $   --            150,000         285,000       $    --         $  1,015,313

 ----------------
</TABLE>

   (1) Based on the closing price of  the Company's  Common  Stock on the Nasdaq
       Stock Market(R) on December 31, 1998 ($3.5625).


Compensation Pursuant to Plans

     Other than as disclosed  above,  the Company has no plans pursuant to which
cash or non-cash  compensation  was paid or  distributed  during the last fiscal
year or is proposed to be paid or distributed in the future,  to the individuals
described above.

Compensation of Directors

     Prior to the fourth quarter of 1998,  non-employee Directors of the Company
received a fee of $250 per  meeting,  for their  attendance  at  meetings of the
Company's  Board of  Directors.  Beginning  in the fourth  quarter of 1998,  the
non-employee  director  compensation  was changed to fixed quarterly fees in the
amount of $5,000 per non-employee director. In addition,  non-employee directors
receive a quarterly fee in the amount of $1,000 for each committee on which they
are  a  member.   Reasonable  travel  expenses  are  reimbursed  when  incurred.
Individuals  who become  directors of the Company are  automatically  granted an
initial option to purchase 25,000 shares of Common Stock on the date they become
directors.  Each of such  options  is granted  pursuant  to the  Company's  1996
Non-Qualified Stock Option Plan on terms and conditions  determined by the Board
of Directors.  In addition,  the following  options were granted to directors in
1998:  Arthur F.  Noterman - 30,000 at $3.51 in April  1998,  35,000 at $3.03 in
June 1998,  and 100,000 at $2.00 in December  1998;  Daniel E. Penni - 30,000 at
$3.51 in April  1998,  35,000 at $3.03 in June  1998,  and  100,000  at $2.00 in
December  1998;  Angela M.  Sullivan - 30,000 at $3.51 in April 1998,  35,000 at
$3.03 in June 1998,  and 100,000 at $2.00 in December  1998;  and  Constance  K.
Weaver - 35,000 at $2.76 in July 1998 and  100,000  at $2.00 in  December  1998.
Directors who are not also executive officers are not eligible to participate in
any other benefit plan of the Company.

                                       10
<PAGE>

Compensation Committee Interlocks and Insider Participation

     Richard  J.  Sullivan,  the Chief  Executive  Officer  of the  Company,  is
Chairman of the Compensation Committee.

Employment  Contracts  and  Termination  of  Employment  and   Change-In-Control
Arrangements

     The Company,  or its subsidiary,  has entered into an employment  agreement
with the following executive officers:

<TABLE>

                                              Term                    Base
                                --------------------------------
         Name                   Length         Commencing            Salary
 ---------------------          ----------    -----------------    ------------
 <S>                            <C>           <C>                  <C>    

 Richard J. Sullivan            5 years(1)    July 1, 1998         $450,000 (2)
 Garrett A. Sullivan            5 years(1)    June 1, 1998         $165,000
 Andrew J. Hidalgo              3 years       May 11, 1998         $150,000 (3)
 Marc Sherman                   3 years       November 13, 1996    $210,000 (4)
 Scott R. Silverman             3 years       February 1, 1999     $240,000 (5)
 Jerome C. Artigliere           3 years       December 16, 1997    $100,000 (6)
 Gary A. Gray                   3 years       December __, 1998    $ 42,000 (7)
 David A. Loppert               5 years(1)    June 19, 1998        $150,000
 John F. Reap                   3 years       October 24, 1997     $120,000
 Tabitha Zane                   2 years       February 8, 1999     $120,000

 ----------------------
</TABLE>

(1)   Automatically  renewed  for  successive  additional one-year terms on each
      anniversary.
(2)   Provides for a minimum annual bonus of $140,000.
(3)   Effective as of March 9, 1999.  Also contains a bonus provision if certain
      targets are met.
(4)   Effective as of January 1, 1999.
(5)   Provides for a minimum annual  increase of 10% of base salary.  
(6)   Effective as of February 1, 1999.
(7)   In addition to base  compensation, Mr. Gray  receives a  commission of 10%
      of gross sales revenue of Applied Cellular Technology of Missouri, Inc.


     In 1997, the Company  entered into  employment  agreements  with Richard J.
Sullivan, Chairman; Garrett A. Sullivan,  President; and David A. Loppert, Chief
Financial  Officer.  These  agreements  were  amended  in 1998 and only  covered
certain of the employment terms and conditions; the rest of the employment terms
remained under  negotiation until final agreement was reached on March 23, 1999.
As of that date, each employment  agreement for Richard J. Sullivan,  Garrett A.
Sullivan  and  David A.  Loppert  was  revised  and  restated.  Such  employment
agreements,  as revised  and  restated,  include  certain  "change  of  control"
provisions.  At the employee's option, he may terminate his employment under the
agreement at any time within one year after such change of control.  The Company
shall pay to the employee a severance  payment equal to the maximum amount which
would not result in such payment being an excess parachute payment as defined in
the  Internal  Revenue  Code of 1986,  as amended  (the  "Code")  which would be


                                       11
<PAGE>

subject to an excise tax.  However,  if any other amounts payable by the Company
to the employee are subject to the parachute provisions of the Code and reducing
the severance  payment would  eliminate the excise tax on the severance  payment
and such other  payments  and result in a greater  net  payment,  the  severance
payment may be reduced.  Additionally,  upon  termination  of employment for any
reason other than for breach under the agreement,  each of Garrett  Sullivan and
David  Loppert  shall be entitled to receive  from the Company 60 equal  monthly
payments of 8.333% of his compensation from the Company over the 12-month period
for which his  compensation  was the greatest,  and Mr.  Richard  Sullivan shall
receive 60 monthly  payments of $37,500 each.  These payments are reduced by any
severance payments.  Mr. Richard Sullivan's agreement provides that he may elect
to receive a percentage of his salary for each 12-month  period in the Company's
Common Stock. For the twelve-month  period commencing July 1, 1998, Mr. Sullivan
has elected to receive $200,000 of his compensation in stock.

     Additionally, the agreements for both Richard Sullivan and Garrett Sullivan
provide for certain "triggering events" which include a change in control of the
Company, the termination of Richard Sullivan's  employment other than for cause,
or if Richard Sullivan ceases to hold his current positions with the Company for
any  reason  other  than a  material  breach  of  the  terms  of his  employment
agreement.  Within ten days of the occurrence of a triggering event, the Company
shall pay, in cash or in stock, or in a combination  thereof,  $12.1 million and
$3.5 million,  respectively,  to Richard  Sullivan and to Garrett  Sullivan.  In
addition,  the Company shall transfer to Richard Sullivan certain other property
valued at approximately $0.5 million. The Company would also be required to make
a gross up payment that covers all U.S.  federal and state income taxes  payable
by Mr. Sullivan, if any, as a result of the transfer.

Indebtedness of Management

     Garrett A. Sullivan,  the Company's President,  has executed two promissory
notes in favor of the Company; one in the amount of $75,000, bearing interest at
7% per  annum,  and one in the  amount  of  $102,216.19,  which is  non-interest
bearing and is  repayable  from the proceeds of the sale of any shares of Common
Stock Mr.  Sullivan may receive  upon the  exercise of warrants or options.  The
entire amount due on such notes was outstanding on April 16, 1999.

     Daniel E. Penni, a member of the Company's Board of Directors, has executed
a  revolving  line of  credit  promissory  note in  favor  of  Applied  Cellular
Technology  Financial  Corp.,  a  subsidiary  of the  Company,  in the amount of
$450,000.  The  promissory  note is  payable on demand,  with  interest  payable
monthly on the  unpaid  principal  balance  at the rate equal to one  percentage
point  above the base rate  announced  by State  Street  Bank and Trust  Company
(which interest rate shall fluctuate contemporaneously with changes in such base
rate). As of April 9, 1999, $75,000 had been advanced under this note.

     Scott R. Silverman,  the Company's  Senior Vice  President,  has executed a
promissory  note  in  favor  of the  Company  in the  amount  of  $195,000.  The
promissory note is non-interest  bearing and was executed as  consideration  for
the purchase by Mr.  Silverman of 75,000 shares of the  Company's  Common Stock.
The entire amount due on such note was outstanding on April 16, 1999.

     David A. Loppert,  the Company's  Chief Financial  Officer,  has executed a
promissory  note  in  favor  of the  Company  in the  amount  of  $260,000.  The
promissory note is non-interest  bearing and was executed as  consideration  for
the purchase by Mr. Loppert of 100,000 shares of the Company's Common Stock. The
entire amount due on such note was outstanding on April 16, 1999.


                                       12
<PAGE>

     Marc Sherman, the President of the Company's Inteletek division, and a Vice
President of the Company, has executed a promissory note in favor of the Company
in the amount of $400,000.  The promissory note is non-interest  bearing and was
executed as  consideration  for the purchase by Mr. Sherman of 100,000 shares of
the Company's  Common Stock.  The entire amount due on such note was outstanding
on April  16, 1999.  Additionally,  Mr.  Sherman has executed   promissory notes
totaling $595,000 in favor of the Company's  subsidiary,  Universal  Commodities
Corp.  The notes are  payable on demand and bear  interest at the rate of 6% per
annum.  As of  April  16,  1999,  the  entire  amounts  due on such  notes  were
outstanding.

     The Company has made previous  filings under the Securities Act of 1933, as
amended,  or the Exchange Act, that incorporate  future filings,  including this
Proxy  Statement,  in whole or in part.  However,  the  following  "Compensation
Committee Report on Executive  Compensation"  and the "Performance  Graph" shall
not be incorporated by reference into any such filings.


             COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Compensation Committee of the Board

     The  Compensation  Committee is composed of two  non-employee,  independent
members of the Board of Directors  and Richard J.  Sullivan,  Chairman and Chief
Executive   Officer  of  the  Company.   It  is  the  Compensation   Committee's
responsibility  to  review,  recommend  and  approve  changes  to the  Company's
compensation policies and programs. It is also the Committee's responsibility to
review and approve all  compensation  actions for the executive  officers of the
Company  and  various  other  Company  compensation  policies  and  matters  and
administer the Company's  1996  Non-Qualified  Stock Option Plan,  including the
review and  approval of stock  option  grants to the  executive  officers of the
Company.

General Compensation Philosophy

     The Company's  executive  compensation  programs are designed to enable the
Company to attract,  retain and motivate the  executives  of the Company and its
subsidiaries.  The Company's general compensation  philosophy is that total cash
compensation  should  vary with the  performance  of the  Company  in  attaining
financial  and  non-financial   objectives  and  that  any  long-term  incentive
compensation should be closely aligned with the interests of shareholders. Total
cash  compensation  for the majority of the Company's  employees,  including its
executive  officers,  includes  a base  salary  and a cash  bonus  based  on the
profitability  of  the  Company  and  its  individual  subsidiaries.   Long-term
incentive compensation is realized through the granting of stock options to most
employees,  at the discretion of the presidents of the Company's  divisions,  as
well as eligible executive officers.

Setting Executive Compensation

     In setting  the base  salary and  individual  bonuses  (hereafter  together
referred  to as  "BSB")  for  executives,  the  Compensation  Committee  reviews
information relating to executive compensation of US based companies that are of
the same size as the Company. While there is no specific formula that is used to
set  compensation  in  relation to this market  data,  executive  officer BSB is
generally set at or below the median  salaries for comparable jobs in the market
place.  However,  when  specific  financial  and  non-financial  goals  are met,
additional  compensation  in the form of either cash  compensation  or long-term
incentive compensation may be paid to the executive officers of the Company.


                                       13
<PAGE>

Base Salary

     The  Compensation  Committee  reviews  the history  and  proposals  for the
compensation  package of each of the executive officers,  including base salary.
Increases in base salary are governed by three factors:  merit (an  individual's
performance);  market  parity  (to  adjust  salaries  based  on the  competitive
market);  and promotions (to reflect increases in responsibility).  In assessing
market parity,  the Company relies on market surveys of similarly sized publicly
traded  companies and generally  pays below the median of these  companies.  The
guidelines  are set  each  year  and  vary  from  year to  year to  reflect  the
competitive  environment  and to  control  the  overall  cost of salary  growth.
Individual  merit  increases are based on  performance  and can range from 0% to
100%.

     The salary guidelines for all presidents of the Company's  subsidiaries are
generally  based  upon  individually  negotiated  employment  agreements.  Merit
increases  are  submitted by the  President  of the Company to the  Compensation
Committee for approval based upon individual  performance and the performance of
the  subsidiary.   Merit  increases  for  non-executive  employees  are  at  the
discretion of the presidents of the Company's divisions.

Cash and Stock Incentive Compensation Programs

     To reward performance,  the Company provides its executive officers and its
divisional executive officers with additional compensation in the form of a cash
bonus  and/or  stock  awards.  No fixed  formula or  weighting is applied by the
Compensation Committee to corporate performance versus individual performance in
determining  these  awards.  The  amounts of such awards are  determined  by the
Committee acting in its discretion.  Such  determination,  except in the case of
the award for the Chairman, is made after considering the recommendations of the
Chairman and President and such other matters as the Committee  deems  relevant.
The  Committee,  acting in its  discretion,  may determine to pay a lesser award
than the maximum specified. The amount of the total incentive is divided between
cash and stock at the discretion of the Committee.

Stock Options

     The 1996  Non-Qualified  Stock Option Plan is a long-term  plan designed to
link rewards with shareholder  value over time. Stock options are granted to aid
in the  retention of  employees  and to align the  interests  of employees  with
shareholders.  Stock options have value for an employee only if the price of the
Company's  stock increases above the fair market value on the grant date and the
employee  remains in the Company's  employ for the period required for the stock
option to be exercisable, thus providing an incentive to remain in the Company's
employ.

     The  Company  has a 1996  Non-Qualified  Stock  Option Plan for use for all
employees  of the Company,  including  executive  officers.  Grants to executive
officers of the Company and to officers of the Company's  subsidiaries  are made
at the  discretion of the  Compensation  Committee.  The Committee may also make
available a pool of options to each  subsidiary to be granted at the  discretion
of such subsidiary's president.

     In 1998,  stock  options for the  executive  officers were granted upon the
recommendation of management and approval of the Compensation Committee based on
their subjective  evaluation of the appropriate  amount for the level and amount
of responsibility for each executive officer.

                                       14
<PAGE>

Decisions on 1998 Compensation

     The Company's  compensation program is leveraged towards the achievement of
corporate  and business  objectives.  This  pay-for-performance  program is most
clearly  exemplified  in the  compensation  of  the  Company's  Chief  Executive
Officer, Richard J. Sullivan. Mr. Sullivan's compensation awards were made based
upon the  Compensation  Committee's  assessment of the  Company's  financial and
non-financial  performance.  The  results  were  evaluated  based on the overall
judgment of the Compensation Committee. Prior to June 1997, Mr. Sullivan did not
receive a salary from the Company.  During 1998, Mr.  Sullivan's base salary was
set at $450,000 per annum which is below  market for  similarly  sized  publicly
traded  companies.  Mr.  Sullivan was awarded three stock option grants in 1998;
one in April,  one in June,  and one in December to provide  Mr.  Sullivan  with
total  cumulative  stock  option  grants  which  were more  consistent  with the
competitive marketplace.

     The  Compensation  Committee  is  pleased  to  submit  this  report  to the
shareholders with regard to the above matters.

                                           RICHARD J. SULLIVAN, Chairman
                                           Daniel E. Penni
                                           Angela M. Sullivan


                                PERFORMANCE GRAPH

     The  following  performance  graph  compares  the  changes,  for the period
indicated, in the cumulative total value of $100 hypothetically invested in each
of (a) the  Company's  Common Stock,  (b) the Russell 2000 Stock Index,  (c) the
Nasdaq Stock  Market(R) and (d) a group of  publicly-traded  companies which the
Company  considers to be in its peer group.  Such peer group companies are Aztec
Technology Partners, Inc., Comdisco,  Inc., Glenayre Technologies,  Inc., Micros
to Mainframes, Inc., PC DOCS Group International, and Thermo Voltek Corporation.
The component  companies of the peer group have changed from the prior year, and
the  following  companies  have been removed from the peer group,  because their
shares of common  stock are no longer  traded on an active  stock  market in the
United States:  Cerplex Group, Inc., Innovative Tech Systems, Inc., and Telecomm
Industries Corporation. The following component companies have been added to the
peer group: Aztec Technology Partners,  Inc., Micros to Mainframes,  Inc. and PC
DOCS Group International.

                                       15
<PAGE>

<TABLE>

<CAPTION>

                             Cumulative Total Return
                           Based on Investment of $100
                      December 31, 1995 - December 31, 1998
  
                                [OBJECT OMITTED]



                                              Dollar Value of $100 Investment at
                                          12/31/95   12/31/96   12/31/97   12/31/98
- ----------------------------------------  --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>   
The Company.............................  $100.00    $ 97.58    $105.82    $ 60.70
Russell 2000 Index .....................  $100.00    $116.49    $142.54    $138.91
Nasdaq Stock Market Total Return Index..  $100.00    $122.97    $150.86    $212.08
Peer Group .............................  $100.00    $ 87.71    $ 46.36    $ 35.85

</TABLE>

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Changes in Control

     There are no  arrangements,  known to the Company,  including any pledge by
any  person  of  securities  of the  Company,  the  operation  of which may at a
subsequent date result in a change of control of the Company.

Consulting Agreements

     On October  16,  1996,  the Company  entered  into a  Consulting  Agreement
("Agreement")  with  Joseph,  Brian &  Christopher  Associates,  a  Pennsylvania
partnership  ("Consultant").  The  Company  engaged  the  Consultant  to  render
acquisition  advice to the Company  and to ACT  Communications,  Inc.,  a wholly
owned  subsidiary  of the Company,  for a fee of $10,000 per month.  The general
partners of the Consultant are the selling shareholders of ATI Communications, a
company that was acquired by the Company effective as of September 1, 1996. This
Agreement was terminated in December 1998.

                                       16
<PAGE>

Potential Conflicts of Interest and Related Party Transactions

     Mr. Richard J. Sullivan,  the Chief  Executive  Officer of the Company,  is
Managing  General  Partner  of The Bay Group.  Until  June  1998,  The Bay Group
conducted  business  with the  Company  and  received  compensation  from it for
various  services,  including  assistance in identifying  potential  acquisition
candidates and in negotiating acquisition transactions.  The relationships among
The Bay Group,  Mr. Sullivan and the Company may involve  conflicts of interest.
For services rendered in connection with acquisitions  which took place in 1998,
1997 and 1996, the Company paid The Bay Group  $597,500,  $473,750 and $457,152,
respectively, for investment banking services.

     In  December  1998,  the  Company  sold its  eighty-percent  interest  in a
non-core subsidiary to a Company controlled by Richard J. Sullivan and Angela M.
Sullivan,  a Director of the Company.  In  consideration,  the Company  received
2,000 shares of redeemable preferred stock valued at $2 million. The sales price
was determined  based upon competitive  offers received by the Company,  and the
highest  offer was  accepted.  The  Company  had  acquired  its  interest in the
subsidiary in 1996 for approximately $1 million.

Earnout Agreements

     The Company has entered into various earnout  arrangements with the selling
shareholders of certain acquired  subsidiaries.  These arrangements  provide for
additional  consideration  to be paid in future years if certain earnings levels
are met.

Put Options

     The Company has entered into put options with the selling  shareholders  of
various companies in which the Company acquired less than a 100% interest. These
options  allow the  minority  shareholder  to require the Company to acquire the
remaining  portion it does not own after periods ranging from four to five years
from the dates of  acquisition  at  amounts  generally  equal to  10%-20% of the
average  annual  earnings of the company  before  income  taxes for the two-year
period ending the  effective  date of the put  multiplied by a multiple  ranging
from four to five.

Employment Agreements

     At the  time  the  Company  acquires  a  particular  company,  the  Company
generally   enters   into   employment   agreements   with   the   key   selling
shareholder/officers  of the acquired company. The agreements are for periods of
one to ten years, and some provide for bonus  arrangements based on the earnings
of the subsidiary.

             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section  16(a) of the Exchange  Act requires the officers and  directors of
the Company and persons who own more than 10% of the  Company's  Common Stock to
file  reports of  ownership  and changes in ownership  with the  Securities  and
Exchange  Commission  and to furnish  copies of all such reports to the Company.
The Company believes,  based on its stock transfer records and other information
available  to it,  that all reports  required  under  Section  16(a) were timely
filed.

                                       17

<PAGE>

                RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
                                    (Item 2)

     On October 23, 1998, the Board of Directors of the Company voted to replace
Rubin,  Brown,  Gornstein  & Co. LLP  ("RBG")  with  PricewaterhouseCoopers  LLP
("PwC") as the Company's  independent  accountants  for the year ending December
31, 1998.

     The reports of RBG on the Company's  financial  statements for the past two
fiscal years did not contain an adverse  opinion or a disclaimer  of opinion and
were not  qualified or modified as to  uncertainty,  audit scope,  or accounting
principles.  In connection with the audits of the Company's financial statements
for each of the two fiscal years ended  December  31, 1997 and 1996,  and in the
subsequent  interim period through November 2, 1998, there were no disagreements
with  RBG on any  matters  of  accounting  principles  or  practices,  financial
statement disclosure, or auditing scope and procedures which, if not resolved to
the  satisfaction  of RBG, would have caused RBG to make reference to the matter
in their report.

     During  the two most  recent  fiscal  years and in the  subsequent  interim
period through November 2, 1998,  there were no reportable  events as defined in
Securities and Exchange Commission Regulation S-K Item 304(a)(1)(v).

     On November 2, 1998, the Company  engaged PwC as its principal  accountants
to audit its consolidated  financial statements for the year ending December 31,
1998.  During fiscal 1996 and 1997 and in the  subsequent  interim  period,  the
Company  had not  consulted  PwC on items which  concerned  the  application  of
accounting  principles  generally,  or to a  specific  transaction  or  group of
transactions,  either  completed or proposed,  or the type of audit opinion that
might be rendered on the Company's consolidated financial statements.

     The Company filed a Current Report on Form 8-K on November 4, 1998 with the
Securities and Exchange  Commission to report the engagement of PwC. Attached to
that report as an exhibit was a letter from RBG addressed to the  Securities and
Exchange  Commission  stating that they agreed with the disclosure  contained in
Current Report on Form 8-K.

     The Board of Directors of the Company,  at the  recommendation of the Audit
Committee, has appointed PwC to serve as independent auditors of the Company for
the  calendar  year ending  December 31, 1999,  subject to  ratification  by the
shareholders  of  the  Company.  Audit  services  of PwC in  1998  included  the
examination of the  consolidated  financial  statements of the Company,  certain
services relating to filings with the Securities and Exchange Commission as well
as certain services relating to the Company's consolidated quarterly reports.

     A  representative  of each of PwC and RBG is  expected to be present at the
Meeting  and  will  have  an  opportunity  to make a  statement  if he or she so
desires.  The PwC and RBG  representatives  will also be available to respond to
appropriate questions from shareholders.

Recommendation of the Board of Directors

     The  Board  of  Directors   recommends  a  vote  FOR  ratification  of  the
appointment of PricewaterhouseCoopers, LLP as the Company's independent auditors
for the 1999  fiscal  year.  Unless a  contrary  choice  is  specified,  proxies
solicited  by the  Board of  Directors  will be voted  FOR  ratification  of the


                                       18
<PAGE>

appointment of PricewaterhouseCoopers, LLP as the Company's independent auditors
for the 1999 fiscal year.


                    APPROVAL TO CHANGE THE COMPANY'S NAME TO
      APPLIED DIGITAL SOLUTIONS, INC., AND TO AMEND ANY AND ALL DOCUMENTS,
         AGREEMENTS AND INSTRUMENTS TO REFLECT SUCH NAME CHANGE 
                                    (Item 3)

     The Board of  Directors  has adopted and  referred  to the  shareholders  a
proposal to amend the Company's  Articles of Incorporation that would change the
name of the Company to "Applied Digital Solutions,  Inc." The Board of Directors
of the Company  believes  that the current name of the Company  limits  people's
understanding of the Company's business  operations and does not clearly reflect
our role in the  evolving  communications  industry.  A copy of the  Amended and
Restated  Articles  of  Incorporation  of the  Company is attached to this Proxy
Statement as Appendix A.

         The  proposed  name  change must be  effected  by an  amendment  to the
Articles of Incorporation of the Company,  described below.  Under Missouri law,
such action requires the affirmative  vote of the holders of at least a majority
of the issued and outstanding shares entitled to vote at the Annual Meeting.

Recommendation of the Board of Directors

     The Board of  Directors  recommends  a vote FOR the  proposal to change the
Company's  name to Applied  Digital  Solutions,  Inc.,  and to amend any and all
documents,  agreements  and  instruments  to reflect such name change.  Unless a
contrary choice is specified,  proxies  solicited by the Board of Directors will
be voted FOR the  proposal  to change  the  Company's  name to  Applied  Digital
Solutions, Inc., and to amend any and all documents,  agreements and instruments
to reflect such name change.


       APPROVAL FOR AN AMENDMENT AND SECOND RESTATEMENT OF THE ARTICLES OF
                          INCORPORATION OF THE COMPANY
                                    (Item 4)

     In order to effect the name change  described above, the Company must amend
its Articles of Incorporation. The Articles of Incorporation of the Company were
previously  amended  several  times.  Contemporaneously  with the proposed  name
change  of the  Company,  the  Board  of  Directors  determined  that  adoption,
amendment and restatement of the Articles of Incorporation  into one document is
appropriate to simplify reference to the Articles of Incorporation. The proposed
amendment and restatement is attached to this Proxy Statement as Appendix A.

     Under  Missouri  law, the Articles of  Incorporation  may be amended by the
affirmative  vote of the  holders  of at  least a  majority  of the  issued  and
outstanding shares entitled to vote at the Annual Meeting.

Recommendation of the Board of Directors

     The Board of Directors  recommends a vote FOR approval of the amendment and
second  restatement of the articles of  incorporation  of the Company to reflect
the name change. Unless a contrary choice is specified, proxies solicited by the
Board  of  Directors  will  be  voted  FOR the  approval  of the  amendment  and


                                       19
<PAGE>

restatement of the articles of  incorporation of the Company to reflect the name
change.



         APPROVAL AND ADOPTION OF THE COMPANY'S 1999 FLEXIBLE STOCK PLAN
                                    (Item 5)

Introduction

     On April 12, 1999, the Board of Directors  adopted,  subject to shareholder
approval,  the Applied  Cellular  Technology,  Inc. 1999 Flexible Stock Purchase
Plan  ("Plan").  The Plan is intended to attract,  retain,  motivate  and reward
employees  and other  individuals  and to encourage  ownership by employees  and
other  individuals of the Company's  Common Stock.  An employee is an individual
employed  by the  Company  or a  subsidiary.  The  Plan  provides  for  benefits
(collectively  "Benefits") to be awarded in the form of Incentive Stock Options,
Non-Qualified  Stock Options,  Stock Appreciation Rights (as described below and
referred to hereafter as "SARs"),  Restricted Stock,  Performance  Shares,  Cash
Awards, and Other Stock Based Awards, each of which is defined below.

     Set forth below is a  description  of the  essential  features of the Plan.
This description is subject to and qualified in its entirety by the full text of
the Plan which is attached to this Proxy Statement as Appendix B.


                             DESCRIPTION OF THE PLAN

Number of Shares

     The number of shares of Common Stock which may be issued in connection with
Benefits  shall be 5,000,000  shares plus an annual  increase,  effective on the
first day of each  calendar  year  commencing  on  January 1, equal to 5% of the
number  of  outstanding  shares  of  Common  Stock as of the  first  day of such
calendar  year,  but in no event more than  15,000,000  shares in the aggregate.
Such shares may be authorized but unissued shares,  shares held in the Company's
treasury, or both. If an option or SAR expires or is terminated,  surrendered or
canceled,   without  having  been  fully  exercised,   if  Restricted  Stock  or
Performance  Shares are  forfeited,  or if any other grant  results in shares of
Common Stock not being issued,  the shares  covered by such option or SAR, grant
of shares of Restricted  Stock,  Performance  Shares or other grant, as the case
may be, shall again be available for use under the Plan.

     If there is any change in the Common  Stock of the Company by reason of any
stock  dividend,  spin-off,  split-up,   spin-out,   recapitalization,   merger,
consolidation,  reorganization, combination or exchange of shares, the number of
SARs and  number  and  class of  shares  available  for  options  and  grants of
Restricted Stock, Performance Shares and Other Stock Based Awards and the number
of shares subject to any outstanding  options,  SARs, grants of Restricted Stock
Performance  Shares which are not yet vested,  and Other Stock Based Awards, and
the price thereof, as applicable, will be appropriately adjusted.

Administration

     The Plan is administered by a committee ("Committee").  The Committee shall
consist of the Board,  unless the Board  appoints a Committee of two or more but
less than all of the Board.  If the Committee does not include the entire Board,
it shall serve at the pleasure of the Board, which may from time to time appoint


                                       20
<PAGE>

members in  substitution  for members  previously  appointed and fill vacancies,
however caused, in the Committee.

     Subject to the express  provisions of the Plan,  the Committee has complete
authority to: (i)  determine  when and to whom Benefits are granted and the type
and amounts of Benefits; (ii) determine the terms, conditions and provisions of,
and restrictions relating to, each Benefit granted; (iii) interpret and construe
the Plan and any agreement  ("Agreement")  evidencing  and describing a Benefit;
(iv) prescribe,  amend and rescind rules and  regulations  relating to the Plan;
(v)  determine  the form and  contents of all  Agreements;  (vi)  determine  all
questions  relating to Benefits  under the Plan; and (vii) take any other action
which it considers  necessary or appropriate for the  administration of the Plan
and to carry out the purposes of the Plan.

     Except as  required  by Rule 16b-3  with  respect  to  Benefits  granted to
persons  who are  subject to  Section  16 of the  Exchange  Act  (consisting  of
directors  and  officers),  the  Committee  may  delegate  its  authority to any
employee, employees or committee.

Amendment, Termination and Change in Control

     The Board may amend the Plan at any time. However,  the Board may not amend
the Plan without shareholder  approval if such amendment (i) would cause options
which are intended to qualify as Incentive  Stock  Options to fail to qualify as
such, (ii) would cause the Plan to fail to meet the  requirements of Rule 16b-3,
or (iii) would violate  applicable law. The Plan has no fixed  termination  date
and shall continue in effect until terminated by the Board.

     The  amendment or  termination  of the Plan will not  adversely  affect any
Benefit granted prior to such amendment or termination. However, any Benefit may
be modified or canceled by the  Committee if and to the extent  permitted by the
Plan or  Agreement or with the consent of the  participant  to whom such Benefit
was granted.

     In the event of a Change in Control,  as defined  below,  the Committee may
provide  such  protection  as it deems  necessary  to  maintain a  participant's
rights, including, without limitation: (i) providing for the acceleration of any
time  periods  relating to the  exercise or  realization  of any  Benefit;  (ii)
providing for purchase of a Benefit upon the participant's request for an amount
in cash equal to the amount which could have been  attained upon the exercise or
realization of the Benefit had it been currently  exercisable or payable;  (iii)
making  such  adjustment  to the  outstanding  Benefits as the  Committee  deems
appropriate;  and/or (iv) causing the outstanding Benefits to be assumed, or new
Benefits substituted therefor, by the surviving corporation. "Change in Control"
means:  the  acquisition,  without the  approval of the Board,  by any person or
group, other than the Company and certain related entities,  of more than 20% of
the  outstanding  shares of Common Stock;  the liquidation or dissolution of the
Company following a sale or other disposition of all or substantially all of its
assets;  a  merger  or   consolidation   involving  the  Company  in  which  the
shareholders  of the Company prior to the effective  date of the  transaction do
not have more than 50% of the voting power of the surviving  entity  immediately
following  the  transaction;  or a change in the  majority of the members of the
Board during any two year period which is not approved by at least two-thirds of
the  members  of the Board who were  members  at the  beginning  of the two year
period.

Eligibility for Benefits

     Benefits may be awarded to individuals selected by the Committee.  Benefits
may be awarded only to employees,  members of the Board, employees and owners of
entities which are not affiliates but which have a direct or indirect  ownership

                                       21
<PAGE>

interest in an employer,  individuals  who, and employees and owners of entities
which, are customers or suppliers of an employer, individuals who, and employees
and owners of entities which,  render  services to an employer,  and individuals
who, and  employees  and owners of entities  which,  have  ownership or business
affiliations with any individual or entity previously described.

Types of Benefits

     Under the Plan,  the  Committee  may grant a number of  different  types of
Benefits.  A  summary  of the  principal  characteristics  of  various  types of
Benefits which may be granted is set forth below.

     Stock  Options.  Two types of stock  options may be granted under the Plan.
Stock options intended to qualify for special tax treatment under Section 422 of
the Code are referred to as "Incentive  Stock Options," and options not intended
to so qualify are referred to as  "Non-Qualified  Stock Options." In the case of
Non-Qualified  Stock  Options,  the  option  price  shall be  determined  by the
Committee  but shall be no less than 85% of the fair market  value of the shares
of Common Stock on the date the option is granted, and, in the case of Incentive
Stock  Options,  the price shall be  determined by the Committee but shall be no
less than the fair  market  value of the shares of Common  Stock on the date the
option is granted.

     The other terms of options shall be determined by the  Committee.  However,
in the case of options  intended to qualify as  Incentive  Stock  Options,  such
terms must meet all  requirements  of Section 422 of the Code.  Currently,  such
requirements  are (i) the  option  must be  granted  within  10  years  from the
adoption of the Plan,  (ii) the option may not have a term longer than 10 years,
(iii) the  option  must be not  transferable  other  than by will or the laws of
descent  and  distribution  and may be  exercised  only by the  optionee  during
his/her  lifetime,  (iv) the maximum aggregate fair market value of Common Stock
with respect to which such options are first  exercisable  by an optionee in any
calendar year may not exceed $100,000;  and (v) the option must be granted to an
employee.  In  addition,  if the  optionee  owns more than 10% of the  Company's
Common Stock or more than 10% of the total combined  voting power of all classes
of stock of any  subsidiary,  the  option  price  must be at least  110% of fair
market  value of the shares of Common  Stock on the date the option is  granted,
and the option may not have a term longer than five years.

     SARs. An SAR is the right to receive an amount equal to the appreciation in
value of one share of Common  Stock from the time the SAR is  granted  until the
time the grantee elects to receive  payment.  Participants  who elect to receive
payment  of SARs  shall  receive  payment  in cash,  in  Common  Stock or in any
combination of cash and common stock, as determined by the Committee.  When SARs
are granted in tandem with an Incentive Stock Option, the SARs must contain such
terms and  conditions as are  necessary for the related  option to qualify as an
Incentive Stock Option. In addition,  if SARs are granted in tandem with a stock
option:  the exercise of the option shall cause a  correlative  reduction in the
SARs; and the payment of SARs shall cause a correlative  reduction in the shares
under the option.

     Restricted  Stock.  Restricted  Stock is Common  Stock  which is subject to
forfeiture  until a period of time has elapsed or certain  conditions  have been
fulfilled. Unless the Committee determines otherwise, shares of Restricted Stock
shall be  granted  at a cost  equal to par value  (presently  $.001 per  share).
Certificates  representing  shares  of  Restricted  Stock  shall  bear a  legend
referring to the Plan,  noting the risk of  forfeiture of the shares and stating
that such shares are non-transferable until all restrictions have been satisfied
and the legend has been removed. As of the date Restricted Stock is granted, the
grantee shall be entitled to full voting and dividend rights with respect to all
shares of such stock.

                                       22
<PAGE>

     Performance  Shares.  Performance  Shares are the right to  receive  Common
Stock or cash equal to the fair  market  value of the  Common  Stock at a future
date in accordance with the terms of the grant.  Generally,  such right shall be
based  upon  the  attainment  of  targeted   profit  and/or  other   performance
objectives.

     Cash Awards.  A Cash Award is a Benefit  payable in cash.  The maximum cash
award that an  individual  who is subject to Section 16 of the  Exchange Act may
receive in any calendar year in the aggregate is the greater of $100,000 or 100%
of his/her compensation (excluding any Cash Award) for such year.

     Other  Stock Based  Awards.  An Other Stock Based Award is an award that is
valued in whole or in part by  reference  to, or is otherwise  based on,  Common
Stock.

General Provisions Applicable to Benefits

     Under the Plan,  the  following  provisions  are  applicable to one or more
types of Benefits.

     Agreement and Terms of Benefits.  The grant of any Benefit may be evidenced
by an Agreement  which  describes  the specific  Benefit  granted and the terms,
conditions and provisions of, and  restrictions  relating to, such Benefit.  Any
Agreement  shall contain such  provisions as the Committee shall determine to be
necessary, desirable and appropriate.

     Transferability. Unless otherwise specified in an agreement or permitted by
the Committee,  each Benefit shall be non-transferable other than by will or the
laws of descent and distribution and shall be exercisable during a participant's
lifetime only by him/her.

     Tandem Awards.  Awards may be granted by the Committee in tandem.  However,
no Benefit may be granted in tandem with an Incentive Stock Option except SARs.

     Payment. Upon the exercise of an option or in the case of any other Benefit
that requires a payment to the Company,  payment may be made either (i) in cash,
including  a  so-called  "cashless  exercise,"  or (ii) with the  consent of the
Committee,  (a) by the tender of shares of Common Stock having an aggregate fair
market value equal to the amount due the Company, (b) in other property,  (c) by
the surrender of all or part of a Benefit (including the Benefit being exercised
or acquired), or (d) by any combination of the foregoing.

     Dividend  Equivalents.  Grants of Benefits in Common  Stock or Common Stock
equivalents may include dividend equivalent payments or dividend credit rights.

     Deferral.  The right to  receive a Benefit  may,  upon the  request  of the
request of the recipient,  be deferred for such period and upon such  conditions
as the Committee may determine.

     Withholding.  At the time any Benefit is  distributed  under the Plan,  the
Company  may  withhold,  in  cash  or in  shares  of  Common  Stock,  from  such
distribution  any amount  necessary to satisfy income  withholding  requirements
applicable to such distribution.

     Limitation on Benefits.  The number of shares  covered by options where the
purchase  price is no less than fair market value on the date of grant plus SARs
which may be granted to any one individual in any calendar year shall not exceed
500,000.


                                       23
<PAGE>

Restrictions on Shares

     The Committee may require each person  purchasing  Common Stock pursuant to
an option or receiving  Common Stock pursuant to any other form of Benefit under
the Plan to  represent to and agree with the Company in writing that such person
is acquiring the shares for  investment  and without a view to  distribution  or
resale. In addition,  shares issued under the Plan may be subject to restrictive
agreements  between  the  Company  or a  subsidiary  and  the  participant.  The
Committee may require that a legend  reflecting any restriction  described above
be placed on any certificate for shares.

                U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN

     The following is a summary of the U.S.  federal income tax  consequences of
the Plan, based on current income tax laws, regulations and rulings.

Incentive Stock Options

     Subject to the effect of the Alternative  Minimum Tax,  discussed below, an
optionee does not recognize income on the grant of an Incentive Stock Option. If
an optionee  exercises an Incentive Stock Option in accordance with the terms of
the option and does not dispose of the shares acquired within two years from the
date of the grant of the option  nor within one year from the date of  exercise,
the  optionee  will not  realize any income by reason of the  exercise,  and the
Company will be allowed no  deduction  by reason of the grant or  exercise.  The
optionee's  basis in the shares  acquired  upon exercise will be the amount paid
upon  exercise.  (See  the  discussion  below  for the tax  consequences  of the
exercise of an option with stock  already owned by the  optionee.)  Provided the
optionee  holds  the  shares  as a  capital  asset  at the time of sale or other
disposition of the shares,  his/her gain or loss, if any, recognized on the sale
or other disposition will be capital gain or loss. The amount of his/her gain or
loss will be the difference  between the amount  realized on the  disposition of
the shares and his/her basis in the shares.

     If an  optionee  disposes  of the shares  within two years from the date of
grant of the  option  or  within  one year  from  the date of  exercise  ("Early
Disposition"),  the optionee  will realize  ordinary  income at the time of such
Early  Disposition which will equal the excess, if any, of the lesser of (i) the
amount realized on the Early  Disposition,  or (ii) the fair market value of the
shares on the date of exercise,  over the  optionee's  basis in the shares.  The
Company will be entitled to a deduction  in an amount equal to such income.  The
excess,  if any, of the amount realized on the Early  Disposition of such shares
over the  fair  market  value of the  shares  on the  date of  exercise  will be
long-term or short-term  capital gain,  depending upon the holding period of the
shares, provided the optionee holds the shares as a capital asset at the time of
Early Disposition.  If an optionee disposes of such shares for less than his/her
basis in the shares,  the  difference  between the amount  realized  and his/her
basis will be a long-term or short-term capital loss, depending upon the holding
period of the shares,  provided the optionee holds the shares as a capital asset
at the time of disposition.

     The excess of the fair market value of the shares at the time the Incentive
Stock Option is exercised  over the exercise  price for the shares is an item of
tax preference ("Stock Option Preference").

Non-Qualified Stock Options

     Non-Qualified  Stock  Options do not qualify for the special tax  treatment
accorded to Incentive  Stock Options  under the Code.  Although an optionee does
not  recognize  income at the time of the  grant of the  option,  he  recognizes
ordinary income upon the exercise of a  Non-Qualified  Option in an amount equal


                                       24
<PAGE>

to the  difference  between  the fair  market  value of the stock on the date of
exercise of the option and the amount of cash paid for the stock.

     As a result of the optionee's exercise of a Non-Qualified Stock Option, the
Company will be entitled to deduct as compensation an amount equal to the amount
included in the optionee's gross income.  The Company's  deduction will be taken
in the Company's taxable year in which the option is exercised.

     The excess of the fair market value of the stock on the date of exercise of
a  Non-Qualified  Stock  Option over the  exercise  price is not a Stock  Option
Preference.

SARs

     Recipients of SARs do not  recognize  income upon the grant of such rights.
When a participant  elects to receive payment of an SAR, he recognizes  ordinary
income in an amount  equal to the cash and fair market value of shares of Common
Stock received, and the Company is entitled to a deduction equal to such amount.

Restricted Stock; Performance Shares

     Grantees of Restricted Stock and Performance Shares do not recognize income
at the time of the grant of such stock. However, when shares of Restricted Stock
become free from any restrictions or when Performance Shares are paid,  grantees
recognize  ordinary  income in an amount  equal to the fair market  value of the
stock  on the  date  all  restrictions  are  satisfied,  less,  in the  case  of
Restricted Stock, the amount paid for the Stock.  Alternatively,  the grantee of
Restricted  Stock may elect to recognize  income upon the grant of the stock and
not at the time the  restrictions  lapse,  in which  case the  amount  of income
recognized will be the fair market value of the stock on the date of grant.  The
Company will be entitled to deduct as compensation the amount  includible in the
grantee's income in its taxable year in which the grantee recognizes the income.

Cash Awards

     Cash Awards are taxable as ordinary income when received or  constructively
received  by a  participant.  The  Company is entitled to deduct the amount of a
Cash Award when the award is taxable to the recipient.

Taxation of Preference Items

     Section 55 of the Code  imposes  an  Alternative  Minimum  Tax equal to the
excess,  if  any,  of (i) 26% of the  optionee's  "alternative  minimum  taxable
income" up to $175,000  plus 28% of such income over  $175,000 over (ii) his/her
"regular"  U.S.  federal  income  tax.  Alternative  minimum  taxable  income is
determined by adding the optionee's Stock Option  Preference and any other items
of tax preference to the optionee's  adjusted gross income and then  subtracting
certain allowable  deductions and an exemption  amount.  The exemption amount is
$33,750 for single  taxpayers,  $45,000 for married taxpayers filing jointly and
$22,500  for married  taxpayers  filing  separately.  However,  these  exemption
amounts  are  phased out  beginning  at certain  levels of  alternative  minimum
taxable income.

Change of Control

     If there is an acceleration of the vesting or payment of Benefits and/or an
acceleration  of the  exercisability  of stock options upon a Change of Control,


                                       25
<PAGE>

all or a portion of the accelerated  benefits may constitute  "Excess  Parachute
Payments"  under  Section  280G of the Code.  The  employee  receiving an Excess
Parachute  Payment  incurs an excise tax of 20% of the amount of the  payment in
excess of the  employee's  average  annual  compensation  over the five calendar
years  preceding  the year of the  Change of  Control,  and the  Company  is not
entitled to a deduction for such payment.

Limitation on Deduction

     Section  162(m) of the Code provides that no deduction  will be allowed for
certain  remuneration  with  respect to a covered  employee  to the extent  such
remuneration exceeds $1,000,000. Under the regulations interpreting Code Section
162(m), an employee is a covered employee if his/her compensation is required to
be reported under the SEC's  disclosure  rules and he is employed as of the last
day of the taxable year. Code Section 162(m) does not apply to: (a) compensation
payable solely on account of the attainment of one or more performance  goals if
(i) the goals are  determined  by a committee of two or more outside  directors,
(ii) the material terms under which the remuneration will be paid, including the
goals,  is  disclosed  to  shareholders  and  approved  by  a  majority  of  the
shareholders, and (iii) except in the case of SARs and certain stock options (as
described below), the committee  certifies that the goals have been met; and (b)
compensation  payable  under a binding  contract in effect on February  17, 1993
which is not thereafter modified in any material respect.  Compensation  arising
from  SARs and  stock  options  where  the  price  from  which  appreciation  is
calculated  or exercise  price,  as the case may be, is no less than fair market
value on the date of grant constitute  compensation on amount of attainment of a
performance  goal as long as the  shareholders  approve  the  maximum  number of
shares per participant over a specific time period. The $1,000,000 limitation is
reduced by any remuneration  subject to such limitation for which a deduction is
disallowed under the Change of Control provisions set forth above.

Summary Only

     The foregoing  statement is only a summary of the U.S.  federal  income tax
consequences of the Plan and is based on the Company's  understanding of present
U.S. federal tax laws and regulations.

Recommendation of the Board of Directors

     The Board of  Directors  recommends a vote FOR approval and adoption of the
Company's  1999  Flexible  Stock Plan.  Unless a contrary  choice is  specified,
proxies  solicited  by the Board of  Directors  will be voted FOR  approval  and
adoption of the Company's 1999 Flexible Stock Plan.


                                       26
<PAGE>


                     APPROVAL AND ADOPTION OF THE COMPANY'S
                       1999 EMPLOYEES STOCK PURCHASE PLAN
                                    (Item 6)

Introduction

     On April 12, 1999, the Board of Directors  adopted,  subject to shareholder
approval,  the Applied Cellular  Technology,  Inc. 1999 Employees Stock Purchase
Plan ("Stock  Purchase  Plan").  The Stock  Purchase Plan is intended to provide
eligible  employees an opportunity to acquire an ownership stake in the Company.
Stock ownership by employees ties their interests directly to the performance of
the Company's Common Stock.

     Set forth below is a  description  of the  essential  features of the Stock
Purchase Plan.  This  description is subject to and qualified in its entirety by
the full  text of the  Stock  Purchase  Plan  which is  attached  to this  Proxy
Statement as Appendix C.

General Description of the Stock Purchase Plan

     The Stock Purchase Plan provides for the granting of options ("Options") to
employees of the Company and its subsidiaries who are eligible to participate in
the Stock Purchase Plan and who elect to participate ("Participants"). The Stock
Purchase Plan is intended to qualify as an "Employee  Stock Purchase Plan" under
Section 423 of the Code.

     Options  granted under the Stock Purchase Plan are not  transferable  other
than by will or under the laws of descent and  distribution and are exercisable,
during the Participant's lifetime, only by him/her.

Number of Shares

     The  number of shares  for which  Options  may be  granted  under the Stock
Purchase Plan are 1,500,000  shares of Common  Stock,  plus an annual  increase,
effective as of the first day of the  calendar  year,  commencing  on January 1,
equal to 5% of the number of outstanding  shares of Common Stock as of the first
day of such calendar  year,  but in no event more than  3,000,000  shares in the
aggregate. Such shares may be authorized but unissued shares, shares held in the
Company's treasury, or both.

     If the  Common  Stock of the  Company  is  changed  by  reason of any stock
dividend,   spin-off,   split-up,   recapitalization,   merger,   consolidation,
reorganization,  combination  or  exchange  of  shares,  the number and class of
shares available for Options and the price of such shares, as applicable,  shall
be appropriately adjusted.

Administration of the Stock Purchase Plan

     The Stock Purchase Plan is administered by a committee  ("Committee").  The
Committee  shall consist of the Board,  unless the Board appoints a Committee of
two or more but less than all of the Board.  If the  Committee  does not include
the entire  Board,  it shall serve at the pleasure of the Board,  which may from
time to time appoint members in substitution  for members  previously  appointed
and fill vacancies, however caused, in the Committee.

     Subject to the express provisions of the Stock Purchase Plan, the Committee
has  authority  to: (i)  determine  when and to whom Options are  granted;  (ii)
determine the terms and  conditions of each offering,  as defined  below;  (iii)
interpret the Stock Purchase Plan; (iv) prescribe,  amend, and rescind rules and


                                       27
<PAGE>

regulations  relating to the Stock  Purchase Plan; and (v) take any other action
which it considers  necessary or appropriate for the administration of the Stock
Purchase Plan.

Amendment or Termination

     The Board  may amend or  terminate  the  Stock  Purchase  Plan at any time.
However,  the Board may not amend the Stock  Purchase  Plan without  shareholder
approval if such  amendment  (i) would cause the Stock  Purchase Plan to fail to
meet the  requirements of Code Section 423 or (ii) would violate  applicable law
or  administrative  regulation or rule.  No such  amendment or  termination  may
adversely affect any Option previously granted.

Eligibility for Participation

     The  Committee   determines  which  entities  among  the  Company  and  its
subsidiaries are eligible to participate in each offering.  Generally, if any of
an entity's  employees are eligible to  participate  in an offering,  all of its
employees must be eligible.  However, the Committee may, in its sole discretion,
exclude from participation in any offering: (i) employees who have been employed
for less than two years;  (ii) employees whose customary  employment is 20 hours
or less per week;  (iii) employees  whose  customary  employment is for not more
than five months in any calendar  year;  and (iv) highly  compensated  employees
(within the meaning of Section 414(q) of the Code). In addition, no employee may
be  granted  an  Option:  (i) if  immediately  after the grant of the Option the
employee would own, within the meaning of Section  423(b)(3) of the Code,  stock
possessing 5% or more of the total combined voting power or value of all classes
of  stock  of the  Company  or of any  subsidiary;  or (ii)  which  permits  the
employee's  rights to purchase  stock under all employee stock purchase plans of
the Company and its  subsidiaries  to accrue at a rate which exceeds  $25,000 of
fair market value of such stock,  determined  at the time the Option is granted,
for any calendar year.

Offerings Under the Stock Purchase Plan

     The  Committee  shall  select  each date for the  granting  of  Options  to
purchase shares under the Stock Purchase Plan  ("Offering").  Each Offering will
commence on such date and continue for a period set by the Committee  ("Offering
Period").

     The Committee  determines all of the terms and conditions of each Offering,
including the entities whose employees may participate in the Offering,  whether
any  employees of any such entity who may be excluded  are to be  excluded,  the
number of shares to be offered, the maximum number of shares any Participant may
purchase,  each date Options are exercised  ("Exercise Date"), the length of the
Offering  Period,  the price per share to be paid by the Participant  ("Exercise
Price"), and whether interest will be paid on Participants' Accounts, as defined
below. The Exercise Price may not be less than the lower of: (i) 85% of the fair
market value of the shares on the date the Option is granted; or (ii) 85% of the
fair market value of the shares on the date the Option is exercised.

     Each eligible  employee may elect to participate in the Stock Purchase Plan
as of a date determined by the Committee ("Entry Date") and become a Participant
by delivering  to the Company an executed  agreement in the form approved by the
Committee.  Payment for the shares is made (i) through payroll  deductions,  and
(ii) if permitted by the  Committee,  by separate cash payments and in shares of
Common  Stock to be valued on the  Exercise  Date.  An  account  ("Account")  is
established  on the books of the  Company in the name of each  Participant.  All
payroll  deductions,  separate  cash payments or tenders of shares made by or on
behalf of such Participant are credited to the Account.


                                       28
<PAGE>

     A Participant's Option is automatically exercised on each Exercise Date for
that number of full shares  which may be purchased  at the  applicable  Exercise
Price with the aggregate payroll  deductions and, if permitted by the Committee,
separate cash payments and tendered  shares as of the Exercise Date,  unless the
Participant withdraws from the Stock Purchase Plan. Any balance remaining in the
Participant's  Account  after any exercise of an Option  remains in such Account
unless the Offering is over, in which case it is refunded to the Participant.

     A Participant  may withdraw from the Stock  Purchase Plan at such times and
upon such conditions as the Committee may determine.

     In the event of a Participant's  retirement,  death or other termination of
employment,  the  amount in  his/her  Account  shall be  applied  as of the next
Exercise Date to purchase Common Stock unless the employee,  or, in the event of
his/her death, his/her successor, requests that the amount in his/her Account be
refunded.  However, if the retirement,  death or other termination of employment
occurs more than three months prior to the next Exercise Date, such amount shall
automatically be refunded.

     An employee of a subsidiary  of the Company which ceases to be a subsidiary
will be  deemed  to have  terminated  his/her  employment  as of the  date  such
corporation  ceases to be a  subsidiary  unless,  as of such date,  the employee
becomes  an  employee  of the  Company  or a  subsidiary  of the  Company  whose
employees are eligible to participate in the Offering.

U.S. Federal Income Tax Consequences

     The amount  which a  Participant  contributes  to the Stock  Purchase  Plan
through payroll deductions or otherwise is not deductible by the Participant for
U.S.  federal income tax purposes.  The Participant does not recognize income on
either the granting or exercise of an Option.  However,  if the acquired  shares
are sold  within two years  from the date the  Option was  granted or within one
year from the date the shares were  purchased,  he/she will  recognize  ordinary
income  equal to the  difference  between the fair market value of the shares on
the Exercise Date over the Exercise  Price.  Any further gain is a capital gain.
The tax basis in any such shares,  for  purposes of computing  gain or loss upon
their  disposition,  will be the fair market value of the shares on the Exercise
Date.  The early  disposition  of the  shares by the  Participant  entitles  the
Company to a deduction to the extent that any gain to the Participant is treated
as ordinary income.

     If the  Participant  sells the shares  more than two years after the Option
was granted and more than one year after the shares  were  purchased,  or if the
Participant  dies without having disposed of the shares,  the  Participant  will
recognize  ordinary income in an amount equal to the lesser of (i) the excess of
the fair market  value of the shares on the date the Option was granted over the
Exercise Price, or (ii) the excess of the fair market value of the shares on the
date of  disposition  or death over the  Exercise  Price.  Any further gain is a
capital  gain.  Any loss is treated as a capital  loss.  The basis of the shares
will be the sum of the  Exercise  Price and the  amount  of any such  recognized
income. The Company will have no tax consequences.

     Any interest on the  Participant's  funds held by the Company which is paid
to the Participant is ordinary income to the Participant.


                                       29
<PAGE>

Recommendation of the Board of Directors

     The Board of  Directors  recommends a vote FOR approval and adoption of the
Company's  1999  Employees  Stock  Purchase  Plan.  Unless a contrary  choice is
specified,  proxies  solicited  by the  Board of  Directors  will be  voted  FOR
approval and adoption of the Company's 1999 Employees Stock Purchase Plan.


               RATIFICATION OF OPTIONS GRANTED UNDER THE COMPANY'S
                      1996 NON-QUALIFIED STOCK OPTION PLAN
                                    (Item 7)

     Under  the  1996   Non-Qualified   Stock   Option  Plan   approved  by  the
shareholders,  options to acquire a total of  7,457,129  shares of Common  Stock
have been issued in 1997 and 1998 by the committee  designated for such purpose.
No further  shareholder  approval is required for the issuance of such  options.
However,  shareholder  ratification  of such options at the Annual  Meeting will
allow the  holders of these  options to have the benefit of Rule 16b-3 under the
Exchange Act,  which,  among other things,  exempts certain grants of options to
officers and  directors of the Company from the  provisions  of Section 16(b) of
such Exchange Act.

Recommendation of the Board of Directors

     The  Board of  Directors  recommends  a vote FOR  ratification  of  options
granted  under the  Company's  1996  Non-Qualified  Stock Option Plan.  Unless a
contrary choice is specified,  proxies  solicited by the Board of Directors will
be  voted  FOR   ratification  of  options  granted  under  the  Company's  1996
Non-Qualified Stock Option Plan.


                              SHAREHOLDER PROPOSALS

     Pursuant to the applicable  rules under the Exchange Act, some  shareholder
proposals may be eligible for inclusion in the Company's  2000 Proxy  Statement.
Proposals by shareholders intended to be presented at the 2000 Annual Meeting of
Shareholders  must be  submitted  in writing to the  Secretary of the Company no
later than  November 20, 1999.  Shareholders  interested  in  submitting  such a
proposal  are  advised  to  contact  knowledgeable  counsel  with  regard to the
detailed requirements of such securities rules.


                                  OTHER MATTERS

     Financial Statements.  The Company's  consolidated financial statements for
the year ended  December  31,  1998 are  included in the  Company's  1998 Annual
Report  to  Shareholders.  Copies of the  Annual  Report  are being  sent to the
Company's  shareholders  concurrently  with the mailing of this Proxy Statement.
The Annual Report does not form any part of the material for the solicitation of
proxies.

     Other  Matters.  At the date hereof,  there are no other  matters which the
Board of  Directors  intends to present  or has  reason to believe  others  will
present at the Meeting.  If other  matters come before the Meeting,  the persons
named in the accompanying  form of proxy will vote in accordance with their best
judgment with respect to such matters.

                                       30
<PAGE>

     Proxy Solicitation. The expense of solicitation of proxies will be borne by
the Company. The Company has retained ADP Investor Communication  Services, Inc.
to solicit  proxies.  ADP Investor  Communication  Services,  Inc. has agreed to
perform  this  service  for a fee of not more than  $10,000  plus  out-of-pocket
expenses.  Proxies may also be solicited by certain of the Company's  directors,
officers and other employees, without additional compensation,  personally or by
written  communication,  telephone  or other  electronic  means.  The Company is
required to request brokers and nominees who hold stock in their name to furnish
the  Company's  proxy  material  to  beneficial  owners  of the  stock  and will
reimburse such brokers and nominees for their reasonable  out-of-pocket expenses
in so doing.

     The form of proxy and this Proxy  Statement have been approved by the Board
of  Directors  and  are  being  mailed  and  delivered  to  shareholders  by its
authority.


                                             Richard J. Sullivan
                                             Secretary

Palm Beach, Florida
May ___, 1999









                                       31
<PAGE>




                                   APPENDIX A

                           AMENDED AND SECOND RESTATED
                            ARTICLES OF INCORPORATION
                                       OF
                         APPLIED DIGITAL SOLUTIONS, INC.



ARTICLE ONE

         The name of the Corporation is Applied Digital Solutions, Inc. The name
under which it was originally organized was Great Bay Acquisition Company.


ARTICLE TWO

     The  address  of the  Corporation's  registered  office in this  state is 1
Metropolitan Square,  Suite 3600, St. Louis,  Missouri 63102 and the name of its
agent is Llewellyn Sale III.


ARTICLE THREE

     The  aggregate  number  of  shares  of  all  classes  of  stock  which  the
Corporation  shall have authority to issue is Eighty-Five  Million  (85,000,000)
shares,  of which Five  Million  (5,000,000)  shares  shall be  preferred  stock
("Preferred  Stock")  having a par value of $10.00 per share and Eighty  Million
(80,000,000) shares shall be common stock ("Common Stock") having a par value of
$.001 per share. A statement of the  preferences,  qualifications,  limitations,
restrictions,  and the special or relative rights, including convertible rights,
in respect of the shares of each class is as follows:

         A.  Preferred Stock.

         Subject  to the  requirements  of the laws of the  State  of  Missouri,
authority is hereby vested in the Board of Directors  from time to time to issue
5,000,000  shares of Preferred  Stock in one or more series and by resolution or
resolutions as to each series:

         (a) to  fix the  distinctive  serial  designation of the shares of such
     series;

         (b) to fix the rate per annum at which  the  holders  of the  shares of
     such series shall be entitled to receive dividends, the dates on which said
     dividends  shall be  payable,  and,  if the  directors  determine  that the
     dividends  with  respect to said series  shall be  cumulative,  the date or
     dates from which such dividends shall be cumulative;

         (c) to  determine  whether the shares of such series  shall have voting
     power, and, if so, the extent and definition of such voting power;

         (d) to fix the price or prices at which the  shares of such  series may
     be  redeemed,  and to  determine  whether  the shares of such series may be
     redeemed in whole or in part or only as a whole;

         (e) to fix the amounts  payable on the shares of  such  series  in  the
     event of liquidation,  dissolution,  or winding up of
     the Corporation;

         (f) to determine  whether or not the shares of any such series shall be
     made  convertible  into or  exchangeable  for shares of any other  class or
     classes of stock of the  Corporation  or of any other  series of  Preferred
     Stock and the conversion price or prices,  or the rate or rates of exchange
     at which such conversion or exchange may be made;



<PAGE>

         (g) to determine the amount of the sinking fund,  purchase fund, or any
     analogous  fund,  if any, to be provided  with respect to each such series;
     and

         (h) to fix preferences and relative, participating,  optional, or other
     special rights, and  qualifications,  limitations or restrictions  thereof,
     applicable to each such series.

         B.  Common Stock.

         Each share of Common Stock shall be identical  with each other share of
Common Stock,  except as the holders thereof shall otherwise  expressly agree in
writing.  Subject to the prior rights of the  Preferred  Stock from time to time
issued and  outstanding,  as hereinbefore set forth, the holders of Common Stock
shall be entitled to receive such sums as the Board of  Directors  may from time
to time declare as dividends thereon, or authorize as distributions thereon, out
of any sums  available to be distributed as dividends and to receive any balance
remaining  in  case  of  the  dissolution,  liquidation  or  winding  up of  the
Corporation  after satisfying the prior rights of the Preferred Stock, if any be
then  outstanding.  Each  share  of  Common  Stock  shall  have one vote for all
corporate purposes.


ARTICLE FOUR

         No holder of shares of any class of stock of this  corporation,  either
now or hereafter  authorized or issued,  shall have a preemptive or preferential
right to  subscribe  for or  purchase  any  shares of any class of stock of this
corporation,  either  now or  hereafter  authorized  whether  issued  for  cash,
property or services, or to subscribe for or purchase obligations, bonds, notes,
debentures,  other  securities or stock  convertible  into stock of any class of
this corporation other than such right, if any, as the Board of Directors in its
discretion may from time to time  determine,  and at such prices as the Board of
Directors may from time to time fix.


ARTICLE FIVE

         The name and place of residence of the incorporator is as follows:

                             Mr. William E. Evans
                             3254 South Glenhaven
                             Springfield, MO 65804


ARTICLE SIX

         The number of  directors  to  constitute  the Board of Directors is six
(6).  Hereafter,  the  number of  directors  shall be fixed by, or in the manner
provided  in, the  By-Laws.  Any  changes in the number  will be reported to the
Secretary of State within thirty (30) calendar days of such change.


ARTICLE SEVEN

         The duration of the Corporation is perpetual.


ARTICLE EIGHT

         The Corporation is formed for the following purposes:  To engage in any
lawful  business  permitted  under The General and Business  Corporation  Law of
Missouri.


<PAGE>


ARTICLE NINE

         The Board of Directors is authorized to make, amend,  alter and rescind
the By-Laws of the Corporation.


<PAGE>
                                   APPENDIX B

                        APPLIED CELLULAR TECHNOLOGY, INC.



                            1999 FLEXIBLE STOCK PLAN



<PAGE>
                        APPLIED CELLULAR TECHNOLOGY, INC.

                            1999 FLEXIBLE STOCK PLAN

                                TABLE OF CONTENTS

                                                                            Page


1. NAME AND PURPOSE                                                            1
         1.1. Name.............................................................1
         1.2. Purpose..........................................................1

2. DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION                              1
         2.1. General Definitions..............................................1
                  2.1.1. Affiliate.............................................1
                  2.1.2. Agreement.............................................1
                  2.1.3. Benefit...............................................1
                  2.1.4. Board.................................................1
                  2.1.5. Cash Award............................................2
                  2.1.6. Change of Control.....................................2
                  2.1.7. Code..................................................2
                  2.1.8. Company...............................................2
                  2.1.9. Committee.............................................2
                  2.1.10. Common Stock.........................................2
                  2.1.11. Effective Date.......................................2
                  2.1.12. Employee.............................................3
                  2.1.13. Employer.............................................3
                  2.1.14. Exchange Act.........................................3
                  2.1.15. Fair Market Value....................................3
                  2.1.16. Fiscal Year..........................................3
                  2.1.17. ISO..................................................3
                  2.1.18. NQSO.................................................3
                  2.1.19. Option...............................................3
                  2.1.20. Other Stock Based Award..............................3
                  2.1.21. Parent...............................................3
                  2.1.22. Participant..........................................4
                  2.1.23. Performance Based Compensation.......................4
                  2.1.24. Performance Share....................................4
                  2.1.25. Plan.................................................4
                  2.1.26. Reload Option........................................4
                  2.1.27. Restricted Stock.....................................4
                  2.1.28. Rule 16b-3...........................................4
                  2.1.29. SEC..................................................4
                  2.1.30. Share................................................5
                  2.1.31. SAR..................................................5
                  2.1.32. Subsidiary...........................................5
         2.2. Other Definitions................................................5
         2.3. Conflicts........................................................5


                                       i
<PAGE>

3. COMMON STOCK                                                                5
         3.1. Number of Shares.................................................5
         3.2. Reusage..........................................................5
         3.3. Adjustments......................................................6

4. ELIGIBILITY                                                                 6
         4.1. Determined By Committee..........................................6

5. ADMINISTRATION                                                              6
         5.1. Committee........................................................6
         5.2. Authority........................................................6
         5.3. Delegation.......................................................7
         5.4. Determination....................................................7

6. AMENDMENT                                                                   8
         6.1. Power of Board...................................................8
         6.2. Limitation.......................................................8

7. TERM AND TERMINATION                                                        8
         7.1. Term.............................................................8
         7.2. Termination......................................................8

8. MODIFICATION OR TERMINATION OF BENEFITS                                     8
         8.1. General..........................................................8
         8.2. Committee's Right................................................8

9. CHANGE OF CONTROL                                                           9
         9.1. Right of Committee...............................................9

10. AGREEMENTS AND CERTAIN BENEFITS                                            9
         10.1. Grant Evidenced by Agreement....................................9
         10.2. Provisions of Agreement.........................................9
         10.3. Transferability................................................10

11. REPLACEMENT AND TANDEM AWARDS                                             10
         11.1. Replacement....................................................10
         11.2. Tandem Awards..................................................10

12. PAYMENT, DIVIDENDS, DEFERRAL AND WITHHOLDING                              10
         12.1. Payment........................................................10
         12.2. Dividend Equivalents...........................................11
         12.3. Deferral.......................................................11
         12.4. Withholding....................................................11

13. OPTIONS                                                                   11
         13.1. Types of Options...............................................11
         13.2. Grant of ISOs and Option Price.................................11
         13.3. Other Requirements for ISOs....................................11
         13.4. NQSOs..........................................................12
         13.5. Determination by Committee.....................................12

14. SARS                                                                      12
         14.1. Grant and Payment..............................................12
         14.2. Grant of Tandem Award..........................................12


                                       ii
<PAGE>

         14.3. ISO Tandem Award...............................................12
         14.4. Payment of Award...............................................12

15. ANNUAL LIMITATIONS                                                        12
         15.1. Limitation on Options and SARs.................................12
         15.2. Computations...................................................13

16. RESTRICTED STOCK AND PERFORMANCE SHARES                                   13
         16.1. Restricted Stock...............................................13
         16.2. Cost of Restricted Stock.......................................13
         16.3. Non-Transferability............................................13
         16.4. Performance Shares.............................................13
         16.5. Grant..........................................................13

17. CASH AWARDS                                                               14
         17.1. Grant..........................................................14
         17.2. Rule 16b-3.....................................................14
         17.3. Restrictions...................................................14

18. OTHER STOCK BASED AWARDS AND OTHER BENEFITS                               14
         18.1. Other Stock Based Awards.......................................14
         18.2. Other Benefits.................................................14

19. MISCELLANEOUS PROVISIONS                                                  14
         19.1. Underscored References.........................................14
         19.2. Number and Gender..............................................14
         19.3. Unfunded Status of Plan........................................15
         19.4. Termination of Employment......................................15
         19.5. Designation of Beneficiary.....................................15
         19.6. Governing Law..................................................15
         19.7. Purchase for Investment........................................15
         19.8. No Employment Contract.........................................16
         19.9. No Effect on Other Benefits....................................16


                                      iii
<PAGE>
                        APPLIED CELLULAR TECHNOLOGY, INC.

                            1999 FLEXIBLE STOCK PLAN


1. NAME AND PURPOSE

     1.1. Name.

          The name of this Plan is the "Applied Cellular  Technology,  Inc. 1999
     Flexible Stock Plan."

     1.2. Purpose.

          The Company has established this Plan to attract, retain, motivate and
     reward  Employees  and other  individuals,  to  encourage  ownership of the
     Company's Common Stock by Employees and other  individuals,  and to promote
     and further the best  interests  of the Company by granting  cash and other
     awards.

2. DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION

     2.1. General Definitions.

          The  following  words  and  phrases,  when  used in the  Plan,  unless
     otherwise  specifically  defined or unless the  context  clearly  otherwise
     requires, shall have the following respective meanings:

          2.1.1. Affiliate.

               "Affiliate"  means a Parent or Subsidiary of the Company.  

          2.1.2. Agreement.

               "Agreement"  means the document which  evidences the grant of any
          Benefit under the Plan and which sets forth the Benefit and the terms,
          conditions  and  provisions  of, and  restrictions  relating  to, such
          Benefit.

          2.1.3. Benefit.

               "Benefit"  means any benefit  granted to a Participant  under the
          Plan.

          2.1.4. Board.

               "Board" means the Board of Directors of the Company.

                                       1
<PAGE>

          2.1.5. Cash Award.

               "Cash Award" means a Benefit payable in the form of cash.

          2.1.6. Change of Control.

               "Change of Control" means the  acquisition,  without the approval
          of the Board,  by any  "person"  or  "group"  (as that term is used in
          Section  13(d) and  14(d)(2)  of the  Exchange  Act),  other  than the
          Company or a Related  Entity,  of beneficial  ownership (as defined in
          Rule 13d-3 under the Exchange Act) of outstanding voting securities of
          the Company carrying more than 20% of the combined voting power in the
          election  of  directors  through  a tender  offer,  exchange  offer or
          otherwise;  the liquidation or dissolution of the Company  following a
          sale or other disposition of all or substantially all of its assets; a
          merger or  consolidation  involving  the  Company as a result of which
          persons who were shareholders of the Company  immediately prior to the
          effective date of the merger or  consolidation  shall have  beneficial
          ownership  of  less  than  50% of the  combined  voting  power  in the
          election of  directors  of the  surviving  corporation  following  the
          effective date of such merger or consolidation; or any time during any
          two-year period in which  individuals who constituted the Board at the
          start of such  period  (or whose  election  was  approved  by at least
          two-thirds  of the then  members of the Board who were  members at the
          start of the two-year  period) do not  constitute  at least 50% of the
          Board for any reason.  A Related Entity is the Parent, a Subsidiary or
          any employee  benefit plan (including a trust forming a part of such a
          plan) maintained by the Parent, the Company or a Subsidiary.

          2.1.7. Code.

               "Code" means the Internal  Revenue Code of 1986, as amended.  Any
          reference to the Code includes the regulations promulgated pursuant to
          the Code.

          2.1.8. Company.

               "Company" means Applied Cellular Technology, Inc.

          2.1.9. Committee.

               "Committee" means the Committee described in Section 5.1.

          2.1.10. Common Stock..

               "Common Stock" means the Company's  common stock which  presently
          has a par value of $.001 per Share.

          2.1.11. Effective Date.

               "Effective  Date" means the date that the Plan is approved by the
          shareholders of the Company which must occur within one year before or
          after  approval  by the  Board.  Any grants of  Benefits  prior to the
          approval  by the  shareholders  of the  Company  shall be void if such
          approval is not obtained.


                                       2
<PAGE>

          2.1.12. Employee.

               "Employee" means any person employed by the Employer.

          2.1.13. Employer.

               "Employer" means the Company and all Affiliates.

          2.1.14. Exchange Act.

               "Exchange  Act" means The  Securities  Exchange  Act of 1934,  as
          amended.

          2.1.15. Fair Market Value.

               "Fair  Market  Value"  means the  closing  price of Shares on the
          Nasdaq National Market on a given date, or, in the absence of sales on
          a given date, the closing price on the Nasdaq  National  Market on the
          last day on which a sale occurred prior to such date.

          2.1.16. Fiscal Year.

               "Fiscal  Year" means the taxable year of the Company which is the
          calendar year.

          2.1.17. ISO.

               "ISO" means an  Incentive  Stock Option as defined in Section 422
          of the Code.

          2.1.18. NQSO.

               "NQSO" means a  non-qualified  stock  Option,  which is an Option
          that does not qualify as an ISO.

          2.1.19. Option.

               "Option"  means an option to purchase  Shares  granted  under the
          Plan.

          2.1.20. Other Stock Based Award.

               An award  under  Section  8 that is valued in whole or in part by
          reference to, or is otherwise based on, Common Stock.

          2.1.21. Parent.

               Any  corporation  (other than the Company or a Subsidiary)  in an
          unbroken  chain of  corporations  ending with the Company,  if, at the
          time  of  the  grant  of an  Option  or  other  Benefit,  each  of the
          corporations (other than the Company) owns stock possessing
 
 
                                      3
<PAGE>

         50% or more of the total combined  voting power of all classes of stock
         in one of the other corporations in such chain.

          2.1.22. Participant.

               An individual  who is granted a Benefit under the Plan.  Benefits
          may be granted only to Employees,  members of the Board, employees and
          owners of entities which are not Affiliates but which have a direct or
          indirect ownership interest in an Employer or in which an Employer has
          a  direct  or  indirect  ownership  interest,   individuals  who,  and
          employees and owners of entities which, are customers and suppliers of
          an Employer,  individuals  who, and  employees  and owners of entities
          which,  render  services to an  Employer,  and  individuals  who,  and
          employees  and owners of  entities,  which have  ownership or business
          affiliations with any individual or entity previously described.

          2.1.23. Performance Based Compensation.

               Compensation which meets the requirements of Section 162(m)(4)(C)
          of the Code.

          2.1.24. Performance Share.

               A Share awarded to a Participant under Section 16 of the Plan.

          2.1.25. Plan.

               The Applied  Cellular  Technology,  Inc. 1999 Flexible Stock Plan
          and all amendments and supplements to it.

          2.1.26. Reload Option.

               An Option to purchase the number of Shares used by a  Participant
          to  exercise  an Option and to  satisfy  any  withholding  requirement
          incident to the exercise of such Option.

          2.1.27. Restricted Stock.

               Shares issued under Section 15 of the Plan.

          2.1.28. Rule 16b-3.

               Rule 16b-3  promulgated by the SEC, as amended,  or any successor
          rule in effect from time to time.

          2.1.29. SEC.

               The Securities and Exchange Commission.

 
                                       4
<PAGE>

          2.1.30. Share.

               A share of Common Stock.

          2.1.31. SAR.

               A stock  appreciation  right,  which is the right to  receive  an
          amount equal to the appreciation,  if any, in the Fair Market Value of
          a Share  from  the date of the  grant of the  right to the date of its
          payment.

          2.1.32. Subsidiary.

               Any corporation,  other than the Company, in an unbroken chain of
          corporations beginning with the Company if, at the time of grant of an
          Option or other Benefit, each of the corporations, other than the last
          corporation in the unbroken chain,  owns stock  possessing 50% or more
          of the total  combined  voting power of all classes of stock in one of
          the other corporations in such chain.

     2.2. Other Definitions.

          In addition to the above  definitions,  certain words and phrases used
     in the Plan and any Agreement may be defined in other  portions of the Plan
     or in such Agreement. 2.3. Conflicts.

          In the case of any  conflict  in the terms of the Plan  relating  to a
     Benefit,  the  provisions  in the  section of the Plan  which  specifically
     grants such Benefit shall control those in a different section. In the case
     of any conflict between the terms of the Plan relating to a Benefit and the
     terms of an  Agreement  relating to a Benefit,  the terms of the Plan shall
     control.

3. COMMON STOCK

     3.1. Number of Shares.

          The number of Shares which may be issued or sold or for which Options,
     SARs or Performance Shares may be granted under the Plan shall be 5,000,000
     Shares,  plus an  annual  increase,  effective  as of the first day of each
     calendar  year,  commencing  with  2000,  equal  to 5%  of  the  number  of
     outstanding  Shares as of the first day of such  calendar  year,  but in no
     event more than  15,000,000  Shares in the  aggregate.  Such  Shares may be
     authorized but unissued Shares,  Shares held in the treasury,  or both. The
     full number of Shares available may be used for any type of Option or other
     Benefit.

     3.2. Reusage.

          If an Option or SAR expires or is terminated, surrendered, or canceled
     without having been fully  exercised,  if Restricted  Shares or Performance
     Shares are forfeited, or if any other grant results in any Shares not being
     issued, the Shares covered by such Option or SAR, grant of Restricted


                                       5
<PAGE>

     Shares,  Performance Shares or other grant, as the case may be, shall again
     be available  for use under the Plan.  Any Shares which are used as full or
     partial  payment to the Company upon exercise of an Option or for any other
     Benefit  that  requires a payment to the  Company  shall be  available  for
     purposes of the Plan.

     3.3. Adjustments.

          If there is any change in the Common Stock of the Company by reason of
     any stock dividend, spin-off, split-up, spin-out, recapitalization, merger,
     consolidation,  reorganization,  combination  or  exchange  of  shares,  or
     otherwise,  the number of SARs and number and class of shares available for
     Options and grants of Restricted Stock,  Performance Shares and Other Stock
     Based Awards and the number of Shares subject to outstanding Options, SARs,
     grants of  Restricted  Stock  which are not vested,  grants of  Performance
     Shares which are not vested,  and Other Stock Based  Awards,  and the price
     thereof, as applicable, shall be appropriately adjusted by the Committee.

4. ELIGIBILITY

     4.1. Determined By Committee.

          The Participants and the Benefits they receive under the Plan shall be
     determined  solely by the  Committee.  In making  its  determinations,  the
     Committee shall consider past, present and expected future contributions of
     Participants and potential Participants to the Employer, including, without
     limitation,  the performance of, or the refraining from the performance of,
     services. Unless specifically provided otherwise herein, all determinations
     of the Committee in connection  with the Plan or an Agreement shall be made
     in its sole discretion.

5. ADMINISTRATION

     5.1. Committee.

          The Plan shall be administered  by the Committee.  The Committee shall
     consist of the Board,  unless the Board appoints a Committee of two or more
     but less than all of the  Board.  If the  Committee  does not  include  the
     entire Board,  it shall serve at the pleasure of the Board,  which may from
     time to  time  appoint  members  in  substitution  for  members  previously
     appointed  and  fill  vacancies,  however  caused,  in the  Committee.  The
     Committee  may select one of its members as its Chairman and shall hold its
     meetings  at such times and places as it may  determine.  A majority of its
     members shall constitute a quorum. All determinations of the Committee made
     at a meeting  at which a quorum is present  shall be made by a majority  of
     its members present at the meeting.  Any decision or determination  reduced
     to  writing  and  signed by a  majority  of the  members  shall be fully as
     effective  as if it had been  made by a  majority  vote at a  meeting  duly
     called and held.

     5.2. Authority.

          Subject  to  the  terms  of  the  Plan,   the  Committee   shall  have
     discretionary authority to:

                                       6
<PAGE>

               (a) determine the  individuals to whom Benefits are granted,  the
          type and  amounts of  Benefits  to be granted and the date of issuance
          and duration of all such grants;

               (b)  determine  the  terms,  conditions  and  provisions  of, and
          restrictions relating to, each Benefit granted;

               (c) interpret and construe the Plan and all Agreements;

               (d) prescribe,  amend and rescind rules and regulations  relating
          to the Plan;

               (e) determine the content and form of all Agreements;

               (f) determine all questions relating to Benefits under the Plan;

               (g) maintain accounts, records and ledgers relating to Benefits;

               (h) maintain records concerning its decisions and proceedings;

               (i) employ  agents,  attorneys,  accountants or other persons for
          such purposes as the Committee considers necessary or desirable;

               (j) take,  at any time,  any  action  permitted  by  Section  9.1
          irrespective  of  whether  any Change of Control  has  occurred  or is
          imminent;

               (k)  determine,  except to the extent  otherwise  provided in the
          Plan,  whether and the extent to which Benefits under the Plan will be
          structured   to   conform   to   the   requirements    applicable   to
          Performance-Based  Compensation,  and to take such  action,  establish
          such  procedures,  and  impose  such  restrictions  at the  time  such
          Benefits are granted as the  Committee  determines  to be necessary or
          appropriate to conform to such requirements; and

               (l) do and  perform  all  acts  which it may  deem  necessary  or
          appropriate for
         the administration of the Plan and carry out the purposes of the Plan.

     5.3. Delegation.

          Except as  required  by Rule 16b-3 with  respect to grants of Options,
     Stock Appreciation Awards, Performance Shares, Other Stock Based Awards, or
     other Benefits to individuals who are subject to Section 16 of the Exchange
     Act or as  otherwise  required  for  compliance  with  Rule  16b-3 or other
     applicable law, the Committee may delegate all or any part of its authority
     under the Plan to any Employee, Employees or committee.

     5.4. Determination.

          All determinations of the Committee shall be final.

                                       7
<PAGE>


6. AMENDMENT

     6.1. Power of Board.

          Except as  hereinafter  provided,  the Board shall have the sole right
     and power to amend the Plan at any time and from time to time.

     6.2. Limitation.

          The Board may not amend the Plan, without approval of the shareholders
     of the Company:

               (a) in a manner which would cause  Options  which are intended to
          qualify as ISOs to fail to qualify;

               (b) in a manner  which  would  cause the Plan to fail to meet the
          requirements of Rule 16b-3; or

               (c) in a manner which would violate applicable law.

7. TERM AND TERMINATION

     7.1. Term.

          The Plan shall commence as of the Effective  Date and,  subject to the
     terms of the Plan,  including those requiring  approval by the shareholders
     of the Company and those  limiting  the period over which ISOs or any other
     Benefits  may be granted,  shall  continue  in full force and effect  until
     terminated.

     7.2. Termination.

          The Plan may be terminated at any time by the Board.

8. MODIFICATION OR TERMINATION OF BENEFITS

     8.1. General.

          Subject to the provisions of Section 8.2, the amendment or termination
     of the Plan shall not adversely affect a Participant's right to any Benefit
     granted prior to such amendment or termination.

     8.2. Committee's Right.

          Any Benefit granted may be converted, modified, forfeited or canceled,
     in whole or in part, by the Committee if and to the extent permitted in the
     Plan or applicable Agreement or with the consent of the Participant to whom
     such Benefit was granted. Except as may be provided in an Agreement, the


                                       8
<PAGE>

     Committee  may,  in its sole  discretion,  in whole or in part,  waive  any
     restrictions or conditions applicable to, or accelerate the vesting of, any
     Benefit.

9. CHANGE OF CONTROL

     9.1. Right of Committee.

          In order to maintain a  Participant's  rights in the event of a Change
     of Control,  the Committee,  in its sole discretion,  may, in any Agreement
     evidencing a Benefit,  or at any time prior to, or  simultaneously  with or
     after  a  Change  of  Control,  provide  such  protection  as it  may  deem
     necessary.  Without,  in any way,  limiting the generality of the foregoing
     sentence or requiring any specific  protection,  the Committee may, without
     the approval or consent of the Participant:

               (a) provide for the  acceleration of any time periods relating to
          the exercise or  realization  of such Benefit so that such Benefit may
          be  exercised  or  realized  in full on or before a date  fixed by the
          Committee;

               (b)  provide  for  the  purchase  of  such   Benefit,   upon  the
          Participant's request, for an amount of cash equal to the amount which
          could have been  attained  upon the  exercise or  realization  of such
          Benefit had such Benefit been currently exercisable or payable;

               (c) make such adjustment to the Benefits then  outstanding as the
          Committee  deems  appropriate  to reflect such  transaction or change;
          and/or

               (d) cause the Benefits  then  outstanding  to be assumed,  or new
          Benefits substituted  therefor,  by the surviving  corporation in such
          change.

10. AGREEMENTS AND CERTAIN BENEFITS

     10.1. Grant Evidenced by Agreement.

          The  grant  of any  Benefit  under  the Plan  may be  evidenced  by an
     Agreement  which shall describe the specific  Benefit granted and the terms
     and conditions of the Benefit. The granting of any Benefit shall be subject
     to, and  conditioned  upon,  the  recipient's  execution  of any  Agreement
     required by the  Committee.  Except as otherwise  provided in an Agreement,
     all capitalized  terms used in the Agreement shall have the same meaning as
     in the Plan, and the Agreement  shall be subject to all of the terms of the
     Plan.

     10.2. Provisions of Agreement.

          Each Agreement  shall contain such provisions that the Committee shall
     determine  to be  necessary,  desirable  and  appropriate  for the  Benefit
     granted which may include, but not necessarily be limited to, the following
     with  respect  to any  Benefit:  description  of the type of  Benefit;  the
     Benefit's duration; its transferability;  if an Option, the exercise price,
     the


                                       9
<PAGE>

     exercise period and the person or persons who may exercise the Option;  the
     effect upon such Benefit of the Participant's death, disability, changes of
     duties or termination of employment;  the Benefit's  conditions;  when, if,
     and how any Benefit  may be  forfeited,  converted  into  another  Benefit,
     modified,  exchanged for another Benefit, or replaced; and the restrictions
     on any Shares purchased or granted under the Plan.

     10.3. Transferability.

          Unless  otherwise  specified  in an  Agreement  or  permitted  by  the
     Committee,  each Benefit  granted shall be not  transferable  other than by
     will or the laws of  descent  and  distribution  and  shall be  exercisable
     during a Participant's lifetime only by him.

11. REPLACEMENT AND TANDEM AWARDS

     11.1. Replacement.

          The Committee may permit a Participant to elect to surrender a Benefit
     in exchange for a new Benefit.

     11.2. Tandem Awards.

          Awards may be granted by the Committee in tandem.  However, no Benefit
     may be granted in tandem with an ISO except SARs.

12. PAYMENT, DIVIDENDS, DEFERRAL AND WITHHOLDING

     12.1. Payment.

          Upon the  exercise  of an Option  or in the case of any other  Benefit
     that requires a payment by a Participant to the Company, the amount due the
     Company is to be paid:

               (a)  in  cash,  including  by  means  of  a  so-called  "cashless
          exercise" of an Option;

               (b) by the surrender of all or part of a Benefit  (including  the
          Benefit being exercised);

               (c) by the tender to the Company of Shares  owned by the optionee
          and
         registered  in his name having a Fair Market  Value equal to the amount
         due to the Company;

               (d) in other  property,  rights and credits deemed  acceptable by
          the
         Committee, including the Participant's promissory note;

               (e) by any combination of the payment  methods  specified in (a),
          (b), (c) and (d) above.

          Notwithstanding,  the foregoing,  any method of payment other than (a)
     may be used only with the consent of the  Committee or if and to the extent
     so provided in an Agreement.  The proceeds of the sale of Shares  purchased
     pursuant to an Option and any  payment to the  Company  for other  Benefits
     shall be added to the general funds of the Company or to the Shares held in
     


                                       10
<PAGE>

     treasury,  as the case may be, and used for the  corporate  purposes of the
     Company as the Board shall determine.

     12.2. Dividend Equivalents.

          Grants of Benefits in Shares or Share equivalents may include dividend
     equivalent payments or dividend credit rights.

     12.3. Deferral.

          The right to receive any Benefit under the Plan may, at the request of
     the  Participant,  be  deferred  for such period and upon such terms as the
     Committee  shall  determine,  which may  include  crediting  of interest on
     deferrals of cash and  crediting of dividends on deferrals  denominated  in
     Shares.

     12.4. Withholding.

          The Company may, at the time any  distribution is made under the Plan,
     whether  in cash or in  Shares,  or at the time any  Option  is  exercised,
     withhold from such  distribution or Shares issuable upon the exercise of an
     Option,  any amount  necessary to satisfy  federal,  state and local income
     and/or other tax withholding requirements with respect to such distribution
     or exercise of such  Options.  The  Committee  or the Company may require a
     participant  to tender to the  Company  cash  and/or  Shares in the  amount
     necessary to comply with any such withholding requirements.

13. OPTIONS

     13.1. Types of Options.

          It is intended that both ISOs and NQSOs,  which may be Reload Options,
     may be granted by the Committee under the Plan.

     13.2. Grant of ISOs and Option Price.

          Each ISO must be granted to an Employee  and granted  within ten years
     from the  earlier  of the date of  adoption  by the Board or the  Effective
     Date. The purchase price for Shares under any ISO shall be no less than the
     Fair Market Value of the Shares at the time the Option is granted.

     13.3. Other Requirements for ISOs.

          The terms of each Option  which is intended to qualify as an ISO shall
     meet all requirements of Section 422 of the Code.

                                       11
<PAGE>

     13.4. NQSOs.

          The terms of each NQSO  shall  provide  that such  Option  will not be
     treated as an ISO. The purchase price for Shares under any NQSO shall be no
     less than 85% of the Fair Market Value of the Shares at the time the Option
     is granted.

     13.5. Determination by Committee.

          Except as otherwise provided in Section 13.2 through Section 13.4, the
     terms of all Options shall be determined by the Committee.

14. SARS

     14.1. Grant and Payment.

          The  Committee may grant SARs.  Upon electing to receive  payment of a
     SAR, a  Participant  shall receive  payment in cash,  in Shares,  or in any
     combination of cash and Shares, as the Committee shall determine.

     14.2. Grant of Tandem Award.

          The Committee may grant SARs in tandem with an Option,  in which case:
     the  exercise of the Option  shall cause a  correlative  reduction  in SARs
     standing to a  Participant's  credit  which were granted in tandem with the
     Option; and the payment of SARs shall cause a correlative  reduction of the
     Shares under such Option.

     14.3. ISO Tandem Award.

          When SARs are granted in tandem with an ISO,  the SARs shall have such
     terms and conditions as shall be required for the ISO to qualify as an ISO.

     14.4. Payment of Award.

          SARs  shall be paid by the  Company  to a  Participant,  to the extent
     payment is elected by the  Participant  (and is otherwise due and payable),
     as soon as practicable after the date on which such election is made.


15. ANNUAL LIMITATIONS

     15.1. Limitation on Options and SARs.

          The number of (a) Shares  covered by Options where the purchase  price
     is no less than the Fair  Market  Value of the  Shares on the date of grant
     plus (b) SARs which may be granted to any  Participant  in any Fiscal  Year
     shall not exceed 500,000.

                                       12
<PAGE>

     15.2. Computations.

          For  purposes  of Section  15.1:  Shares  covered by an Option that is
     canceled shall count against the maximum,  and, if the exercise price under
     an Option is reduced, the transaction shall be treated as a cancellation of
     the Option and a grant of a new Option; and SARs covered by a grant of SARs
     that is canceled  shall count against the maximum,  and, if the Fair Market
     Value of a Share on which  the  appreciation  under a grant of SARs will be
     calculated is reduced, the transaction will be treated as a cancellation of
     the SARs and the grant of a new grant of SARs.


16. RESTRICTED STOCK AND PERFORMANCE SHARES

     16.1. Restricted Stock.

          The Committee may grant Benefits in Shares  available  under Section 3
     of the Plan as Restricted Stock. Shares of Restricted Stock shall be issued
     and  delivered at the time of the grant or as otherwise  determined  by the
     Committee,  but shall be subject to forfeiture until provided  otherwise in
     the applicable Agreement or the Plan. Each certificate  representing Shares
     of Restricted  Stock shall bear a legend referring to the Plan and the risk
     of   forfeiture   of  the  Shares  and   stating   that  such   Shares  are
     nontransferable  until all restrictions  have been satisfied and the legend
     has been removed.  At the discretion of the  Committee,  the grantee may or
     may not be entitled to full voting and dividend  rights with respect to all
     shares of Restricted Stock from the date of grant.

     16.2. Cost of Restricted Stock.

          Unless  otherwise  determined  by the  Committee,  grants of Shares of
     Restricted Stock shall be made at a per Share cost to the Participant equal
     to par value.

     16.3. Non-Transferability.

          Shares of Restricted  Stock shall not be transferable  until after the
     removal of the legend with respect to such Shares.

     16.4. Performance Shares.

          Performance  Shares are the right of an  individual to whom a grant of
     such  Shares is made to  receive  Shares or cash  equal to the Fair  Market
     Value of such  Shares  at a future  date in  accordance  with the terms and
     conditions of such grant.  The terms and conditions  shall be determined by
     the  Committee,  in its sole  discretion,  but generally are expected to be
     based   substantially   upon  the  attainment  of  targeted  profit  and/or
     performance objectives.

     16.5. Grant.

          The Committee may grant an award of Performance  Shares. The number of
     Performance  Shares and the terms and  conditions of the grant shall be set
     forth in the applicable Agreement.


                                       13
<PAGE>

17. CASH AWARDS

     17.1. Grant.

          The  Committee  may grant Cash  Awards at such times and  (subject  to
     Section 17.2) in such amounts as it deems appropriate.

     17.2. Rule 16b-3.

          The amount of any Cash Award in any Fiscal Year to any Participant who
     is subject to Section 16 of the  Exchange  Act shall not exceed the greater
     of  $100,000  or 100% of his cash  compensation  (excluding  any Cash Award
     under this Section 17) for such Fiscal Year.

     17.3. Restrictions.

          Cash  Awards may be subject or not subject to  conditions  (such as an
     investment requirement),  restricted or nonrestricted, vested or subject to
     forfeiture and may be payable currently or in the future or both.


18. OTHER STOCK BASED AWARDS AND OTHER BENEFITS

     18.1. Other Stock Based Awards.

          The  Committee  shall have the right to grant Other Stock Based Awards
     which may include, without limitation, the grant of Shares based on certain
     conditions,  the  payment  of cash based on the  performance  of the Common
     Stock, and the grant of securities convertible into Shares.

     18.2. Other Benefits.

          The Committee  shall have the right to provide types of Benefits under
     the  Plan in  addition  to  those  specifically  listed,  if the  Committee
     believes that such  Benefits  would further the purposes for which the Plan
     was established.


19. MISCELLANEOUS PROVISIONS

     19.1. Underscored References.

          The underscored references contained in the Plan are included only for
     convenience,  and they shall not be  construed  as a part of the Plan or in
     any respect affecting or modifying its provisions.

     19.2. Number and Gender.

          The  masculine and neuter,  wherever used in the Plan,  shall refer to
     either the masculine, neuter or feminine; and, unless the context otherwise
     requires,  the  singular  shall  include  the  plural  and the  plural  the
     singular.

                                       14
<PAGE>

     19.3. Unfunded Status of Plan.

          The Plan is intended to constitute  an  "unfunded"  plan for incentive
     and deferred  compensation.  With respect to any payments or  deliveries of
     Shares not yet made to a  Participant  by the  Company,  nothing  contained
     herein  shall  give any  rights  that are  greater  than those of a general
     creditor of the Company. The Committee may authorize the creation of trusts
     or other  arrangements  to meet the  obligations  created under the Plan to
     deliver Shares or payments hereunder consistent with the foregoing.

     19.4. Termination of Employment.

          If the employment of a Participant  by the Company  terminates for any
     reason,  except as otherwise  provided in an  Agreement,  all  unexercised,
     deferred, and unpaid Benefits may be exercisable or paid only in accordance
     with rules  established by the Committee.  These rules may provide,  as the
     Committee   may  deem   appropriate,   for  the   expiration,   forfeiture,
     continuation,  or  acceleration  of  the  vesting  of all  or  part  of the
     Benefits.

     19.5. Designation of Beneficiary.

          A Participant  may file with the Committee a written  designation of a
     beneficiary or beneficiaries (subject to such limitations as to the classes
     and number of beneficiaries  and contingent  beneficiaries as the Committee
     may from time to time prescribe) to exercise,  in the event of the death of
     the Participant, an Option, or to receive, in such event, any Benefits. The
     Committee   reserves   the  right  to  review   and   approve   beneficiary
     designations. A Participant may from time to time revoke or change any such
     designation of  beneficiary  and any  designation of beneficiary  under the
     Plan  shall be  controlling  over any other  disposition,  testamentary  or
     otherwise; provided, however, that if the Committee shall be in doubt as to
     the right of any such  beneficiary to exercise any Option or to receive any
     Benefit,  the Committee may determine to recognize  only an exercise by the
     legal  representative  of the  recipient,  in which case the  Company,  the
     Committee and the members thereof shall not be under any further  liability
     to anyone.

     19.6. Governing Law.

          This Plan shall be construed and  administered  in accordance with the
     laws of the State of Missouri.

     19.7. Purchase for Investment.

          The Committee may require each person purchasing Shares pursuant to an
     Option or other  award  under the Plan to  represent  to and agree with the
     Company in writing that such person is acquiring the Shares for  investment
     and without a view to distribution  or resale.  The  certificates  for such
     Shares may include any legend  which the  Committee  deems  appropriate  to
     reflect any restrictions on transfer. All certificates for Shares delivered
     under the Plan  shall be subject  to such  stock-transfer  orders and other
     restrictions as the Committee may deem advisable under all applicable laws,
     rules and  regulations,  and the Committee may cause a legend or legends to
     be put on any such  certificates  to make  appropriate  references  to such
     restrictions.


                                       15
<PAGE>

     19.8. No Employment Contract.

          Neither the  adoption of the Plan nor any  Benefit  granted  hereunder
     shall confer upon any Employee any right to continued  employment nor shall
     the Plan or any Benefit interfere in any way with the right of the Employer
     to terminate the employment of any of its Employees at any time.

     19.9. No Effect on Other Benefits.

          The  receipt  of  Benefits  under the Plan shall have no effect on any
     benefits to which a Participant  may be entitled  from the Employer,  under
     another plan or  otherwise,  or preclude a Participant  from  receiving any
     such benefits.








                                       16


<PAGE>






                                   APPENDIX C

                        APPLIED CELLULAR TECHNOLOGY, INC.

                       1999 EMPLOYEES STOCK PURCHASE PLAN















<PAGE>

                        APPLIED CELLULAR TECHNOLOGY, INC.
                       1999 EMPLOYEES STOCK PURCHASE PLAN


                                Table of Contents


                                                                            Page
1. NAME AND PURPOSE............................................................1
         1.1. Name.............................................................1
         1.2. Purpose and Construction.........................................1
2. DEFINITION OF TERMS.........................................................1
         2.1. General Definitions..............................................1
                  2.1.1. Board.................................................1
                  2.1.2. Code..................................................1
                  2.1.3. Company...............................................1
                  2.1.4. Committee.............................................1
                  2.1.5. Common Stock..........................................2
                  2.1.6. Compensation..........................................2
                  2.1.7. Effective Date........................................2
                  2.1.8. Employee..............................................2
                  2.1.9. Eligible Employee.....................................2
                  2.1.10. Employer.............................................2
                  2.1.11. Entry Date...........................................2
                  2.1.12. Exercise Date........................................2
                  2.1.13. Fair Market Value....................................3
                  2.1.14. Offering.............................................3
                  2.1.15. Offering Date........................................3
                  2.1.16. Offering Period......................................3
                  2.1.17. Option...............................................3
                  2.1.18. Parent...............................................3
                  2.1.19. Participant..........................................3
                  2.1.20. Plan.................................................3
                  2.1.21. Share................................................3
                  2.1.22. Subsidiary...........................................4
                  2.1.23. Termination Date.....................................4
         2.2. Other Definitions................................................4


                                       i
<PAGE>

3. SHARES TO BE OFFERED........................................................4
         3.1. Number of Shares.................................................4
         3.2. Reusage..........................................................4
         3.3. Adjustments......................................................4
4. ADMINISTRATION..............................................................5
         4.1. Committee........................................................5
         4.2. Authority........................................................5
         4.3. Determination....................................................5
         4.4. Delegation.......................................................5
5. AMENDMENT AND TERMINATION...................................................6
         5.1. Power of Board...................................................6
         5.2. Limitation.......................................................6
         5.3. Term.............................................................6
         5.4. Termination......................................................6
         5.5. Effect...........................................................6
6. OFFERINGS...................................................................6
         6.1. Offerings........................................................6
         6.2. Terms of Offering................................................7
7. GRANTS, PARTICIPATION AND WITHDRAWAL........................................8
         7.1. Grant of Options.................................................8
         7.2. Options Not Transferable.........................................8
         7.3. Election to Participate..........................................8
         7.4. Method of Payment and Stock Purchase Accounts....................8
         7.5. Withdrawal from the Plan.........................................9
8. PURCHASE OF STOCK...........................................................9
         8.1. Exercise of Option...............................................9
         8.2. Allotment of Shares..............................................9
         8.3. Rights on Retirement, Death or Termination of Employment.........9
         8.4. Delivery of Stock...............................................10
9. MISCELLANEOUS PROVISIONS...................................................10
         9.1. Underscored References..........................................10
         9.2. Number and Gender...............................................10


                                       ii
<PAGE>

         9.3. Governing Law...................................................10
         9.4. Purchase for Investment.........................................10
         9.5. Restricted Shares...............................................11
         9.6. No Employment Contract..........................................11
         9.7. Offset..........................................................11
         9.8. No Effect on Other Benefits.....................................11














                                   iii
<PAGE>

                        APPLIED CELLULAR TECHNOLOGY, INC.
                       1999 EMPLOYEES STOCK PURCHASE PLAN



1. NAME AND PURPOSE.

     1.1. Name.

          The name of this Plan is the "Applied Cellular  Technology,  Inc. 1999
     Employees Stock Purchase Plan".

     1.2. Purpose and Construction.

          The Company has established  this Plan to encourage and facilitate the
     purchase of its Common Stock by Eligible  Employees.  This Plan is intended
     to qualify as an "Employee  Stock  Purchase  Plan" under Section 423 of the
     Code.  Consequently,  the  provisions  of this Plan shall be construed in a
     manner  consistent  with the  requirements  of Section 423 of the Code. Any
     term or provision of this Plan which is inconsistent  with the requirements
     of Section 423 of the Code shall be inapplicable.

2. DEFINITION OF TERMS.

     2.1. General Definitions.

          The  following  words  and  phrases,  when  used in the  Plan,  unless
     otherwise  specifically  defined or unless the  context  clearly  otherwise
     requires, shall have the following respective meanings:

               2.1.1. Board.

                    The Board of Directors of the Company.

               2.1.2. Code.

                    The internal Revenue Code of 1986, as amended. Any reference
               to the Code includes the regulations  promulgated pursuant to the
               Code.

               2.1.3. Company.

                    Applied Cellular Technology, Inc.

               2.1.4. Committee.

                    The Committee described in Section 4.1.


                                       1
<PAGE>

               2.1.5. Common Stock.

                    The Company's $.001 par value common stock.

               2.1.6. Compensation.

                    The  gross  salary  and  wages  earned  by an  Employee  for
               services  rendered to an Employer plus any other  remuneration so
               earned as the Committee shall determine.

               2.1.7. Effective Date.

                    The date the Plan is  approved  by the  shareholders  of the
               Company which must occur within one year before or after approval
               by the Board.  Any  Offerings  made prior to the  approval by the
               shareholders  of the  Company  and  Options  granted  under  such
               Offerings shall be void if such approval is not obtained.

               2.1.8. Employee.

                    A person employed by the Employer.

               2.1.9. Eligible Employee.

                    With respect to each  Offering,  an Employee who is eligible
               to be  granted  an  Option  under  the  terms  of such  Offering.
               Notwithstanding the foregoing,  with respect to any Offering, all
               Employees must be Eligible  Employees except Employees who may be
               excluded under Section  423(b)(4) of the Code. The  determination
               of whether an Employee is an Eligible  Employee  shall be made as
               of each Entry Date.  For purposes of  determining  an  Employee's
               eligibility under the Plan, the Committee shall have the right to
               determine  that  employment for an entity which is acquired by an
               Employer  or  whose   assets  are  acquired  by  an  Employer  is
               employment by the Employer.

               2.1.10. Employer.

                    With  respect to each  Offering,  the Company and all of its
               Parents  and  Subsidiaries  whose  Employees  are  eligible to be
               granted Options to purchase Common Stock in such Offering.

               2.1.11. Entry Date.

                    Each date that an Eligible Employee may become a Participant
               in the Plan.

               2.1.12. Exercise Date.

                    Each date on which an Option is exercised.


                                       2
<PAGE>


               2.1.13. Fair Market Value.

                    The closing price of Shares on the NASDAQ on a given date or
               in the absence of sales on a given date, the closing price on the
               NASDAQ  on the last day on  which a sale  occurred  prior to such
               date.

               2.1.14. Offering.

                    An  offering  consisting  of grants of Options  to  purchase
               Shares under the Plan.

               2.1.15. Offering Date.

                    Each date selected by the Committee for the initial granting
               of Options to purchase Shares in an Offering.

               2.1.16. Offering Period.

                    With respect to each Offering,  the period  beginning on the
               Offering Date and ending on the Termination Date.

               2.1.17. Option.

                    An option granted under the Plan to purchase Shares.

               2.1.18. Parent.

                    Any corporation  (other than the Company or a Subsidiary) in
               an unbroken chain of corporations ending with the Company, if, at
               the time of the  grant  of an  Option,  each of the  corporations
               (other than the Company) owns stock possessing 50% or more of the
               total combined voting power of all classes of stock in one of the
               other corporations in such chain.

               2.1.19. Participant.

                    An Eligible  Employee who has elected to  participate in the
               Plan.

               2.1.20. Plan.

                    The Applied  Cellular  Technology,  Inc. 1999 Employee Stock
               Purchase Plan and all amendments and supplements to it.

               2.1.21. Share.

                    A share of Common Stock.

 
                                      3
<PAGE>


               2.1.22. Subsidiary.

                    Any  corporation,  other than the  Company,  in an  unbroken
               chain of corporations  beginning with the Company if, at the time
               of grant of an Option,  each of the corporations,  other than the
               last corporation in the unbroken chain, owns stock possessing 50%
               or more of the total  combined  voting  power of all  classes  of
               stock in one of the other corporations in such chain.

               2.1.23. Termination Date.

                    The date on which an Offering expires.

     2.2. Other Definitions.

          In addition to the above  definitions,  certain words and phrases used
     in the Plan and in any  Offering  may be defined in other  portions  of the
     Plan or in such Offering.

3. SHARES TO BE OFFERED.

     3.1. Number of Shares.

          The number of Shares for which  Options may be granted  under the Plan
     shall be 1,500,000, plus an annual increase,  effective as of the first day
     of each calendar year,  commencing with 2000,  equal to 5% of the number of
     outstanding  Shares as of the first day of such  calendar  year,  but in no
     event  more than  3,000,000  Shares in the  aggregate.  Such  Shares may be
     authorized but unissued Shares, Shares held in the treasury, or both.

     3.2. Reusage.

          If an Option expires or is terminated, surrendered or canceled without
     having been fully  exercised,  the Shares covered by such Option which were
     not purchased shall again be available for use under the Plan.

     3.3. Adjustments.

          If there is any change in the Common Stock of the Company by reason of
     any stock dividend, spin-off, split-up, spin-out, recapitalization, merger,
     consolidation,  reorganization,  combination  or  exchange  of  shares,  or
     otherwise,  the class of stock and number of shares of such class available
     for Options,  the class of stock and maximum number of shares of such class
     that may be purchased  in the current  Offering  Period,  and the price per
     share, as applicable, shall be appropriately adjusted by the Committee.

                                       4
<PAGE>

4. ADMINISTRATION.

     4.1. Committee.

          The Plan shall be administered  by the Committee.  The Committee shall
     consist of the Board,  unless the Board appoints a Committee of two or more
     but less than all of the  Board.  If the  Committee  does not  include  the
     entire Board,  it shall serve at the pleasure of the Board,  which may from
     time to  time  appoint  members  in  substitution  for  members  previously
     appointed  and  fill  vacancies,  however  caused,  in the  Committee.  The
     Committee  may select one of its members as its Chairman and shall hold its
     meetings  at such times and places as it may  determine.  A majority of its
     members shall constitute a quorum. All determinations of the Committee made
     at a meeting  at which a quorum is present  shall be made by a majority  of
     its members present at the meeting.  Any decision or determination  reduced
     to  writing  and  signed by a  majority  of the  members  shall be fully as
     effective  as if it had been  made by a  majority  vote at a  meeting  duly
     called and held.

     4.2. Authority.

          Subject to the terms of the Plan,  the  Committee  shall have complete
     authority to:

               (a) determine the terms and  conditions of, and the Employers and
          the  Eligible  Employees   under,   each   Offering,  as  described in
          Section 6;

               (b) interpret and construe the Plan;

               (c) prescribe,  amend and rescind rules and regulations  relating
          to the Plan;

               (d) maintain accounts, records and ledgers relating to Options;

               (e) maintain  records  concerning its decisions and  proceedings;

               (f) determine all questions relating to Options under the Plan;

               (g) employ  agents,  attorneys,  accountants or other persons for
          such purposes as the Committee considers necessary or desirable; and

               (h) do and  perform  all  acts  which it may  deem  necessary  or
          appropriate  for the  administration  of the  Plan and  carry  out the
          purposes of the Plan.

     4.3. Determination.

          All determinations of the Committee shall be final.

     4.4. Delegation.

          The Committee may delegate all or any part of its authority  under the
     Plan to any Employee, Employees or committee.


                                       5
<PAGE>


5. AMENDMENT AND TERMINATION.

     5.1. Power of Board.

          Except as  hereinafter  provided,  the Board shall have the sole right
     and power to amend the Plan at any time and from time to time.

     5.2. Limitation.

          The Board may not amend the Plan, without approval of the shareholders
     of the Company:

               (a) in a manner  which  would  cause the Plan to fail to meet the
          requirements of Section 423 of the Code; or

               (b)  in  a  manner  which  would   violate   applicable   law  or
          administrative regulation or rule.

     5.3. Term.

          The Plan shall commence as of the Effective  Date and,  subject to the
     terms of the Plan including those requiring approval by the shareholders of
     the Company, shall continue in full force and effect until terminated.

     5.4. Termination.

          The Plan may be  terminated  at any time by the Board.  The Plan shall
     automatically terminate when all of the Shares available for purchase under
     the Plan have been sold. Upon  termination of the Plan, and the exercise or
     lapse  of  all  outstanding   Options,   any  balances  remaining  in  each
     Participant's stock purchase account shall be refunded to him.

     5.5. Effect.

          The amendment or  termination  of the Plan shall not adversely  affect
     any Options granted prior to such amendment or termination.

6. OFFERINGS.

     6.1. Offerings.

          There may be one or more Offerings  under the Plan,  which shall occur
     at such time or times, if any, as the Committee shall determine.  Offerings
     may run concurrently and/or consecutively.  Except as otherwise provided in
     an Offering, all capitalized terms used in the Offering shall have the same
     meaning  as in the Plan,  and the  Offering  shall be subject to all of the
     terms and conditions of the Plan.


                                       6
<PAGE>


     6.2. Terms of Offering.

          At the time each Offering is made, the Committee will determine all of
     the terms and conditions of the Offering,  which terms and conditions shall
     include, but not be limited to, the following:

               (a) The number of Shares to be  offered,  which in no event shall
          exceed  the  maximum  number  of  Shares  then  available   under  the
          provisions of Section 3.

               (b) The  Offering  Period,  which in no event  shall  exceed  the
          maximum period permitted under Section 423 of the Code.

               (c) The price per Share for which  Common  Stock  will be sold to
          Participants
         who exercise  Options,  which price shall not be less than the lower of
         the following:

                    (i) 85% of the Fair Market  Value on the date upon which the
               Option was granted; or

                    (ii) 85% of the Fair Market Value on the Exercise  Date upon
               which the Option is exercised.

               Notwithstanding  the  foregoing,  in no event shall the price per
          Share be less than the par value.

               (d) The  Employers  and  Eligible  Employees  with respect to the
          Offering.  All  Eligible  Employees on an Entry Date shall be eligible
          with respect to the Options to be granted on such Entry Date. However,
          no Employee shall be granted an Option:

                    (i) if, immediately after the grant, such Employee would own
               (within  the  meaning of  Section  423(b)(3)  of the Code)  stock
               possessing 5% or more of the total combined voting power or value
               of all  classes  of  stock of the  Company  or of any  Parent  or
               Subsidiary; or

                    (ii) which  permits his rights to  purchase  stock under all
               employees  stock  purchase plans (as defined in Section 423(b) of
               the Code) of the  Company and its  Parents  and  Subsidiaries  to
               accrue at a rate which  exceeds  $25,000 of fair market  value of
               such stock, determined as of the time such Option is granted, for
               each  calendar  year in  which  such  Option  is  outstanding  at
               anytime.

               (e) The number of Entry Dates and the date of each Entry Date.

               (f) The number of  Exercise  Dates and the date of each  Exercise
          Date.

               (g) The maximum  number of Shares,  if any, that may be purchased
          in the Offering Period by a Participant.

 
                                      7
<PAGE>

               (h) The maximum number of Shares,  if any, which may be purchased
          in an
         Offering Period by a Participant as a percentage of his Compensation.

               (i)  Whether  or  not  interest  will  be  paid  on  balances  in
          Participant's stock purchase accounts, and, if interest is to be paid,
          the rate of interest or method of  determining  the rate of  interest,
          and whether  interest is to be used to purchase  Shares or paid to the
          Participant.

7. GRANTS, PARTICIPATION AND WITHDRAWAL.

     7.1. Grant of Options.

               On  an  Entry  Date,  each  Eligible  Employee,  who  shall  have
          indicated his desire to participate in the Plan  commencing  with such
          Entry Date by executing and  delivering to the Company an agreement in
          the form  approved by the  Committee  ("Participation  Agreement")  in
          accordance  with the  provisions of the Offering,  shall be granted an
          Option to purchase Shares under the Plan.

     7.2. Options Not Transferable.

          Each option  shall not be  transferable  by the grantee  other than by
     will  or  under  the  laws  of  descent  and   distribution  and  shall  be
     exercisable, during his lifetime, only by him.

     7.3. Election to Participate.

          An Eligible  Employee who wishes to  participate  in the Plan as of an
     Entry Date must deliver his executed Participation Agreement to the Company
     no later than required by the Committee.

     7.4. Method of Payment and Stock Purchase Accounts.

          Payment for Shares shall be made through  payroll  deductions from the
     Participant's   Compensation,   such  deductions  to  be  authorized  by  a
     Participant in the Participation Agreement, by separate cash payments which
     may be  made by a  Participant  from  time to  time,  if  permitted  by the
     Committee,  and if permitted,  in accordance with rules and limitations set
     by the  Committee,  and, with the consent of the  Committee,  and upon such
     terms as it shall  require,  in Shares which shall be valued at Fair Market
     Value on the Exercise Date. A stock purchase account shall be set up on the
     books of the  Company  in the name of each  Participant.  The amount of all
     payroll deductions,  separate cash payments,  and tender of Shares shall be
     credited to the respective  stock purchase  accounts of the Participants on
     the Company's books. The funds deducted and withheld by the Company through
     payroll  deductions,  the funds  received by the Company from separate cash
     payments,  and the  tendered  Shares  may be used  by the  Company  for any
     corporate purposes as the Board shall determine,  and the Company shall not
     be obligated to segregate said funds or Shares in any way.

                                       8
<PAGE>


     7.5. Withdrawal from the Plan.

          A Participant  may not withdraw from the Plan unless  permitted by the
     Committee and, if so permitted, only at such times and upon such conditions
     as the Committee shall determine.

8. PURCHASE OF STOCK.

     8.1. Exercise of Option.

          Unless a Participant shall have withdrawn from the Plan as provided in
     Section 7.5, is Option to purchase Shares will be  automatically  exercised
     for him on each  Exercise  Date for the  number  of full  Shares  which the
     accumulated  payroll  deductions,  separate  cash  payments  (plus,  if  so
     permitted  by the  Committee  pursuant  to  paragraph  (i) of Section  6.2,
     interest on such cash  deductions  and payments) and tendered  Shares as of
     the Exercise Date will purchase at the applicable Option price,  subject to
     the  limitations  set forth in the Plan and the  Offering  and  subject  to
     allotment  in  accordance  with  Section  8.2.  Any balance  remaining in a
     Participant's  stock purchase  account after the exercise of an Option will
     remain in such account  unless the Offering is over, in which event it will
     be refunded to such Participant.

     8.2. Allotment of Shares.

          In the event that,  on any  Exercise  Date,  the  aggregate  funds and
     Shares available for the purchase of Shares,  pursuant to the provisions of
     Section 8.1,  would  purchase a greater number of Shares than the number of
     Shares then  available for purchase  under the Plan on such Exercise  Date,
     the Company  shall  issue to each  Participant,  on a pro rata basis,  such
     number of Shares as,  when  taken  together  with the Shares  issued to all
     other Participants,  will result in the issuance of Shares totaling no more
     than the number of Shares then  remaining  available for issuance under the
     Plan on such Exercise  Date.  If, after such  allotment,  all of the Shares
     under  an  Offering  have  been  purchased,  any  balance  remaining  in  a
     Participant's stock purchase account shall be refunded to such Participant.

     8.3. Rights on Retirement, Death or Termination of Employment.

          In the event of a  Participant's  retirement,  death or termination of
     employment,  no payroll  deduction shall be taken from any Compensation due
     and owing to him at such time,  and the amount in the  Participant's  stock
     purchase  account  shall be  applied  as of the next  Exercise  Date in the
     manner set forth in Section 8.1, as if the retirement, death or termination
     of employment had not occurred, unless the former Employee or, in the event
     of his death,  the person or persons to whom his rights pass by will or the
     laws of the  descent  and  distribution  (including  his estate  during the
     period of  administration)  requests in writing  prior to the Exercise Date
     that such amount be refunded;  provided, however, if the retirement,  death
     or  termination  of  employment  occurs more than three months prior to the
     next  Exercise  Date,  such amount  shall  automatically  be  refunded.  An
     Employee of a Subsidiary  or a Parent which ceases to be a Subsidiary  or a
     Parent shall be deemed to have  terminated  his  employment for purposes of
     this Section 8.3 as of the date such corporation  ceases to be a Subsidiary

                                       9
<PAGE>

     or a Parent,  as the case may be,  unless,  as of such date,  the  Employee
     shall become an Employee of the Company or any Subsidiary or Parent.

     8.4. Delivery of Stock.

          Certificates for Shares purchased will be issued and delivered as soon
     as practicable,  which certificates shall be registered only in the name of
     the Participant,  or, if he so indicates on his Participation  Agreement in
     his name and that of his spouse as tenants  by the  entirety  with right of
     survivorship  or in his name and that of  another  person as joint  tenants
     with  right  of  survivorship.  None  of  the  rights  or  privileges  of a
     shareholder  of the Company  shall exist with  respect to Shares  purchased
     under the Plan until the certificates representing such Shares as issued.

9. MISCELLANEOUS PROVISIONS.

     9.1. Underscored References.

          The underscored references contained in the Plan are included only for
     convenience,  and they shall not be  construed  as a part of the Plan or in
     any respect affecting or modifying its provisions.

     9.2. Number  and  Gender.  The  masculine  and neuter, wherever used in the
     Plan, shall refer to either the masculine,  neuter or feminine; and, unless
     the context otherwise  requires,  the singular shall include the plural and
     the plural the singular.

     9.3. Governing Law.

          This Plan shall be construed and  administered  in accordance with the
     laws of the State of Missouri.

     9.4. Purchase for Investment.

          The Committee may require each person purchasing Shares pursuant to an
     Option to  represent  to and agree with the  Company  in writing  that such
     person  is  acquiring  the  Shares  for  investment  and  without a view to
     distribution or resale.  The  certificates  for such shares may include any
     legend which the Committee deems appropriate to reflect any restrictions on
     transfer.  All  certificates  for Shares  delivered under the Plan shall be
     subject  to such  stock  transfer  orders  and  other  restrictions  as the
     Committee  may  deem  advisable  under  all  applicable  laws,  rules,  and
     regulations,  and the  Committee may cause a legend or legends to be put on
     any such certificates to make appropriate references to such restrictions.

                                       10
<PAGE>


     9.5. Restricted Shares.

          Shares  purchased  under  the  Plan  may  be  subject  to  restrictive
     agreements  between  an  Employer  and a  Participant.  In such  case,  the
     Employer  shall  have the  right to  include a legend  reflecting  any such
     restriction on any certificate for such Shares.

     9.6. No Employment Contract.

          The  adoption of the Plan shall not confer upon any Employee any right
     to continued employment nor shall it interfere in any way with the right of
     the Company,  a Parent or Subsidiary to terminate the  employment of any of
     its employees at any time.

     9.7. Offset.

          In the event that any  Participant  wrongfully  appropriates  funds or
     other  property  of an  Employer  and  thereby  becomes  indebted  to  such
     Employer,  any funds or Shares in his stock purchase account may be applied
     against and used to satisfy such indebtedness.

     9.8. No Effect on Other Benefits.

          The  grant of  Options  under  the Plan  shall  have no  effect on any
     benefits to which a Participant  may be entitled  from the Employer,  under
     another plan or  otherwise,  or preclude a Participant  from  receiving any
     such benefits.













                                       11



<PAGE>

                      THIS PROXY IS SOLICITED ON BEHALF OF
                            THE BOARD OF DIRECTORS OF
                        APPLIED CELLULAR TECHNOLOGY, INC.


Richard J. Sullivan and Garrett A. Sullivan,  and each of them, are appointed by
the undersigned as proxies,  each with power of  substitution,  to represent and
vote the shares of stock of Applied  Cellular  Technology,  Inc. (the "Company")
which  the  undersigned  would be  entitled  to vote at the  Annual  Meeting  of
Shareholders of the Company to be held on June 5, 1999 and at any  postponements
or  adjournments  thereof (the  "Annual  Meeting")  as if the  undersigned  were
present and voting at the meeting.

     1. Election of Directors

     Note: Unless otherwise indicated, the shares represented by this proxy will
be voted FOR each nominee named below.

     NOMINEES:

Daniel E. Penni, Angela M. Sullivan and Constance K. Weaver

     FOR all nominees (except as written on the line below)                [   ]

     WITHHOLD AUTHORITY TO VOTE for all nominees listed above              [   ]

(INSTRUCTIONS:  To withhold authority to vote for any individual  nominees write
the nominees' names on the line below.)

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

     2. Ratification of  PricewaterhouseCoopers  LLP as independent  auditors of
the Company for the 1999 fiscal year.

     FOR    [   ]              AGAINST   [   ]            ABSTAIN    [   ]

     3. Approval to change the Company's name to Applied Digital Solutions, Inc.
and to amend any and all documents,  agreements and  instruments to reflect such
name change.

     FOR    [   ]              AGAINST   [   ]            ABSTAIN    [   ]

     4. Approval of a further  amendment and second  restatement of the articles
of incorporation of the Company.

     FOR    [   ]              AGAINST   [   ]            ABSTAIN    [   ]

     5. Approval and adoption of the Company's 1999 Flexible Stock Plan.

     FOR    [   ]              AGAINST   [   ]            ABSTAIN    [   ]

     6. Approval and adoption of the Company's  1999  Employees  Stock  Purchase
Plan.

     FOR    [   ]              AGAINST   [   ]            ABSTAIN    [   ]

     7. Ratification   of  the  options   granted  under  the  Company's    1996
Non-Qualified Stock Option Plan since the 1997 Annual Meeting.

     FOR    [   ]              AGAINST   [   ]            ABSTAIN    [   ]

     8. In their discretion, on any other business that may properly come before
the Meeting.


THE SHARES  REPRESENTED  HEREBY WILL BE VOTED IN ACCORDANCE  WITH THE DIRECTIONS
SET FORTH ABOVE AND,  WHERE NO DIRECTIONS  ARE GIVEN,  SUCH SHARES WILL BE VOTED
FOR THE  NOMINEES  FOR DIRECTOR  NAMED ABOVE AND FOR EACH  PROPOSAL  REFERRED TO
ABOVE. 

Dated _______________, 1999

                                                    ----------------------------
                                                    Signature

                                                    ----------------------------
                                                    Signature

Please sign, date and return this proxy in the enclosed  envelope.  Joint Owners
should  each  sign this  proxy.  Attorneys-in-fact,  executors,  administrators,
trustees, guardians or corporation officers should give their full title.





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