EPICEDGE INC
8-K, EX-99, 2000-10-16
COMPUTER INTEGRATED SYSTEMS DESIGN
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                            STOCK PURCHASE AGREEMENT

                            DATED SEPTEMBER __, 2000

                                      AMONG

                                 EPICEDGE, INC.,
                    (f/k/a Design Automation Services, Inc.)
                    EDGEWATER PRIVATE EQUITY FUND III, L.P.,

                                       AND

                            FLECK T.I.M.E. FUND, L.P.
















<PAGE>

<TABLE>
<CAPTION>


                                                 TABLE OF CONTENTS

                                                                                                               Page
<S>               <C>                                                                                            <C>
Section 1.        Definitions.....................................................................................1
         1.1      Certain Definitions.............................................................................1

Section 2.        Purchase of Investor Common Stock; Closing......................................................5
         2.1      Purchase and Sale of the Investor Common Stock at the Closing...................................5
         2.2      Use of Purchase Price...........................................................................6
         2.3      The Closing.....................................................................................6

Section 3.        Representations and Warranties..................................................................6
         3.1      Organization and Qualification..................................................................6
         3.2      Corporate Power.................................................................................6
         3.3      Subsidiaries and Investments....................................................................7
         3.4      Authorization, Governmental Approvals...........................................................7
         3.5      Capital Stock...................................................................................7
         3.6      Conflict with Other Instruments.................................................................7
         3.7      Validity and Binding Effect.....................................................................7
         3.8      Capitalization..................................................................................8
         3.9      Compliance with Instruments.....................................................................8
         3.10     Brokerage.......................................................................................8
         3.11     Litigation......................................................................................8
         3.12     Employee Benefit Plans..........................................................................9
         3.13     Reserved.......................................................................................10
         3.14     Compliance with Laws; Certain Operations.......................................................10
         3.15     Financial Statements...........................................................................10
         3.16     Absence of Undisclosed Liabilities.............................................................11
         3.17     Assets.........................................................................................11
         3.18     Tax Matters....................................................................................11
         3.19     Absence of Material Adverse Change.............................................................11
         3.20     Absence of Certain Developments................................................................12
         3.21     Contracts......................................................................................13
         3.22     Proprietary Rights.............................................................................13
         3.23     Insurance......................................................................................15
         3.24     Year 2000 Compliance...........................................................................15
         3.25     Disclosure Schedule............................................................................15
         3.26     Extent of Offering.............................................................................15
         3.27     Reserved.......................................................................................15
         3.28     Registration Rights............................................................................16
         3.29     Illegal Payments...............................................................................16
         3.30     Related Party Transactions.....................................................................16


                                                         i


<PAGE>



         3.31     Disclosure.....................................................................................16

Section 4.        Conditions Precedent...........................................................................17
         4.1      Conditions Precedent...........................................................................17

Section 5.        Covenants......................................................................................18
         5.1      Affirmative Covenants..........................................................................18
         5.2      Reporting Requirements.........................................................................19
         5.3      Negative Covenants.............................................................................21
         5.4      Reserved.......................................................................................22
         5.5      Reserved.......................................................................................22
         5.6      Investor Covenants.............................................................................22

Section 6.        Events of Default..............................................................................23
         6.1      Events of Default..............................................................................23
         6.2      Remedies on Default............................................................................24
         6.3      Reserved.......................................................................................25

Section 7.        Miscellaneous..................................................................................27
         7.1      Investor's Investment Representations..........................................................27
         7.2      Benefit of Agreement, Assignment...............................................................27
         7.3      Right to Conduct Activities....................................................................28
         7.4      Notices........................................................................................28
         7.5      Choice of Law..................................................................................29
         7.6      Entire Agreement...............................................................................29
         7.7      No Implied Waivers; Cumulative Remedies; Writing Required......................................29
         7.8      Reimbursement of Expenses......................................................................30
         7.9      Survival.......................................................................................30
         7.10     Waivers of the Company/Personal Jurisdiction...................................................30
         7.11     Herein, etc....................................................................................31
         7.12     Severability...................................................................................31
         7.13     Headings.......................................................................................31
         7.14     Counterparts...................................................................................31


</TABLE>


                                                        ii


<PAGE>



                                 EPICEDGE, INC.

                            STOCK PURCHASE AGREEMENT
                            ------------------------

     THIS STOCK PURCHASE  AGREEMENT  (this  "Agreement") is made as of September
__, 2000, among EpicEdge,  Inc. (f/k/a Design Automation Systems, Inc.), a Texas
corporation (the "Company"), Edgewater Private Equity Fund III, L.P., a Delaware
limited partnership  ("Edgewater"),  and Fleck T.I.M.E.  Fund, LP, a Connecticut
limited  partnership  ("TIME").  Edgewater and TIME are  sometimes  collectively
referred to herein as the "Investors" and individually as an "Investor".


     The parties hereto agree as follows:

     Section 1. Definitions.

     1.1 Certain  Definitions.  In addition to other terms defined  elsewhere in
this Agreement, the following terms shall have the meanings set forth below:

                  "Affiliate"  means  as to any  Person  (a)  any  Person  which
directly,  or  indirectly  through  one or  more  intermediaries,  controls,  is
controlled by, or is under common  control with such Person;  (b) any Person who
is a director or officer (i) of such Person,  or (ii) of any Person described in
clause (a) above;  or (c) any  Person  who is related to a Person  described  in
clauses (a) or (b) above by blood or marriage.  For purposes of this definition,
"control" shall include the ownership of 20% or more of the voting securities of
such Person.

                  "AMEX" means the American Stock Exchange.

                  "Articles" means the Articles of Incorporation of the Company,
as may be amended or restated from time to time.

                  "Capitalized  Lease" means a lease under which the obligations
of the lessee would, in accordance with GAAP consistently  applied,  be included
in  determining  total  liabilities  as shown on the liability side of a balance
sheet of the lessee.

                  "Code"  shall  mean the  Internal  Revenue  Code of  1986,  as
amended,  and the rules and regulations of any governmental agency or authority,
as from time to time in effect, promulgated thereunder.

                  "Common  Stock" means the  Company's  common  stock,  $.01 par
value per share, which is the publicly-traded class of capital stock on AMEX.


                                        1


<PAGE>



                  "Contingent  Obligations,"  as  applied to any  Person,  shall
mean,  without  duplication,  any direct or indirect  liability,  contingent  or
otherwise, of that Person (a) with respect to any Indebtedness,  lease, dividend
or other  obligation of another if the primary  purpose or intent thereof by the
Person  incurring  the  Contingent  Obligation  is to provide  assurance  to the
obligee of such  obligation  of another that such  obligation of another will be
paid or  discharged,  or that any agreements  relating  thereto will be complied
with, or that the holders of such  obligation  will be protected (in whole or in
part) against loss in respect  thereof,  (b) with respect to the Indebtedness of
any  partnership  or joint  venture of which  such  Person is a partner or joint
venturer or (c) with  respect to any letter of credit  issued for the account of
that Person or as to which that Person is otherwise liable for  reimbursement of
drawings.  Contingent  Obligations  shall  include  (i) the  direct or  indirect
guaranty,  endorsement  (other than for  collection  or deposit in the  ordinary
course of business), co-making, discounting with recourse, or sale with recourse
by such  Person of the  obligation  of another  and (ii) any  liability  of such
Person for the  obligations  of another  through any  agreement  (contingent  or
otherwise) (x) to purchase,  repurchase or otherwise  acquire such obligation or
any security therefor,  or to provide funds for the payment or discharge of such
obligation  (whether in the form of loans,  advances,  stock purchases,  capital
contributions  or otherwise),  (y) to maintain the solvency or any balance sheet
item,  level  of  income  or  financial  condition  of  another  or (z) to  make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement.  The amount of any Contingent Obligation
shall be equal to the amount of the  obligation  to the extent so  guaranteed or
otherwise supported.

                  "Disclosure  Schedule"  shall  mean  the  Disclosure  Schedule
attached as Exhibit A hereto and made a part hereof.

                  "Employee  Benefit Plan" shall mean any employee  benefit plan
as defined in Section  3(3) of ERISA,  whether or not  terminated,  to which the
Company or any of its Affiliates (other than individual Affiliates) contributes,
has an obligation to contribute or with respect to which any such Person has any
actual or potential liability.

                  "ERISA" shall mean the Employee Retirement Income Security Act
of 1974,  as the same may be  amended  from  time to  time,  and the  rules  and
regulations  of any  governmental  agency or authority,  as from time to time in
effect, promulgated thereunder.

                  "ERISA  Affiliate"  as applied to any  Person,  shall mean any
trade or business (whether or not incorporated)  which is a member of a group of
which  that  Person is a member  and which is under  common  control  within the
meaning of Section 414 of the Code and the  regulations  promulgated and rulings
issued thereunder.

                  "Events  of  Default"  shall  have the  meaning  specified  in
Section 6.1 of this Agreement.

                  "Financial  Statements"  shall have the meaning  specified  in
Section 3.15 of this Agreement.


                                        2


<PAGE>



                  "Fiscal Year" shall  mean the  twelve (12) month period ending
on December 31 of each calendar year.

                  "GAAP" shall mean generally  accepted  accounting  principles,
consistently applied.

                  "Including  (or  includes)"  and words to the same or  similar
effect shall be interpreted and construed to mean including  without  limitation
(or includes without limitation).

                  "Indebtedness"   means   at   a   particular   time,   without
duplication,  (i) any  indebtedness for borrowed money or issued in substitution
for or  exchange of  indebtedness  for  borrowed  money,  (ii) any  indebtedness
evidenced  by any  note,  bond,  debenture  or other  debt  security,  (iii) any
indebtedness  for the  deferred  purchase  price of property  or  services  with
respect to which a Person is liable,  contingently  or otherwise,  as obligor or
otherwise (other than trade payables and other current  liabilities  incurred in
the ordinary  course of business that are not more than one hundred twenty (120)
days past due),  (iv) any  Contingent  Obligations,  (v) any  obligations  under
Capitalized  Leases with  respect to which a Person is liable,  contingently  or
otherwise,  as  obligor,  guarantor  or  otherwise,  or with  respect  to  which
obligations  a Person  assures a creditor  against loss,  (vi) any  indebtedness
secured by a Lien on a Person's assets and (vii) any unsatisfied  obligation for
"withdrawal  liability" to a Multiemployer  Plan as such terms are defined under
ERISA.

                  "IRS" means the United States Internal Revenue Service.

                  "Investor Common Stock" shall have the meaning as set forth in
Section 2.1 of this Agreement.

                  "Investor  Representative" means (a) any individual designated
by the Majority Holders, the Lenders (as defined in the Shareholders' Agreement)
or  Edgewater,  as the case may be, as an Investor  Representative  prior to the
election of a representative  designated by the Majority Holders to the Board of
Directors  of the  Company  pursuant  to clause (b) below or at any time no such
representative is a member of the Board of Directors of the Company,  or (b) any
Board Member of the Company  designated by the Majority Holders,  the Lenders or
Edgewater,  as the case may be, as an Investor Representative and elected to the
Board of Directors of the Company pursuant to Section 1.2(a) of the Shareholders
Agreement.

                  "Latest  Balance  Sheet"  shall have the meaning  specified in
Section 3.15 of this Agreement.

                  "Lien" shall mean any security interest,  pledge, bailment (in
the nature of a pledge or for purposes of  security),  mortgage,  deed of trust,
the grant of a power to confess judgment,  conditional sales and title retention
agreement  (including any lease in the nature thereof),  charge,  encumbrance or
other similar  arrangement or interest in real or personal property,  other than
licenses of Proprietary Rights.


                                        3


<PAGE>



                  "Majority Holders" shall mean the holders of a majority of the
shares of Investor Common Stock.

                  "Material Adverse Effect" shall mean a material adverse effect
on the financial condition,  business, operating results,  operations,  business
prospects or property of the Company.

                  "Multiemployer  Plan" has the  meaning  set  forth in  Section
3(37) of ERISA.

                  "Person" shall mean any individual, corporation,  partnership,
company, limited liability company, joint venture,  association,  bank, business
trust or other entity, whether or not legal entities, or any governmental entity
or agency or political subdivision thereof.

                  "Principal  Shareholders"  means  Carl  Rose,  Charles Leaver,
Jeffrey Sexton and Kelly Knake.

                  "Private  Option  Agreement"  means the Stock Option  Purchase
Agreement dated the date hereof among Carl Rose, Edgewater and TIME.

                  "Proprietary   Rights"   shall   mean  all   patents,   patent
applications,  patent  disclosures,  inventions  (whether or not  patentable and
whether  or  not  reduced  to  practice),   and  any  reissues,   continuations,
continuations-in-part,   divisions,   extensions  or   reexaminations   thereof;
trademarks,  service marks,  trade dress,  logos,  trade names,  corporate names
(including  the use of the  current  corporate  name  and  trade  names  and all
translations,  adaptations,  derivations and  combinations of the foregoing) and
the goodwill associated  therewith;  copyrights and copyright works; mask works;
all registrations, applications and renewals for any of the foregoing; all trade
secrets,  confidential  information,  ideas, formulae,  compositions,  know-how,
manufacturing and production processes and techniques,  research and development
information  (including drawings,  specifications,  designs,  plans,  proposals,
technical  data,  financial,  business  and  marketing  plans,  and customer and
supplier lists and related  information);  Software  (including data, data bases
and  documentation);  all other  proprietary  rights;  all copies  and  tangible
embodiments  of the  foregoing  (in  whatever  form or medium);  and all income,
royalties,  damages and payments due or payable  (including damages and payments
for past or future infringements or misappropriation  thereof), the right to sue
and recover for past or future infringements or misappropriation thereof and any
and all corresponding  rights that, now or hereafter,  may be secured throughout
the world.

                  "Registration Agreement" shall mean the Registration Agreement
of even date herewith among the Company and the Investors.

                  "Securities"  shall mean any debt or equity  securities of the
Company or Subsidiary,  whether now or hereafter authorized,  and any instrument
convertible  into  or  exchangeable  for  Securities  or a  Security.  The  term
"Security" shall mean any one of the Securities.


                                        4


<PAGE>



                  "Securities  Act" shall mean the  Securities  Act of 1933,  as
amended from time to time, and any rules or regulations promulgated thereunder.

                  "Shareholders'   Agreement"   shall  mean  the   Shareholders'
Agreement  of even  date  herewith  among the  Company,  the  Investors  and the
Principal Shareholders.

                  "Software" shall mean all software products developed or owned
by the Company as of the date of Closing as  described  in Schedule  3.22 of the
Disclosure Schedule, including all enhancements,  versions, releases and updates
of such products as of Closing,  and any other software  products of the Company
in  development  or in which the  Company has any  interest  as of the  Closing,
regardless of the product's stage of development.

                  "Stock  Purchase"  shall mean any  redemption,  acquisition or
other retirement of capital stock of the Company (including  preferred stock, if
any) or of warrants,  rights or other options to purchase such stock, other than
upon  conversion  thereof  into or  exchange  thereof  for  other  shares of the
Company's  capital  stock  which  is not  preferred  stock  that  is or  will be
redeemable at the option of the holder thereof.

                  "Subsidiary"  of any  Person  shall  mean any other  Person of
which  the  outstanding  capital  stock,  membership  interest  or other  equity
interest  possessing a majority of the voting power in the election of directors
(otherwise  than as the  result of a  default)  is owned or  controlled  by such
corporation directly or indirectly through one or more Subsidiaries.

                  "Tax" or  "Taxes"  shall  mean all  federal,  foreign,  state,
county, local or other taxes, charges,  fees, levies or other assessments of any
nature  whatsoever,   including,   without   limitation,   any  federal  income,
alternative  minimum tax, gross  receipts,  excise,  real or personal  property,
sales,  value-added,   withholding,   social  security,   payroll,   employment,
severance, stamp, documentary, gains, environmental,  retirement,  unemployment,
occupation,  use,  ad  valorem,  service,  net worth,  franchise,  transfer  and
recording  taxes,  imposed  by any  federal,  state,  local  or  foreign  taxing
authority, and shall include all interest,  penalties and additions imposed with
respect to such amounts.

                  "Tax  Returns"  shall mean all returns,  reports,  information
statements  or  other  documents  (including,  without  limitation,   elections,
declarations,   disclosures,  schedules,  estimates,  information,  and  amended
returns)  provided  to or filed or  required to be provided to or filed with any
taxing authority relating to Taxes.

                  "Trade   Secrets"   shall   mean  all   licenses,   processes,
algorithms, formulae, designs, methods, trade secrets, inventories,  proprietary
or technical information, and data covering or embodied in any Software or other
assets owned by the Company or used in the conduct of its business.

                  "Transaction   Documents"  shall  mean  this  Agreement,   the
Shareholders' Agreement, and the Registration Agreement.


                                        5


<PAGE>



         Section 2.        Purchase of Investor Common Stock; Closing.

         2.1 Purchase and Sale of the Investor  Common Stock at the Closing.  At
the Closing (as defined below), the Company shall sell to Investors and, subject
to  the  terms  and   conditions   set  forth  herein,   and  relying  upon  the
representations,  warranties and covenants of the Company set forth herein, each
Investor shall purchase from the Company,  severally and not jointly, the number
of shares  set forth in  Section  2.3  hereof  with  respect  to such  Investor,
representing  in the aggregate  2,000,000  shares (as adjusted for stock splits,
recapitalizations  and the  like)  of  Common  Stock  at $1.00  per  share  (the
"Investor Common Stock"), for an aggregate purchase price of Two Million Dollars
($2,000,000) (the "Purchase Price").

         2.2 Use of  Purchase  Price.  The  Purchase  Price shall be used by the
Company solely for working capital requirements, and not to reduce the principal
portion of any  Indebtedness  or to make any  payments  to any  shareholders  or
Affiliates of the Company.

         2.3 The  Closing.  The closing of the purchase and sale of the Investor
Common Stock shall take place on the date of execution  of this  Agreement  (the
"Closing").  At the Closing,  the Company shall  deliver to each Investor  stock
certificate(s) and other applicable  instruments  evidencing the Investor Common
Stock to be purchased by each  Investor,  issued in the name of each  applicable
Investor,  upon  payment  of the  Purchase  Price  therefor  by a  cashier's  or
certified  check,  or by wire  transfer of  immediately  available  funds to the
Company's  account in the aggregate amount of Two Million Dollars  ($2,000,000).
The stock  certificates  shall bear a legend as  provided  in the  Shareholders'
Agreement.  The  Investor  Common  Stock  to be  purchased  hereunder  shall  be
allocated  among the  Investors  as follows:  (a) One Million Two Hundred  Fifty
Thousand  (1,250,000)  shares to  Edgewater  for One Million  Two Hundred  Fifty
Thousand Dollars  ($1,250,000);  and (b) Seven Hundred Fifty Thousand  (750,000)
shares to TIME for Seven Hundred Fifty Thousand Dollars ($750,000).

         Section 3.        Representations and Warranties.

         The Company hereby makes the following  representations  and warranties
which shall  survive  the  execution  and  delivery  of this  Agreement  and the
issuance of the Investor  Common Stock hereunder and shall expire as provided in
Section 7.9 hereof.

         3.1 Organization and  Qualification.  The Company is a corporation duly
organized,  validly existing and in good standing under the laws of the State of
Texas. The Company has all licenses, permits and authorizations necessary to own
its  properties  and to carry on its  businesses  as now being  conducted and as
presently  proposed to be  conducted  and is duly  qualified to do business as a
foreign  corporation  in each  state or  country,  if any,  in which  failure to
qualify  would  have a  material  adverse  effect on the  business,  operations,
properties,  financial condition, operating results or business prospects of the
Company.  The Company has provided the Investors with true and correct copies of
the Articles and Bylaws.


                                        6


<PAGE>



         3.2 Corporate Power. The Company has the requisite  corporate power and
authority to execute,  deliver and carry out the  Transaction  Documents and all
other  instruments,  documents and  agreements  contemplated  or required by the
provisions  of any of the  Transaction  Documents to be  executed,  delivered or
carried out by the Company  hereunder.  The Company has all requisite  corporate
power and authority under the laws of its  jurisdiction of  incorporation to own
and operate its  properties  and to carry on its businesses as now conducted and
as presently proposed to be conducted.

         3.3 Subsidiaries  and Investments.  Except as set forth on Schedule 3.3
of the  Disclosure  Schedule,  the  Company  does not own or hold any  rights to
acquire any shares of stock,  membership interest or any security or interest in
any other Person, and the Company has never had a Subsidiary.

         3.4 Authorization,  Governmental Approvals.  The execution and delivery
of this Agreement,  the issuance of the Investor Common Stock, the execution and
delivery of the other Transaction Documents and all other instruments, documents
and agreements  contemplated or required by the provisions  hereof or thereof to
be executed and delivered by the Company and the  consummation by the Company of
the  transactions  herein and  therein  contemplated  to be  consummated  by the
Company have each been duly authorized by all necessary  corporate action on the
part of the Company.  Except for filings  necessary for the sale of the Investor
Common  Stock  to  qualify  for  certain   exemptions   from  the   registration
requirements  under  state  blue  sky  laws  and  federal  securities  laws,  no
authorization,  consent, approval, license or exemption of, and no registration,
qualification,   designation,   declaration   or  filing  with,   any  court  or
governmental department,  commission,  board, bureau, agency or instrumentality,
domestic  or  foreign,  and no  vote,  authorization,  consent  or  approval  of
shareholders of the Company, is or was necessary for (a) the valid execution and
delivery of this  Agreement  by the  Company,  (b) the  execution,  issuance and
delivery of the Investor  Common  Stock,  (c) the  execution and delivery by the
Company of the other Transaction Documents and all other instruments,  documents
and agreements  contemplated or required by the provisions hereof or thereof and
to be executed  and  delivered by the Company,  or (d) the  consummation  by the
Company of the transactions herein and therein contemplated to be consummated by
the Company.

         3.5 Capital Stock. The Investor Common Stock that is being purchased by
Investors  hereunder,  when issued,  sold, and delivered in accordance  with the
terms of this Agreement for the consideration expressed herein, will be duly and
validly  issued,  fully paid,  and  nonassessable,  is not subject to preemptive
rights,  purchase rights or similar rights,  and will be free of restrictions on
transfer other than  restrictions  on transfer  under the  applicable  state and
federal securities laws and pursuant to the Shareholders' Agreement.

         3.6 Conflict  with Other  Instruments.  Except as set forth on Schedule
3.6 of the  Disclosure  Schedule,  neither  the  execution  and  delivery by the
Company of the  Transaction  Documents or the other  instruments,  documents and
agreements  contemplated or required hereby or thereby,  nor the consummation of
the  transactions  herein  or  therein  contemplated  to be  consummated  by the
Company, nor compliance by the Company with the terms, conditions and provisions
hereof


                                        7


<PAGE>



or  thereof,  shall  conflict  with or result  in a breach of any of the  terms,
conditions or  provisions  of the Articles or the Bylaws of the Company,  or any
law or any  regulation,  order,  writ,  injunction  or  decree  of any  court or
governmental instrumentality or any agreement or instrument to which the Company
is a party  or by  which  it or any of its  respective  properties  is  bound or
constitute a default  thereunder  or result in the creation or imposition of any
Lien.

         3.7 Validity and Binding Effect.  The  Transaction  Documents which the
Company  is  required  to  execute  and all  other  instruments  and  agreements
contemplated  hereby or thereby  to which the  Company is a party have been duly
and validly  executed and delivered by the Company and constitute  legal,  valid
and binding obligations of the Company,  and all such obligations of the Company
are enforceable in accordance with their respective terms.

         3.8      Capitalization.

                  (a) The  authorized  capital stock of the Company  consists of
150,000,000 shares of Common Stock, of which at Closing,  __________ shares were
issued and  outstanding,  and 5,000,000  shares of preferred  stock, of which at
Closing no shares  were  issued  and  outstanding.  The  issued and  outstanding
capital  stock  of the  Company  at the  Closing  Date  owned  by the  Principal
Shareholders is set forth on Schedule 3.8 of the Disclosure Schedule. All of the
outstanding  shares of capital  stock of the Company are validly  issued,  fully
paid and  nonassessable and are owned of record or beneficially by the Company's
shareholders. Except as set forth on Schedule 3.8, there are not outstanding any
shares of stock, securities,  rights or options convertible or exchangeable into
or exercisable for any shares of the Company's capital stock, stock appreciation
rights or phantom stock, nor is the Company under any obligation  (contingent or
otherwise) to redeem or otherwise acquire any shares of its capital stock or any
securities,  rights or options to acquire such capital stock, stock appreciation
rights or phantom stock.

                  (b)  There  are  no  statutory  or  contractual   shareholders
preemptive  rights with  respect to any shares of capital  stock of the Company.
The Company has not  violated  and will not  violate any  applicable  federal or
state  securities  laws in  connection  with the offer,  sale or issuance of the
Investor  Common  Stock  and such  issuances,  offers,  or sales do not  require
registration  of the Investor  Common Stock of the Company under the  Securities
Act or any  applicable  state  securities  laws.  Except  for the  Shareholders'
Agreement,  the Registration Agreement and the Private Option Agreement,  to the
Company's knowledge,  there are no agreements between the Company's shareholders
(or any one or more of them)  with  respect  to the  voting or  transfer  of the
Company's  capital  stock or with respect to any other  aspect of the  Company's
affairs.

         3.9 Compliance with Instruments. The Company is not in violation of any
term  of (a) the  Articles  or the  Bylaws  or (b)  any  agreement,  instrument,
contract  or  commitment  to which  it is a party  or by which it may be  bound,
except for such violations of agreements,  instruments, contracts or commitments
which  individually  and in the  aggregate  do not result in a Material  Adverse
Effect.


                                        8


<PAGE>



         3.10 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any  arrangement or agreement  binding upon the Company.
The Company shall pay, and hold Investors harmless against, any liability,  loss
or expense  (including  reasonable  attorneys' fees and out-of-pocket  expenses)
arising in connection with any claim by any Person.

         3.11 Litigation. Except as set forth on Schedule 3.11 of the Disclosure
Schedules,  there  are no  actions,  suits or  proceedings  pending  or,  to the
Company's knowledge, threatened against or affecting the Company or its business
or   assets,   before   any  court  or   governmental   department,   agency  or
instrumentality,   domestic  or  foreign.   The  foregoing   includes,   without
limitation,  any action, suit, proceeding, or investigation pending or currently
threatened  involving the prior  employment  of any of the Company's  employees,
their use in  connection  with the  Company's  business  of any  information  or
techniques  allegedly  proprietary  to  any of  their  former  employers,  their
obligations  under any agreements with prior  employers,  or negotiations by the
Company with potential  backers of, or investors in, the Company or its proposed
business. The Company is not a party to or, to the best of its knowledge,  named
in or  subject  to  any  order,  writ,  injunction,  or  decree  of  any  court,
governmental agency, or instrumentality. There is no action, suit, proceeding or
investigation  by the Company  currently  pending or that the Company  currently
intends to  initiate,  except as set forth on  Schedule  3.11 of the  Disclosure
Schedules.

         3.12 Employee Benefit Plans.  Schedule 3.12 of the Disclosure  Schedule
contains a list of all Employee  Benefit Plans  maintained by Company and/or any
ERISA Affiliate or to which the Company or any ERISA Affiliate contributes or is
or was obligated to contribute.  Each Employee  Benefit Plan that is intended to
be a qualified plan under Section 401(a) of the Code is a standardized prototype
plan that meets the requirements for  qualification  under Section 401(a) of the
Code,  except to the extent that such  requirements may be satisfied by adopting
any  necessary  amendments  issued by the  prototype  plan sponsor  prior to the
current  expiration of the remedial amendment period under Section 401(b) of the
Code.

                  (a) As applicable with respect to each Employee  Benefit Plan,
the Company has delivered to the Investors or made available,  true and complete
copies of (A) each Employee Benefit Plan,  including all amendments thereto, (B)
all trust documents,  investment management contracts,  custodial agreements and
insurance  contracts relating thereto,  (C) the current summary plan description
and each summary of material  modifications  thereto, (D) the most recent annual
report (Form 5500 and all  schedules  thereto)  filed with the Internal  Revenue
Service  ("IRS"),  the most recent IRS  determination  letter and each currently
pending application to the IRS for a determination  letter, and (F) all records,
notices  and  filings   concerning   IRS  or   Department  of  Labor  audits  or
investigations.

                  (b) Except as  set  forth  in  Schedule  3.12  the  Disclosure
Schedule:

                           (1) all accrued  contributions and  other payments to
be made by the  Company or any ERISA  Affiliate  to any  Employee  Benefit  Plan
through the date of the latest balance


                                       9


<PAGE>



sheet  have  been made or  reserves  adequate  therefor  have been set aside and
reflected on the latest balance sheet;

                           (2) neither the  Company nor  any ERISA Affiliate has
any  liability on account of any failure to make  contributions  to any Employee
Benefit  Plan.  The Employee  Benefit  Plans have in all material  respects been
maintained and administered in accordance with the documents  governing them and
the laws and  regulations  applicable to them  (including,  without  limitation,
rules and regulations of the Department of Labor and the IRS under ERISA and the
Code);

                           (3) there  are  no  outstanding  liabilities  of  any
Employee  Benefit  Plan  other  than  liabilities  for  benefits  to be  paid to
participants and beneficiaries in the ordinary course of business;

                           (4) there is  no pending  litigation or,  to the best
knowledge of the Company,  any overtly  threatened  litigation or pending claim,
that involves any of the Employee  Benefit Plans. No prohibited  transaction has
occurred with respect to any Employee Benefit Plan;

                           (5) none of the Employee Benefit Plans is or ever has
been  subject  to Title IV of ERISA or  Section  412 of the  Code.  Neither  the
Company nor any ERISA Affiliate is or ever has been required to contribute to an
Employee Benefit Plan that is a Multiemployer Plan;

                           (6) except to the  extent required by  ERISA, none of
the Employee  Benefit  Plans  provides for (or has ever provided for) medical or
health care or other welfare benefits for any former employee,  officer, member,
manager  or  director  of the  Company or any ERISA  Affiliate  (or any of their
beneficiaries); and

                           (7) the transactions  contemplated by  this Agreement
will not entitle any employee to any  severance  benefit  under the terms of any
Employee  Benefit Plan or any personnel or  employment  policy of the Company or
any ERISA  Affiliate.  None of the Employee Benefit Plans contains any change in
control or other  provisions  which would cause an increase or  acceleration  of
benefits or benefit entitlements to participants or their  beneficiaries,  or an
increase  in  liability  of  the  Company  as  a  result  of  the   transactions
contemplated by this Agreement or any related action thereafter.

         3.13     Reserved.

         3.14  Compliance  with Laws;  Certain  Operations.  The Company and its
officers,  directors,  agents and employees have substantially complied with all
applicable laws and regulations of foreign, federal, state and local governments
and all agencies  thereof  which affect the  business,  operations,  properties,
financial  condition,  operating results or business prospects of the Company in
any material respect, and no claims have been filed against the Company alleging
a violation of, or liability or responsibility under, any such law or regulation
which have not been heretofore settled.


                                       10


<PAGE>



         3.15 Financial  Statements.  The Company has delivered to Investors (a)
the audited  balance  sheets and related  statements of income and cash flows at
and for the  years  ended  December  31,  1998 and 1999,  and (b) the  unaudited
balance sheet (the "Latest Balance Sheet") and related  statements of income and
cash flow at and for the six months ended June 30, 2000.  Each of the  foregoing
financial  statements,  including in all cases the notes thereto  (collectively,
the "Financial Statements"),  is accurate and complete in all material respects,
is consistent  with the books and records of the Company  (which,  in turn,  are
accurate and complete in all material  respects),  fairly presents the financial
condition  of the  Company  as at their  respective  dates  and the  results  of
operations and cash flow for the periods covered thereby,  and has been prepared
in accordance with GAAP, subject to the lack of footnote disclosure and year end
adjustments.

         3.16 Absence of Undisclosed Liabilities.  The Company does not have any
liability (whether accrued,  known to the Company,  whether due or to become due
and regardless of when asserted) arising out of transactions  entered into on or
prior to the date  hereof,  or any  action or  inaction  on or prior to the date
hereof, or any state of facts existing on or prior to the date hereof other than
(a)  liabilities  set forth on the Latest  Balance  Sheet  (including  any notes
thereto)  or (b)  liabilities  which  have  arisen  after the date of the Latest
Balance Sheet in the ordinary  course of business  (none of which is a liability
resulting from breach of contract, breach of warranty, tort, infringement, claim
or lawsuit).

         3.17 Assets.  The Company has good and indefeasible  title to, or has a
valid  leasehold  interest  in,  or has a valid  license  to use,  the  tangible
properties and assets used by it, located on its premises or shown on the Latest
Balance Sheet or acquired  thereafter (except for properties and assets disposed
of in the  ordinary  course of  business  since the date of the  Latest  Balance
Sheet),  free and clear of all Liens,  except for Liens  disclosed on the Latest
Balance Sheet (including any notes thereto) and Liens for current property Taxes
not yet due and payable.  The Company's  tangible  assets are in good  operating
condition,  ordinary wear and tear excepted, and are fit for use in the ordinary
course of business.  The Company owns, or has a valid leasehold  interest in, or
has a valid license to use, all tangible assets necessary for the conduct of its
business as presently conducted and as presently proposed to be conducted.

         3.18 Tax Matters.  The Company has filed all Tax Returns required to be
filed by it and all such Tax  Returns  are  true and  accurate  in all  material
respects. The Company has paid all sales, use, income, payroll, excise and other
Taxes owed by it and  withheld  and paid over all Taxes which it is obligated to
withhold from amounts owing to any employee,  creditor, customer or third party;
to the best knowledge of the Company,  the Company has not waived any statute of
limitations  with  respect  to Taxes or  agreed  to any  extension  of time with
respect to a Tax assessment or deficiency;  and there are no pending  federal or
state Tax  audits  being  conducted  with  respect to the  Company.  To the best
knowledge of the Company,  the Company has never had any Tax deficiency proposed
or  assessed  against  it and has not  executed  any  waiver of any  statute  of
limitations on the assessment or collection of any Tax or  governmental  charge.
Except as set forth on Schedule 3.18, to the best knowledge of the Company, none
of the  Company's  Tax Returns  and none of its state  income or  franchise  Tax
Returns  or sales or use Tax  Returns  has ever  been  audited  by  governmental
authorities. Since the


                                       11


<PAGE>



date of the Financial  Statements,  the Company has made adequate  provisions on
its books of account for all Taxes,  assessments,  and governmental charges with
respect to its business, properties, and operations for such period. The Company
has withheld or collected from each payment to each of its employees, the amount
of all Taxes,  including,  but not limited to,  federal  income  Taxes,  Federal
Insurance Contribution Act Taxes and Federal Unemployment Tax Act Taxes required
to be withheld or collected  therefrom,  and has paid the same to the proper Tax
receiving officers or authorized depositaries.

         3.19 Absence of Material  Adverse Change.  Since the date of the Latest
Balance  Sheet,  there has been no  material  adverse  change  in the  business,
operations,  properties,  financial  condition,  operating  results or  business
prospects of the Company.

         3.20  Absence of Certain Developments.  Except as set forth on Schedule
3.20 of the Disclosure Schedule, since the date of the Latest Balance Sheet, the
Company has not

                  (a)  become  subject  to  any  Indebtedness,   except  current
liabilities  incurred in the ordinary course of business and  liabilities  under
contracts entered into in the ordinary course of business;

                  (b) discharged or satisfied any Lien or paid any Indebtedness,
other than current liabilities paid in the ordinary course of business;

                  (c)  declared or made any payment or  distribution  of cash or
other  property  to its  shareholders  with  respect to its  capital  stock,  or
purchased or redeemed any shares of its capital stock;

                  (d)  mortgaged, pledged  or subjected  to any  Lien any of its
material  assets,  except  Liens  for  current  property  Taxes  not yet due and
payable;

                  (e) sold, assigned or transferred any of its assets, except in
the ordinary  course of business,  or canceled  without fair  consideration  any
debts or claims owing to or held by it;

                  (f) sold,  assigned,  transferred,  abandoned  or permitted to
lapse any licenses or permits or any portion thereof,  or any Proprietary Rights
or other  intangible  assets,  or (except as  necessary  to conduct  its ongoing
operations) disclosed any proprietary confidential information to any Person;

                  (g) made or granted  any bonus or any wage or salary  increase
to any employee (except in the ordinary course of business  consistent with past
practice), former employee or retiree or group of employees, former employees or
retirees  or made or  granted  any  increase  in any  employee  benefit  plan or
arrangement,  or amended or  terminated  any existing  employee  benefit plan or
arrangement or adopted any new employee benefit plan or arrangement;


                                       12


<PAGE>



                  (h) made any capital expenditures or commitments therefor that
aggregate in excess of $1,000,000;

                  (i) made any loans or advances  to any Persons  (other than de
minimis  employee loans or advances not exceeding $5,000 in the aggregate to any
employee);

                  (j) suffered any material  extraordinary losses or  waived any
rights of material  value,  whether or not in the ordinary course of business or
consistent with past practice;

                  (k) entered into any other  material transaction including any
employment agreement;

                  (l) received notice that there has been a loss of, or material
order cancellation by, any customer of the Company;

                  (m) agreed to any change to a material contract arrangement by
which the Company or its assets is bound or subject;

                  (n) suffered any damage,  destruction or loss,  whether or not
covered by insurance materially affecting the business, properties, prospects or
financial condition of the Company;

                  (o) suffered  any other event or  condition  of any  character
that has  materially  and  adversely  affected or, to the best  knowledge of the
Company,  might  materially  and  adversely  affect  the  business,  properties,
prospects or financial condition of the Company; or

                  (p) changed its  accounting principles  or  practices  or  the
method of recording transactions involving accounts receivable and inventory.

         3.21 Contracts.  (a) The Company has in all material respects performed
all the obligations required to be performed by it to the date of this Agreement
and is not in receipt of any written claim of default under any material  lease,
contract, commitment or other agreement to which it is a party; (b) no event has
occurred  which  with the  passage of time or the giving of notice or both would
result in a breach or default under any material lease, contract,  instrument or
other  agreement to which the Company is a party;  (c) to the best  knowledge of
the Company, no contract or commitment material to the Company has been breached
in any  material  respect or  canceled  by the other party since the date of the
Latest  Balance  Sheet;  (d) the Company is not a party to any contract which is
materially adverse to the operations,  financial condition, operating results or
business  prospects  of the Company;  (e) to the best  knowledge of the Company,
since the date of the Latest Balance Sheet, no material customer or supplier has
notified the Company  that it will stop or decrease in any material  respect the
rate of business  done with the Company;  and (f) all material  contracts of the
Company have been provided to the Investors.


                                       13

<PAGE>

         3.22     Proprietary Rights.

                  (a) Schedule 3.22 of the Disclosure Schedule hereto contains a
complete and accurate list as of the date hereof of all patented and  registered
Proprietary  Rights  owned  by the  Company  (including,  but  not  limited  to,
Software,   and  all  pending  patent  applications  and  applications  for  the
registration  of other  Proprietary  Rights  owned  or  filed  by the  Company).
Schedule 3.22 of the  Disclosure  Schedule also contains a complete and accurate
list of all licenses and other rights  granted by the Company to any third party
with respect to the  Proprietary  Rights and material  licenses and other rights
granted by any third party to the Company.  Except as set forth on Schedule 3.22
of the Disclosure Schedule,  (i) the Company owns and possesses all right, title
and  interest in and to, or has a valid and  enforceable  license to use, all of
the  Proprietary  Rights  necessary  for the  operation  of the  business of the
Company as currently conducted or as currently proposed to be conducted; (ii) no
claim  by any  third  party  contesting  the  validity,  enforceability,  use or
ownership of any Proprietary Rights has been made, is currently  outstanding or,
to the best of the Company's  knowledge,  is threatened,  and to the best of the
Company's knowledge,  there are no grounds for any such claim; (iii) the loss or
expiration of any  Proprietary  Right or related group of Proprietary  Rights is
not  threatened,  pending or  reasonably  foreseeable;  (iv) the Company has not
received  any  notices  of,  nor is it  aware  of any  facts  which  indicate  a
likelihood of, any  infringement or  misappropriation  by, or conflict with, any
third party with respect to the Proprietary Rights, nor has the Company received
any claims of  infringement  or  misappropriation  of or other conflict with any
intellectual  property  rights of any third party;  (v) to its  knowledge  after
diligent inquiry,  the Company has not infringed,  misappropriated  or otherwise
conflicted with any intellectual property rights of any third parties, nor is it
aware of any  infringement,  misappropriation  or conflict which will occur as a
result of the  continued  operation  of the business of the Company as currently
conducted or as  currently  proposed to be  conducted;  and (vi) the Company has
made all necessary  filings and  recordations and has paid all required fees and
Taxes to record  and  maintain  its  ownership  of the  patented  or  registered
Proprietary  Rights in the United  States  Patent and  Trademark  Office and the
United States Copyright Office.

                  (b) (i) The Company has good, sole and marketable title to all
copyrights  in and to the  Software  free  and  clear  of any  Liens,  and  such
copyrights are not being challenged in any way; and (ii) no person or entity has
any right of renewal,  reversion,  or termination with respect to any copyrights
owned by the Company or any rights under any such copyrights.

                  (c) All of the Trade  Secrets are  embodied in the Software or
other assets owned by the Company  (other than general  business  knowledge  not
typically reduced to a written form), and there is no other tangible  expression
of the Trade  Secrets  by the  Company.  The  Company  has taken all  reasonable
security measures to protect the secrecy, confidentiality,  and the value of the
Trade  Secrets,  and any  other  persons  who have  knowledge  of or  access  to
information  relating  to the Trade  Secrets  have been put on  notice  and,  if
appropriate, have entered into agreements that the Trade Secrets are proprietary
to the Company and are not to be divulged or misused.  All of the Trade  Secrets
are presently valid and protectable,  are not part of the public domain, and, to
the knowledge of the Company,  have not been used, divulged, or appropriated for
the benefit of any Persons  other than the  Company or to the  detriment  of the
Company.


                                       14


<PAGE>



                  (d) All authors of the  Software or any other Person or entity
who  participated  in the  development of the Software or any portion thereof or
performed any work related to the Software are  collectively  referred to as the
"Software  Authors".  Each Software  Author (with the  exception of  independent
contractors)  made  his  contribution  to  the  Software  within  the  scope  of
employment  with the  Company,  as a "work made for hire," and was  directed  or
engaged  by the  Company  (as the  case  may be) to  work on the  Software.  The
Software  Authors who are  independent  contractors  have  assigned all of their
respective  right,  title and  interest in and to the  Software to the  Company.
Except as set forth on Schedule 3.22 of the  Disclosure  Schedule,  the Software
and every portion thereof are an original  creation of the Software  Authors and
do not contain any source code or portions of source code (including any "canned
program")  created  by any  parties  other  than the  Software  Authors.  To the
knowledge of the Company,  the Company has not, by any of its acts or omissions,
or by acts or  omissions  of its  affiliates,  directors,  officers,  employees,
agents,  or  representatives  caused any of its  Proprietary  Rights,  including
Software,   copyrights,   trademarks,  and  Trade  Secrets  to  be  transferred,
materially distributed, or adversely affected to any material extent.

                  (e) The  Company  is not aware  that any of its  employees  is
obligated under any contract (including licenses,  covenants,  or commitments of
any nature) or other agreement, or subject to any judgment,  decree, or order of
any court or  administrative  agency,  that would interfere with the use of such
employee's  best  efforts to promote the  interests of the Company or that would
conflict  with the Company's  business as proposed to be conducted.  Neither the
execution nor delivery of this  Agreement,  nor the carrying on of the Company's
business by the  employees  of the  Company,  nor the  conduct of the  Company's
business as  proposed,  will  conflict  with or result in a breach of the terms,
conditions,  or  provisions  of, or  constitute a default  under,  any contract,
covenant, or instrument under which any of such employees is now obligated.  The
Company does not believe it is or will be necessary to use any inventions of any
of its employees  (or persons it currently  intends to hire) made prior to their
employment by the Company.

         3.23 Insurance. The Company believes that the insurance coverage of the
Company is customary for  corporations  of similar size engaged in similar lines
of  business  and is  proper  to cover  the  Company's  properties,  assets  and
business.  Each insurance  policy  maintained by the Company with respect to its
properties,  assets  and  businesses  is in full force and effect as of the date
hereof and shall remain in full force and effect following the date hereof.  The
Company is not in default with respect to its  obligations  under any  insurance
policy maintained by it.

         3.24 Year 2000  Compliance.  To the best knowledge of the Company,  the
Software,  computer  firmware,  computer  hardware  (whether general or specific
purpose), and other similar or related items of automated,  computerized, and/or
software  system(s)  that are used or relied on by the Company in the conduct of
its business  (collectively,  "Information  Technology") are designed to be used
prior to,  during,  and after the calendar year 2000 A.D.,  and the  Information
Technology  used during each such period will  accurately  receive,  provide and
process time/date data (including,  but not limited to,  calculating,  comparing
and sequencing) from, into and between the twentieth and twenty-first centuries,
including  the years  1999 and 2000,  and leap  year  calculations  and will not
malfunction,  cease to function,  or provide  invalid or incorrect  results as a
result of date/time data, to


                                       15


<PAGE>



the extent  that other  Information  Technology,  used in  combination  with the
Information  Technology of the Company,  properly exchanges  date/time data with
it.

         3.25  Disclosure  Schedule.  Any  references to "Schedule"  herein or a
Disclosure  Schedule  shall  be  deemed  to  refer  to a part of the  Disclosure
Schedule  which (a) has been  certified as true and correct by the Company,  (b)
has been  delivered  to  Investors  in  connection  with the  execution  of this
Agreement  and  (c)  describes  in  reasonable  detail  all  exceptions  to  the
representations and warranties of the Company.

         3.26 Extent of  Offering.  Neither the Company nor any agent  acting on
its behalf has sold or offered to sell any or all of the  Investor  Common Stock
or any similar  securities  so as to bring the  issuance or sale of the Investor
Common Stock pursuant to this Agreement and the Transaction Documents within the
provisions of Section 5 of the  Securities  Act, and neither the Company nor any
agent acting on its behalf will offer or sell the  Investor  Common Stock or any
similar  securities  so as to bring the issuance or sale of the Investor  Common
Stock  pursuant to this  Agreement  and the  Transaction  Documents  within such
provisions.

         3.27  Reserved.

         3.28  Registration  Rights.  Except for rights existing pursuant to the
Registration  Agreement  contemplated hereby and except as set forth on Schedule
3.28 of the Disclosure  Schedule,  as of the Closing,  no holder of any Security
will  have any right to  require  the  registration  thereof  (or of  Securities
receivable upon the exercise or conversion  thereof) under the Securities Act or
the right to include such Security (or any Security receivable upon the exercise
or conversion  thereof) in a registration  statement  filed by the Company under
the Securities Act.

         3.29 Illegal  Payments.  The Company has never made any illegal payment
of any kind, directly or indirectly,  including,  without limitation,  payments,
gifts or  gratuities,  to the United  States or any foreign  national,  state or
local government officials, employees or agents.

         3.30 Related Party Transactions.  Except as set for on Schedule 3.30 of
the Disclosure Schedule,

                  (a) No  employee,  officer  or  director  of the  Company,  no
Affiliate of any employee,  officer or director of the Company, and no member of
the  immediate  family of any  employee,  officer or  director of the Company is
indebted to the Company.

                  (b) The Company is not indebted,  and is not committed to make
loans or extend or guarantee credit, to any employee, officer or director of the
Company,  or any Affiliate of any employee,  officer or director of the Company,
or any member of the immediate  family of any  employee,  officer or director of
the Company.


                                       16


<PAGE>



                  (c) No Affiliate  of the  Company,  officer or director and no
member of the  immediate  family of any  Affiliate  of the  Company,  officer or
director is  interested,  directly or indirectly,  in any  agreement,  contract,
commitment or transaction with the Company,  except for any employment agreement
entered into in the ordinary  course of business.  To the best of the  Company's
knowledge,  no employee and no member of the immediate family of any employee is
interested,  directly or indirectly,  in any material contract with the Company,
except for any  employment  agreement  entered  into in the  ordinary  course of
business.

         3.31 Disclosure.  Neither this Agreement,  nor the Disclosure Schedule,
nor any of the other  Transaction  Documents  furnished to the  Investors by the
Company at the time of the  execution  and  delivery of this  Agreement  and the
Closing  contains any untrue  statement  of a material  fact or omits to state a
material fact  necessary in order to make the  statements  contained  herein and
therein  not  misleading.  There is no fact  known to the  Company  (other  than
general  conditions  which are a matter of public  knowledge)  which  materially
adversely affects the business,  operations,  properties,  financial  condition,
operating  results or business  prospects of the Company  which has not been set
forth in this Agreement or in the other agreements,  documents, certificates and
statements  furnished in writing to the Investor  prior to or on the date hereof
in connection with the transactions contemplated hereby.

         Section 4.  Conditions Precedent.

         4.1  Conditions Precedent.  The obligation of the Investors to purchase
the Investor Common Stock is subject to the conditions set forth below:

                  (a)  The  representations  and  warranties  contained  in this
Agreement  shall be true and correct as of the  Closing,  and the Company  shall
have  performed  all  obligations  to  be  performed  hereunder  and  under  the
Transaction Documents on or before the Closing.

                  (b) The  Company  shall  have  reserved  no more than  fifteen
percent  (15%) of the issued and  outstanding  Common  Stock on a fully  diluted
basis for  issuances of Common Stock  pursuant to the Stock Option Plan referred
to in Section 1.3 of the Shareholders' Agreement.

                  (c) There shall be no breaches of or defaults under the Share-
holders' Agreement or the Registration Agreement.

                  (d) The  shares  of  Investor  Common  Stock  issuable  to the
Investors pursuant to this Agreement shall be approved for listing on the AMEX.

                  (e)      There shall be delivered to Investors at the Closing:

                            (i)  A legal opinion  of Fox, Rothschild,  O'Brien &
          Frankel,  L.L.P.,  counsel  to the  Company,  in  form  and  substance
          satisfactory to the Investors and their counsel;



                                       17


<PAGE>



                            (ii)  Duly  completed   copies  of  the  Transaction
         Documents executed by the Company and the Principal Shareholders.

                            (iii)   Certified   copies  of  all   documents  and
         resolutions  evidencing  corporate  action  taken by the  Company  with
         respect to the  Transaction  Documents  and the  issuance  of  Investor
         Common Stock,  in form and substance  satisfactory to the Investors and
         their counsel;

                            (iv)  Certified  correct and complete  copies of (A)
         the Articles from the Secretary of State of Texas and (B) Bylaws,  from
         the Secretary of the Company in each case and to the extent applicable,
         as validly  amended to reflect the adoption of any amendments  required
         to  effectuate  the  terms  of  this  Agreement  or  the  Shareholder's
         Agreement;

                            (v)  Good standing certificates for the jurisdiction
         of incorporation of the Company  and for each jurisdiction in which the
         Company is qualified to do business;

                            (vi) Stock certificates in the name of each Investor
         evidencing the shares of Investor Common Stock purchased  hereunder (it
         being  understood  that to the extent such stock  certificates  are not
         delivered at the Closing, such stock certificates shall be delivered by
         the Company to each  Investor  within  three (3)  business  days of the
         Closing); and

                            (vii) Such other instruments, documents and certifi-
         cates as the Investors may reasonably require.

         Section 5. Covenants.

         5.1   Affirmative Covenants.  The Company covenants that as long as the
Investors or their  Affiliates  own of record or  beneficially  at least 500,000
shares of Common Stock in the aggregate, the Company shall:

                  (a)  Preservation of Corporate  Existence,  etc.  Preserve and
maintain its  corporate  existence,  rights,  franchises  and  privileges in the
jurisdiction of its incorporation, and qualify and remain qualified as a foreign
corporation  in each  jurisdiction  in which  failure  to  qualify  would have a
material  adverse  effect on the  business,  operations,  properties,  financial
condition, operating results and business prospects of the Company.

                  (b) Payment of Taxes. Pay and discharge all Taxes, assessments
and  governmental  charges  or  levies  imposed  upon it or upon its  income  or
profits,  or upon any  properties  belonging  to it,  prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, would become a
Lien upon any properties of the Company;  provided that the Company shall not be
required  to pay any such Tax,  assessment,  charge,  levy or claim  which it is
contesting in good faith and by proper  proceedings  and for which such reserves
or  other  provisions  as may be  required  by GAAP  shall  have  been  made and
recorded.


                                       18


<PAGE>



                  (c)  Maintenance  of  Insurance.  Maintain  insurance  on  its
properties and businesses with reputable insurance companies in such amounts, of
such  types  and  covering  such  casualties,  risks  and  contingencies  as  is
ordinarily carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which the Company operates.

                  (d)  Maintenance  of  Properties  and  Assets.   Maintain  and
preserve all of its properties which are necessary for the proper conduct of its
business in good working order and  condition,  ordinary wear and tear excepted,
and all of its other assets  (including  Proprietary  Rights) in accordance with
past custom and practice.

                  (e)  Keeping of Records and Books of  Account.  Keep  adequate
records  and  books of  account,  in  which  complete  entries  shall be made in
accordance with GAAP, reflecting all financial transactions of the Company.

                  (f)  Visitation  Rights.  At any time  and  from  time to time
during normal  business  hours (but so long as no Event of Default  occurs,  not
more  frequently  than  quarterly)  and with prior  notice  (except as set forth
below), permit one or more representatives designated by the Majority Holders to
examine and make copies of and  abstracts  from the records and books of account
of, and to visit the  properties  of the  Company  and to discuss  the  affairs,
finances  and  accounts of the  Company  with any of the  Company's  officers or
directors  and the  Company's  independent  accountants  (and the delivery of an
executed  copy of  this  Agreement  to such  accountants  shall  constitute  the
Company's consent to such discussions);  provided,  however, that if an Event of
Default occurs, no designated  representative is required to give notice and the
Investors may exercise their rights under this Section 5.1(f) at any time.

                  (g)  Compliance  with  Laws.  Substantially  comply  with  the
applicable  requirements  of all  laws,  rules,  regulations  and  orders of any
governmental  authority (including,  without limitation,  ERISA and the Code and
the rules,  regulations  and orders  promulgated  thereunder),  the violation of
which would have a Material Adverse Effect.

                  (h) Related  Documents.  Keep,  observe and comply with all of
its covenants and obligations  which are set forth in the Transaction  Documents
or other  agreement or instrument  delivered in connection  therewith so long as
such covenants and obligations are in force and effect.

                  (i)  Board of  Directors.  Take all  necessary  and  desirable
actions within its control in order to cause and to continue to cause compliance
with the  provisions  of  Section  1.2(a) of the  Shareholders'  Agreement  with
respect to the Board of Directors of the Company.

                  (j) Payment of Indebtedness,  Etc. The Company shall and shall
cause each  Subsidiary  to  faithfully  observe,  perform and  discharge  in all
material  respects  all  the  material  covenants,  conditions  and  obligations
including,  without  limitation,  payment obligations which are imposed on it by
any and all material  indentures,  agreements,  or other instruments securing or
evidencing  Indebtedness  or pursuant to which  Indebtedness  is issued or shall
cure any


                                       19


<PAGE>



non-performance  or  default  prior  to the date the  creditor  accelerates  the
payment  of  the   Indebtedness   or  commences   proceedings   to  collect  the
Indebtedness,  and  not  permit  the  occurrence  or  continuance  of any act or
omission  which is or under  the  provisions  thereof  may be  declared  to be a
material  default  thereunder  (after  the  expiration  of all  applicable  cure
periods),  unless such default  (other than a default in payment of principal or
interest)  or the right to declare a default on account of such act or  omission
is waived pursuant to the provisions thereof;  provided,  however,  that neither
the Company nor any Subsidiary  shall be required to make any payment or to take
any other action by reason of this Section  5.1(j) at any time while it shall be
currently contesting in good faith by appropriate proceedings its obligations to
make such payment or to take such action, if the Company shall have set aside on
its books  reserves  (segregated  or classified to the extent  required by GAAP)
deemed by it adequate with respect thereto.

                  (k) Blue  Sky.  The  Company  shall  make any and all  filings
necessary  (whether  before or after the Closing) in connection  with the offer,
issuance and sale and/or  transfer of the Investor  Common Stock to be purchased
pursuant  to  this  Agreement  under  the  securities  or blue  sky  laws of any
jurisdiction in which such filing is required by law.

         5.2 Reporting  Requirements.  The Company covenants that so long as the
Investors or their  Affiliates own of record or  beneficially  500,000 shares of
Common Stock in the  aggregate,  and if the Company is no longer  subject to the
reporting  requirements  of the Federal  securities  laws, or if the  applicable
report is not publicly disclosed, it shall furnish to Investors:

                  (a) Annual  Budget.  Prior to the end of each Fiscal Year,  an
annual budget, prepared on a quarterly and annual basis for the Company for each
succeeding  Fiscal Year  (displaying  anticipated  statements of income and cash
flows and  balance  sheets);  and within  thirty  (30) days after any  quarterly
period in which there is a material adverse  deviation from the annual budget, a
certificate  from the  Company's  President  explaining  the  deviation and what
actions the Company has taken and proposes to take with respect thereto.

                  (b) Financial Statements. Financial statements and information
to Investors on behalf of itself and any Subsidiaries as follows:

                            (i)  Monthly  Statements.  Within  thirty  (30) days
         after the end of each month during each fiscal year of the  Company,  a
         copy of the unaudited financial  statements of the Company,  consisting
         of a balance sheet as of the close of such month and related statements
         of income and cash flows for such month and from the  beginning of such
         fiscal year to the end of such month,  prepared in accordance with GAAP
         on a consistent basis,  subject to the lack of footnote  disclosure and
         year end adjustments.

                            (ii) Quarterly  Statements.  Within  forty-five (45)
         days  after the end of each  quarter  during  each  fiscal  year of the
         Company, a copy of the unaudited  financial  statements of the Company,
         consisting  of a  balance  sheet as of the  close of such  quarter  and
         related  statements  of income and cash flows for such quarter and from
         the beginning of such fiscal


                                       20


<PAGE>



         year to the end of such quarter,  prepared in accordance with GAAP on a
         consistent basis,  subject to the lack of footnote  disclosure and year
         end adjustments.

                            (iii) Annual Statement.  As soon as available and in
         any event  within one hundred  twenty  (120) days after the end of each
         fiscal year of the  Company,  a copy of its annual  report,  audited by
         nationally  recognized  independent  certified  public  accountants and
         acceptable  to the  Investors,  including  balance  sheet  and  related
         statements of income, cash flows and shareholders equity of the Company
         for such fiscal year, with comparative figures for the preceding fiscal
         year, prepared in accordance with GAAP on a consistent basis.

                  (c) Notices of  Litigation.  Promptly  after the  commencement
thereof (but in no event later than ten (10) days), notice of all actions, suits
and  proceedings  with an amount in  controversy  of $250,000 or more before any
court  or  governmental  department,   commission,   board,  bureau,  agency  or
instrumentality, domestic or foreign.

                  (d)  Notices  of  Adverse   Judgments.   Promptly   after  the
institution  thereof  (but in no event later than ten (10) days),  notice of all
adverse  judgments  of  $100,000  or more  entered by any court or  governmental
department,  commission,  board, bureau, agency or instrumentality,  domestic or
foreign,  against the Company, such notice to include the exact dollar amount of
any such adverse judgment as well as any other estimated adverse economic impact
on the Company.

                  (e) Material  Adverse  Changes.  Promptly after the occurrence
thereof  (but in no event  later  than ten (10)  days),  notice  of all  events,
conditions,  acts,  facts and omissions  (except general  conditions which are a
matter of  public  knowledge)  which  may  reasonably  be  expected  to have any
Material Adverse Effect.

                  (f) Federal  Securities  Laws.   Any   such  information  (and
consents) regarding the Company in order to fulfill their respective obligations
under the federal securities laws.

                  (g) Other Information.  Such other  information respecting the
business, properties, condition or operations of the Company as the Investor may
from time to time reasonably request.

         5.3  Negative  Covenants.  The  Company  covenants  that so long as the
Investors or their  Affiliates own of record or  beneficially  500,000 shares of
Common Stock in the aggregate,  neither it nor any Subsidiary shall, without the
prior written consent of the Investor Representative:

                  (a)   Amendments   or  Changes  in  Bylaws  or   Articles   of
Incorporation.  Amend,  modify,  repeal  or  supplement  any  provision  of  the
Company's  Bylaws  (if  adverse  to the  rights  of  the  Investors  under  this
Agreement,  the  Shareholders'  Agreement or the Registration  Agreement) or the
Articles including, without limitation, any amendments that (i) authorize shares
of any class of stock of the  Company  having any  preference  or priority as to
dividends  or assets  superior to or in parity with the Investor  Common  Stock;
(ii) increase the number of authorized shares of any class of stock


                                       21


<PAGE>



of the Company;  or (iii) authorize or reserve additional shares of Common Stock
with  respect  to the  Stock  Option  Plan  referred  to in  Section  1.3 of the
Shareholders'  Agreement,  or any other plan  arrangements  for  issuing  equity
securities to employees of the Company.

                  (b) Issuance of Capital  Stock.  (i) Issue shares of any class
of stock; and (ii) issue  additional  shares of Common Stock with respect to the
Stock  Option  Plan  (other  than  as  permitted  under  in  Section  1.3 of the
Shareholders'  Agreement),  or any other plan or arrangement  for issuing equity
securities to employees of the Company.

                  (c) Dividends. Directly or indirectly make, declare or pay any
dividends or other  distributions on its capital stock in cash or in property to
any class of stock of the Company.

                  (d)  Acquisitions;  Sale  of  Assets;  Merger;  Consolidation;
Reorganization;  Liquidation, Etc. Acquire any interest in any business (whether
by a purchase of assets, purchase of stock, merger, or otherwise); enter into an
agreement providing for a plan of exchange, merger or consolidation with or into
any  other  entity;  enter  into  any  joint  venture,  partnership  or  plan of
reorganization  (except for  strategic  alliances  entered  into in the ordinary
course of business which do not involve (i) capital contributions,  exchanges or
contributions  of equity or assets,  or (ii)  transactions  violating  any other
provision of Section 5.3 hereof);  sell,  assign,  lease,  transfer or otherwise
dispose of any substantial portion of its capital assets; recapitalize; become a
member in a limited liability company or otherwise acquire an equity interest in
another Person; or liquidate.

                  (e) Change of Control.  Authorize  the sale of voting  capital
stock (whether by the Company or any shareholder  thereof) permitting the holder
thereof to control  fifty-one  percent (51%) of the voting rights of the Company
or any Subsidiary.

                  (f)  Redemption of Stock.  Make or incur any liability to make
any Stock  Purchase  (other than pursuant to equity  incentive  agreements  with
employees  and service  providers  giving the  Company  the right to  repurchase
shares of the Company's capital stock upon termination of employment or services
and as provided in the Shareholders'  Agreement), or other acquisition of shares
of  the  Company's   capital  stock  or  any  payments  with  respect  to  stock
appreciation rights or similar rights.

                  (g)  Change of  Business.  Enter  into the  ownership,  active
management  of operation of any business  other than the ownership and operation
of the  business of the Company  conducted  as of the date  hereof,  or make any
material change in the Company's current business.

                  (h)  Directors.  Increase  the  number  of  directors  of  the
Company, except as permitted by Section 1.2 of the Shareholders' Agreement.

                  (i) Liabilities.  Become liable for, or make any payments with
respect  to,  any  Indebtedness,  except for  Indebtedness  not in excess of Six
Million Dollars ($6,000,000) outstanding at any time in the aggregate.

                                       22


<PAGE>



                  (j) Capital  Expenditures.  Make any capital expenditures that
in  the  aggregate  exceed  (i)  Four  Million  Five  Hundred  Thousand  Dollars
($4,500,000) in the 2000 Fiscal Year, or (ii) Two Million  Dollars  ($2,000,000)
in any other Fiscal Year.

                  (k) Transactions  with Affiliates.  Enter into any transaction
with any of its  Affiliates,  except on  arms-length  terms and  approved by the
disinterested  members of the Board of  Directors of the Company or as otherwise
provided in this Agreement.

         It is understood  and agreed that if the Investor  Representative  does
not provide his consent to any of the actions  prohibited  by this  Section 5.3,
the  Company  shall  have an option to redeem all (but not less than all) of the
Investor  Common Stock pursuant to the terms and conditions set forth in Section
6.4(b) below.

         5.4      Reserved.

         5.5      Reserved.

         5.6 Investor Covenants. The Investors shall use commercially reasonable
efforts to (a) leverage the experience of the Investors in consulting on general
business  matters to the Company,  its officers and its Board of Directors,  (b)
arrange for  analysts to follow and cover the  Company's  public class of stock,
(c) assist the Company in  obtaining an  underwriter  of  nationally  recognized
standing to underwrite a proposed  offering of Common Stock,  and (d) review and
advise the Company on all potential acquisitions.  The Investors shall designate
a Person to serve on the Board of  Directors of the Company as and to the extent
set forth in the Shareholders' Agreement.

         Section 6.         Events of Default.

         6.1  Events of Default.  If any of the following events (each is herein
referred to as an "Event of Default") occur:

                  (a) (i) default or breach shall occur in the performance of or
compliance with any covenant contained in Section 5.3, or (ii) default or breach
shall occur in the  performance  of or  compliance  with any covenant  contained
herein  (other  than as set forth in clause  (i)  above)  which  shall  continue
uncured  for more than  thirty (30) days after  written  notice of such  default
shall have been  provided  by  Investors,  unless  such cure  cannot be effected
within thirty (30) days, in which case the cure period shall  continue for up to
ninety  (90) days if the  default  or  breach  is  curable  and the  Company  is
diligently attempting to effect such cure;

                  (b) the  failure of the  Company  to elect a  designee  of the
Investors to the Company's Board of Directors pursuant to Section 5.1(i) of this
Agreement and Section  1.2(a) of the  Shareholder's  Agreement or the failure to
properly  register  the Investor  Common  Stock as provided in the  Registration
Agreement;


                                       23


<PAGE>



                  (c)  a  breach  of  any  of  the  Company's   representations,
warranties,  covenants and agreements  under the  Registration  Agreement or the
Shareholders' Agreement (which continues beyond the expiration of any applicable
cure period), other than those referred to in clause (b) above;

                  (d) if any representation or warranty to the Investors made in
writing  by the  Company in this  Agreement  or in any  agreement,  certificate,
report,  financial  statement  or  instrument  to be  delivered  to any Investor
pursuant  to the  Transaction  Documents  and which was  prepared by a director,
officer,  employee,  agent or representative  of the Company (which  non-officer
employee,  agent or representative  was authorized by the Company) and delivered
to the  Investors,  shall prove to have been false or inaccurate in any material
respect on the date as of which it was made;

                  (e) a receiver, conservator,  custodian, liquidator or trustee
of the Company or any of its  Subsidiaries  or of all or any of the  property of
any of them,  is appointed  by court order and such order  remains in effect for
more than sixty (60) days;  or an order for relief is entered  under the federal
bankruptcy laws with respect to the Company or any of its  Subsidiaries;  or any
of the material  property of any of them is  sequestered by court order and such
order  remains in effect for more than sixty (60) days;  or a petition  is filed
against  the  Company  or  any  of  its   Subsidiaries   under  the  bankruptcy,
reorganization,  arrangement,  insolvency,  readjustment of debt, dissolution or
liquidation law of any jurisdiction,  whether now or hereafter in effect, and is
not dismissed within sixty (60) days after such filing;

                  (f) The Company or any of its Subsidiaries files a petition in
voluntary  bankruptcy or seeking  relief under any provision of any  bankruptcy,
reorganization,  arrangement,  insolvency,  readjustment of debt, dissolution or
liquidation  law of any  jurisdiction,  whether now or hereafter  in effect,  or
consents to the filing of any petition against it under any such law;

                  (g) The Company or any of its Subsidiaries makes an assignment
for the benefit of its creditors,  or admits in writing its inability to pay its
debts  generally  as they  become  due,  or  consents  to the  appointment  of a
receiver, conservator, custodian, liquidator or trustee of the Company or any of
its subsidiaries, or of all or any part of the property of any of them;

                  (h)  final   judgment   for  the   payment  of  money   which,
individually  or in the  aggregate  exceeds Two Hundred Fifty  Thousand  Dollars
($250,000)  shall be rendered by a court of record against the Company or any of
its Subsidiaries, and the Company or such Subsidiary shall not (i) discharge the
same (by insurance or otherwise) or provide for its discharge in accordance with
its terms or (ii)  procure a stay of  execution  thereof  within sixty (60) days
from the date of entry  thereof and within  said  period of sixty (60) days,  or
such longer  period  during  which  execution of such  judgment  shall have been
stayed,  appeal  therefrom and cause the  execution  thereof to be stayed during
such appeal; or

                  (i)  The Company fails  to maintain the  listing of its Common
Stock on AMEX or any other nationally  recognized securities exchange reasonably
acceptable to the Investors;



                                       24


<PAGE>



then, when any Event of Default has occurred and shall be continuing, and unless
consent of the  Majority  Holders,  at the time has been  obtained  waiving such
Event of Default in writing, Investors shall have all available rights in law or
in equity or as may be available pursuant to this Agreement.

         6.2      Remedies on Default.

                  (a) If an Event of Default  shall have  occurred  pursuant  to
Section 6.1,  Investors  shall be entitled to the rights  specified in Section 6
(subject to the terms and  conditions  of Section 6.4 hereof)  and, in addition,
may proceed to protect and enforce any or all other rights,  powers and remedies
of such  holders  by an  action  at law,  suit in  equity  or other  appropriate
proceeding,  whether for the  specific  performance  of any  covenant  contained
herein or in the Shareholders'  Agreement or Registration  Agreement and, or for
an injunction  against a violation of any of the terms hereof or thereof,  or in
aid of the exercise of any right,  power or remedy  granted hereby or thereby or
available at law, in equity, by statute or otherwise.

                  (b) No right, power or remedy conferred hereby or by ownership
of the Investor Common Stock or under any of the other Transaction Documents, or
now or hereafter  available at law, in equity,  by statute or otherwise shall be
exclusive of any other right,  power or remedy  referred to herein or therein or
now or hereafter  available at law, in equity, by statute or otherwise,  but all
rights,   powers  and  remedies  of  Investors   shall  be  cumulative  and  not
alternative.

         6.3      Reserved.

         6.4        Put and Call Rights.

                  (a) Put. Upon the  occurrence  of an Event of Default  arising
under Section  6.1(a)(i),  Section 6.1(b), or Section 6.1(i),  the Investors (by
vote of the Majority  Holders) may exercise  their option to sell to the Company
all of the  Investor  Common  Stock (the  "Put"),  and the Company  shall,  upon
exercise of the Put by the  Investors,  purchase  from the  Investors all of the
Investor Common Stock.

                            (i) Upon the exercise of the Put, the Company  shall
         pay the Investors  (pro-rata in accordance with the number of shares of
         Investor  Common  Stock  each  Investor  owns) for all of the  Investor
         Common Stock,  in a lump sum for cash an amount equal to the greater of
         (A) the Purchase  Price,  plus a premium equal to a fifty percent (50%)
         compounded  annual rate of return on the  Purchase  Price,  and (B) the
         fair market value of the Common Stock (i.e.,  the closing  price of the
         Common Stock on the AMEX (or if such shares are no longer listed on the
         AMEX, any other applicable exchange or public listing)), if applicable,
         averaged  for the twenty (20)  trading  days ending on the day prior to
         the day of the  occurrence of the Event of Default  triggering the Put)
         (the "Put Purchase Price").

                            (ii) The Company shall pay the Put Purchase Price to
         the  Investors  within  sixty (60) days  after  such Event of  Default,
         except that the Company shall pay the Put


                                       25


<PAGE>



         Purchase  Price to the Investors  within one hundred (100) days thereof
         if the applicable Put was triggered by an Event of Default  pursuant to
         Section 6.1(i).

                  (b) Call. In the event that the Investor  Representative  does
not  provide  his consent to any of the actions set forth in Section 5.3 and the
Board of  Directors  of the Company  authorizes,  approves or ratifies  any such
action,  the Company may exercise its option to purchase  from the Investors all
of the  Investor  Common  Stock (the  "Call"),  and the  Investors  shall,  upon
exercise of the Call by the  Company,  sell to the  Company all of the  Investor
Common Stock.

                            (i) Upon the exercise of the Call, the Company shall
         pay the Investors  (pro-rata in accordance with the number of shares of
         Investor  Common  Stock  each  Investor  owns) for all of the  Investor
         Common Stock,  in a lump sum for cash an amount equal to the greater of
         (a) the Purchase  Price,  plus a premium equal to a fifty percent (50%)
         compounded  annual rate of return on the  Purchase  Price,  and (b) the
         fair market value of the Common Stock (i.e.,  the closing  price of the
         Common Stock on the AMEX (or if such shares are no longer listed on the
         AMEX, any other applicable exchange or public listing)), if applicable,
         averaged  for the twenty (20)  trading  days ending on the day prior to
         the day of the meeting of the Board of Directors of the Company whereby
         the Board of Directors of the Company authorized,  approved or ratified
         the action in question triggering the Call (the "Call Purchase Price").

                            (ii) The Company shall pay the Call  Purchase  Price
         to the Investors  within sixty (60) days after the meeting of the Board
         of Directors of the Company  whereby such Investor  Representative  did
         not approve such action.

                  (c) Notice of  Put/Call.  Any Put or Call  granted  under this
Section  6.4 may be  exercised  from time to time by notice  in  writing,  which
notice must be given within forty five (45) days with respect to a Call and five
(5) days with respect to a Put, of the occurrence of any event  triggering  such
Put or Call,  to the  Company in the case of a Put, or to the  Investors  in the
case of a Call (the "Notice").  The Notice shall state that such Put or Call, as
the case may be, is exercised.  In each case,  the Company shall provide to each
Investor  a  written   statement  of  the  dollar  amount  and  the   supporting
calculations  of the Put Purchase Price or the Call Purchase  Price, as the case
may be,  at least ten (10) days  prior to the date upon  which the Put  Purchase
Price or the Call Purchase  Price, as the case may be, shall be payable and due,
which shall state the date and time of the closing  thereof (which date shall be
in accordance with Section 6.4(a)(ii) or Section  6.4(b)(ii),  as applicable) at
the principal office of the Company.

                  (d)  Exercise  Procedure.  In the  event  that any Put or Call
under this Section 6.4 is exercised, delivery of the certificate or certificates
evidencing the shares involved, properly endorsed for transfer, shall be made by
the  Investors  against full  payment  therefor in the manner and at the time or
times  specified  in  Section   6.4(a)(ii)  or  Section  6.4(b)(ii)  hereof,  as
applicable.


                                       26


<PAGE>



                  (e)  Compounded  Annual Rate of Return.  It is understood  and
agreed  that in  calculating  the premium on the  Purchase  Price based on a 50%
"compounded  annual rate of return" for purposes of this  Section 6.4,  such 50%
return shall be added to and  calculated  based on the  Purchase  Price for each
anniversary  date  hereof (or a pro rata  portion  for a partial  year) plus the
amount of any previous 50% return  calculated for each prior one (1) year period
after the date of this Agreement.  For instance, the 50% "compounded annual rate
of return" (not including the Purchase Price amount) on the day after the second
anniversary of this Agreement  would be equal to $2,500,000 and is calculated as
follows:  (i) $2,000,000  (the Purchase  Price) x 50% = $1,000,000  ("First Year
Return");  plus (ii) $3,000,000  (Purchase Price plus First Year Return) x 50% =
$4,500,000).

         Section 7.         Miscellaneous.

         7.1      Investor's Investment  Representations.  Each  Investor hereby
represents and warrants that:

                  (a)  Investor is  acquiring  shares of Investor  Common  Stock
purchased  hereunder or acquired pursuant hereto for his or its own account with
the present intention of holding such securities for purposes of investment, and
that  he or  it  has  no  intention  of  selling  such  securities  in a  public
distribution in violation of the federal securities laws or any applicable state
securities laws;  provided that nothing contained herein shall prevent Investors
and subsequent holders of such shares of Investor Common Stock from transferring
such  securities  in  compliance  with  the  provisions  of  the   Shareholders'
Agreement.  Each  certificate or instrument  representing  Investor Common Stock
shall be imprinted with the legend prescribed in the Shareholders' Agreement;

                  (b) Such  Investor  has been  furnished  any and all  material
relating to the Company and the shares of Investor  Common  Stock which he or it
has  requested and has been afforded the  opportunity  to obtain any  additional
information   necessary  to  evaluate  such  Investor's   participation  in  the
transactions contemplated by this Agreement;

                  (c) Such  Investor,  either alone or with his or its financial
advisor(s), has the necessary knowledge and experience in financial and business
matters  as to be able to  evaluate  the  merits  and  risks of such  Investor's
participation in the transactions contemplated by this Agreement; and

                  (d) Such  Investor  qualifies as an  "accredited  investor" as
defined in Rule 501 of  Regulation D  promulgated  under the  Securities  Act of
1933, as amended.

         7.2 Benefit of Agreement,  Assignment.  This Agreement shall be binding
upon and inure to the benefit of the Company and Investors and their  respective
successors  and  assigns,  heirs,  executors  and  personal  representative,  as
applicable,  except that the  Company  shall not have the right to assign any of
its rights under this Agreement without the prior written consent of Investors.


                                       27


<PAGE>



Notwithstanding  the  foregoing,  the rights of the  Investors  set forth herein
shall  inure  only  to  the  benefit  of  the  Investors  and  their  "Permitted
Transferees" (as such term is defined in the Registration Agreement).

         7.3 Right to Conduct  Activities.  The Company and each Investor hereby
acknowledge  that some or all of any of the  Investors'  investments in numerous
companies,  may be competitive with the Company's business. No Investor shall be
liable for any claim  arising out of, or based upon,  (i) the  investment by any
Investor in any Person competitive to the Company,  or (ii) actions taken by any
partner,  officer or other  representative  of any  Investor  to assist any such
competitive  company,  whether or not such action was taken as a board member of
such  competitive  company,  or otherwise,  and whether or not such action has a
detrimental effect on the Company.

         7.4 Notices.  Any and all notices or other  communications  required or
permitted to be delivered  hereunder shall be deemed  properly  delivered if (a)
delivered personally,  (b) mailed by first class,  registered or certified mail,
return receipt  requested,  postage  prepaid,  (c) sent by next-day or overnight
mail or  delivery or (d) sent by  telecopy  or  telegram,  to the parties as set
forth below:

If to Edgewater:

Edgewater Private Equity Fund III, L.P.
900 North Michigan Avenue
14th Floor

Chicago, Illinois  60611
Attn:  Brian Thompson, Partner
Telecopy:  (312) 649-8649

With a copy to:

Michael A. Nemeroff, Esq.
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, Illinois  60601-1003
Telecopy:  (312) 609-5005

If to TIME:

Fleck T.I.M.E. Fund, LP
289 Greenwich Avenue
Greenwich, CT  06830
Attn: Kathryn Fleck
Telecopy: (203) 422-2170





                                       28


<PAGE>



If to the Company:

EpicEdge, Inc.
3200 Wilcrest Drive

Suite 370
Houston, Texas 77042-6018
Attn: Charles Leaver, President
Telecopy: (713) 784-2486

With a copy to:

Philip M. Shiekman, Esq.
Fox, Rothschild, O'Brien & Frankel, L.L.P.
2000 Market Street, Tenth Floor
Philadelphia, Pennsylvania 19103-3291
Telecopy:  (215) 299-2150


Either  party may change the name and  address of the  designee  to whom  notice
shall be sent by giving written notice of such change to the other party.

         7.5 Choice of Law. This Agreement shall be governed by and construed in
accordance  with the laws of Illinois,  applicable to agreements  made and to be
performed entirely within such State.

         7.6 Entire  Agreement.  This  Agreement and the  Transaction  Documents
embody the entire agreement and understanding  between the Company and Investors
and the final expression  thereof and supersede any and all prior agreements and
understandings,  written or oral,  formal or  informal,  between the Company and
Investors  relating to the subject  matter  hereof and thereof.  No  extensions,
changes,  modifications  or  amendments  whatsoever  shall be made or claimed by
either party hereto,  and no notices of any extension,  change,  modification or
amendment  made or  claimed  by a party  hereto  shall have any force and effect
whatsoever unless the same shall be endorsed in writing and fully signed by both
parties hereto.

         7.7 No Implied Waivers; Cumulative Remedies; Writing Required. No delay
or failure of the Investors in exercising any right,  power or remedy  hereunder
shall  affect or  operate as a waiver  thereof,  nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps to enforce such a
right,  power or remedy  preclude any further  exercise  thereof or of any other
right,  power or remedy.  The rights and remedies hereunder of the Investors are
cumulative and not exclusive of any rights or remedies which it would  otherwise
have.  Any waiver,  permit,  consent or approval of any kind or character on the
part of the Investors of any breach or default under this  Agreement or any such
waiver of any  provision or condition of this  Agreement  must be in writing and
shall be effective only to the extent in such writing specifically set forth.


                                       29


<PAGE>



         7.8  Reimbursement  of Expenses.  The Company shall, at Closing or upon
demand,  pay all of the  Investors'  reasonable  costs and  expenses  including,
without limitation,  due diligence expenses, travel expenses, legal fees for the
Investors' counsel (provided  reimbursement for such legal fees shall not exceed
$50,000 in the aggregate) and related costs and expenses  incurred by Investors'
legal counsel in the preparation, negotiation and closing of this Agreement, the
Transaction Documents and the transactions and consequences contemplated hereby,
and any and all filings or notices  required at any time under  Federal or state
securities laws. Such payments shall be due immediately  upon demand;  provided,
however,  the amounts  thereof  shall be limited to $25,000 if the  transactions
contemplated by this Agreement are not consummated for any reason.  Furthermore,
the Company shall also pay all brokers' or finders'  fees and expenses  (none of
which shall be the responsibility of the Investors).

         7.9 Survival. All representations, warranties, covenants and agreements
of the Company contained herein or made in writing in connection  herewith shall
survive the  execution  and delivery of this  Agreement  and the issuance of the
Investor Common Stock; provided, however, such representations and warranties of
the Company set forth in Section 3 of this  Agreement  shall  survive only until
thirty  (30) days  after  audited  financial  statements  of the  Company in the
Company's  Form 10-K Annual  Report are  publicly  released  for the fiscal year
ending December 31, 2001.

         7.10     Waivers of the Company/Personal Jurisdiction.

                  (a)  EXCLUSIVE  JURISDICTION.  THE  INVESTORS  AND THE COMPANY
AGREE THAT ALL  ACTIONS TO ENFORCE  THIS  AGREEMENT  AND ALL  DISPUTES  AMONG OR
BETWEEN THEM ARISING OUT OF,  CONNECTED  WITH,  RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG OR BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT
AND THE TRANSACTION DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE,  SHALL BE RESOLVED ONLY BY A COURT LOCATED IN COOK COUNTY,  ILLINOIS,
AND THE COMPANY HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF SUCH COURT.

                  (b) WAIVERS OF THE COMPANY. THE COMPANY HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS  UPON IT AND  CONSENTS  THAT ALL SUCH  SERVICE OF
PROCESS BE MADE BY  REGISTERED  MAIL  DIRECTED TO THE COMPANY AT ITS ADDRESS SET
FORTH IN SECTION 7.4 OF THIS  AGREEMENT,  AND SERVICE SO MADE SHALL BE DEEMED TO
BE COMPLETED UPON ACTUAL RECEIPT  THEREOF.  THE COMPANY HEREBY WAIVES ITS RIGHTS
TO A JURY TRIAL,  ANY OBJECTION  BASED ON FORUM NON CONVENIENS AND ANY OBJECTION
TO VENUE IN COOK  COUNTY,  ILLINOIS  IN  CONNECTION  WITH ANY  CLAIM OR CAUSE OF
ACTION TO ENFORCE  THIS  AGREEMENT  OR BASED UPON OR ARISING  OUT OF ANY OF THIS
AGREEMENT OR THE TRANSACTION  DOCUMENTS OR ANY OF THE TRANSACTIONS  CONTEMPLATED
HEREIN OR THEREIN, INCLUDING, WITHOUT LIMITATION,


                                       30


<PAGE>



CONTRACT CLAIMS, TORT CLAIMS,  BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. THE COMPANY AGREES THAT COOK COUNTY,  ILLINOIS IS A REASONABLY
CONVENIENT  FORUM TO RESOLVE ANY DISPUTE BETWEEN THE COMPANY AND INVESTORS.  THE
COMPANY   REPRESENTS  THAT  IT  HAS  REVIEWED  THIS  WAIVER  AND  KNOWINGLY  AND
VOLUNTARILY  WAIVES  ITS JURY TRIAL  RIGHTS  FOLLOWING  CONSULTATION  WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION,  A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN  CONSENT TO A TRIAL BY THE COURT.  NOTHING  IN THIS  SECTION  7.10 SHALL
AFFECT THE RIGHT OF THE  INVESTORS  TO SERVE LEGAL  PROCESS IN ANY OTHER  MANNER
PERMITTED BY LAW.

                  (c) OTHER JURISDICTIONS. THE COMPANY AGREES THAT THE INVESTORS
SHALL HAVE THE RIGHT TO PROCEED  AGAINST THE COMPANY IN A COURT IN ANY  LOCATION
TO ENABLE THE  INVESTORS  TO ENFORCE A JUDGMENT OR OTHER COURT ORDER  ENTERED IN
FAVOR OF THE INVESTORS. THE COMPANY WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE INVESTOR HAS COMMENCED A PROCEEDING DESCRIBED
IN THIS SECTION 7.10.

                  7.11  Herein,  etc.  Words  such  as  "herein,"   "hereunder,"
"hereof" and the like shall be deemed to refer to this  Agreement as a whole and
not to any  particular  document  or  Article,  Section  or other  portion  of a
document.

                  7.12 Severability.  Whenever possible,  each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable  law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law in any jurisdiction,  such provision shall be
ineffective  only to the  extent  of such  prohibition  or  invalidity,  without
invalidating any other provision of this Agreement.

                  7.13  Headings.   Section  and  subsection  headings  in  this
Agreement  are  included  for  convenience  of  reference  only  and  shall  not
constitute a part of this Agreement for any other purpose.

                  7.14  Counterparts.  This  Agreement  may be  executed  in any
number of counterparts and by either party hereto on separate counterparts, each
of which,  when so executed and  delivered,  shall be an original,  but all such
counterparts shall together constitute one and the same instrument.  One or more
counterparts of this Agreement may be delivered by facsimile, with the intention
that  delivery  by such  means  shall  have the same  effect as  delivery  of an
original counterpart thereof.

                            [Signature Page Follows]


                                       31


<PAGE>



                     Stock Purchase Agreement Signature Page

         IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed  this Stock
Purchase Agreement on the date first written above.

                                          EPICEDGE, INC.,
                                          a Texas corporation



                                          By:___________________________________
                                          Its: President

                                          EDGEWATER PRIVATE EQUITY FUND III,
                                          L.P.



                                          By:  Edgewater III Management, L.P.
                                          Its:  General Partner

                                          By:  Gordon Management, Inc.
                                          Its:   General Partner



                                          By:___________________________________
                                          Its:__________________________________


                                          FLECK T.I.M.E. FUND, LP, a Connecticut
                                          limited partnership



                                          By:___________________________________
                                          Its:  Managing Partner


                                       32


<PAGE>


                                    EXHIBIT A

                               DISCLOSURE SCHEDULE

                                  See Attached


                                       33




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