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EXHIBIT 99.1

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS

In passing the Private Securities Litigation Reform Act of 1995 (the Reform
Act), Congress encouraged public companies to make forward-looking
statements by creating a safe harbor to protect companies from securities law
liability in connection with forward-looking statements. We intend to qualify
both our written and oral forward-looking statements for protection under the
Reform Act and any other similar safe harbor provisions.

Forward-looking statements are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. The words
believe, expect, anticipate, intends, forecast, project, and
similar expressions identify forward-looking statements. Such statements may
include, but not are limited to, projections regarding demand for our products
and the replacement cycle for our existing products and the POS industry in
general, the adequacy of our current facilities to meet our operational needs,
the sufficiency of loss reserves for Golden Eagles loan portfolio, and market
acceptance of and improved margins on our ePic products, as well as assumptions
related to the foregoing. Such forward-looking statements are within the
meaning of that term in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. All
forward-looking statements are inherently uncertain as they are based on
various expectations and assumptions concerning future events and they are
subject to numerous known and unknown risks and uncertainties that could cause
actual events or result to differ materially from those projected. Due to
those and other uncertainties and risks, the investment community is urged not
to place undue reliance on our written or oral forward-looking statements. We
undertake no obligation to update or revise this Cautionary Statement Regarding
Forward-Looking Statements to reflect future developments. In addition, we
undertake no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events, or changes
to future operating results over time.

We provided the following risk factor disclosure in connection with our
continuing effort to qualify our written and oral forward-looking statements
under the safe harbor protection of the Reform Act and any other similar safe
harbor provisions. Important factors currently known to management that could
cause actual results to differ materially from those in forward-looking
statements include the disclosures contained in our Annual Report on Form 10-K
to which this statement is appended as an exhibit and also include the
following:

RISK FACTORS

Risks Related to Our Business

We have incurred significant losses and negative cash flows. If we are unable
to improve our financial performance, the price of our common stock will
suffer.

We incurred losses of $19.9 million for the year ended December 31, 2001 and
$31.0 million for the year ended December 31, 2000. We had negative cash flows
for the year ended December 31, 2000. Although we have undertaken aggressive
efforts to cut costs and increase our cash flows, it is possible that the steps
we have taken will not be successful or of sufficient impact for us to achieve
profitability or maintain positive cash flows. If we fail to do so, the price
of our common stock will suffer.

The loss of one or more of our key customers could significantly reduce our
revenues and profits.

We have derived, and believe that we may continue to derive, a significant
portion of our revenues from a limited number of large customers. For the
fiscal year ended December 31, 2001, our two largest customers accounted for
12.7% of our net revenue and our five largest customers accounted for 22.0% of
our net revenue. As of December 31, 2001, three customers represented 76.2%,
or $86.4 million, of our
total backlog of $113.4 million. Our customers may buy less of our products or
services depending on their own technological developments and internal budget
cycles. A major customer in one year may not purchase any of our products or
services in another year, which may negatively affect our financial
performance.

We may accumulate excess or obsolete inventory that could result in
unanticipated price reductions and write-downs and adversely affect our
financial condition.

Managing the proper inventory levels for components and finished products is
challenging. In formulating our product offerings,









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we have focused our efforts
on providing to our customers products with higher levels of functionality,
which requires us to develop and incorporate cutting edge and evolving
technologies in our products and product components. This approach tends to
increase the risk of obsolescence for products and components we hold in
inventory and may compound the difficulties posed by other factors that affect
our inventory levels, including the following:



| |  |  | the need to maintain significant inventory of components that are in limited supply;
| | - |  | ------------------------------------------------------------------------------------
|
| |  |  | buying components in bulk for the best pricing;                                     
|
| |  |  | responding to the unpredictable demand for products; and                            
|
| |  |  | responding to customer requests for quick delivery schedules.                       

As a result of these factors, we regularly run the risk of maintaining excess
inventory levels. If we accumulate excess or obsolete inventory, price
reductions and inventory write-downs may result, which could adversely affect
our business and financial condition.

We expect our results of operations to vary from quarter to quarter and, as a
result, we may not meet the expectations of our investors and equity analysts,
which could cause the price of our common stock to fluctuate or decline.

Our revenues and results of operations have fluctuated significantly in the
past and are likely to fluctuate significantly in the future. For example,
since January 1, 2000, our net revenues have ranged from a low of $71.0 million
for the quarter ended September 30, 2001 to a high of $89.8 million for the
quarter ended June 30, 2000. Gross profit and gross profit as a percentage of
net revenues have ranged from a low of $17.9 million and 23.7%, respectively,
for the quarter ended September 30, 2000 to a high of $37.3 million and 41.6%,
respectively, for the quarter ended June 30, 2000. Accordingly, we believe
that period-to-period comparisons of our results of operations may be
misleading. You should not rely upon the results of one quarter as an
indication of future performance. Our revenue and operating results may fall
below the expectations of securities analysts or investors in some future
quarter or quarters. Our failure to meet these expectations could cause the
market price of our common stock to decline.
Our quarterly revenue and operating results may vary depending on a number of
factors, including:



| |  |  | the type, timing and size of orders and shipments for major
customers;                                                                               
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|
| |  |  | demand for and acceptance of our new product offerings, and
returns or warranty costs from new product failures that exceed our
established reserves;
|
| |  |  | delays in the implementation and delivery of our products and
services, which may impact the timing of our recognition of revenue;                   
|
| |  |  | write-offs of receivables in excess of reserves;                                                                                                     
|
| |  |  | variations in product mix and cost during any period;                                                                                                
|
| |  |  | development of new relationships and maintenance and
enhancement of existing relationships with customers and strategic
partners;                    
|
| |  |  | manufacturing or production difficulties;                                                                                                            
|
| |  |  | deferral of customer contracts in anticipation of product or service enhancements;                                                                   
|
| |  |  | availability of financing; and                                                                                                                       
|
| |  |  | industry and economic conditions, including competitive
pressures and inventory obsolescence.                                                        









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Our sales cycles are relatively long and unpredictable, and may be subject to
seasonality, which makes it difficult to forecast our revenue and could result
in volatility in the price of our common stock.

Our sales and implementation cycles vary substantially from customer to
customer, which makes it difficult to forecast our revenue and could result in
volatility in the price of our common stock. Prospective customers frequently
view the purchase of our products and services as part of a long-term,
enterprise-wide strategic decision. As a result, potential customers may take
an extended period of time to assess alternative solutions or defer their
purchasing decisions in anticipation of product or service enhancements.
Moreover, the POS systems industry is generally dependent on system roll-outs
with fixed time horizons. Our operating results may vary significantly if we
fail to obtain major projects, if major projects are cancelled or delayed or if
we fail to replace projects that have been completed or are nearing completion.
We have also experienced, and expect to continue to experience, quarters or
periods where individual product or service orders are significantly larger
than our typical product or service orders.

In addition, we may experience seasonality in the sales of our products and
services. For example, net revenue and results of operations tend to be
stronger from July to December due to increased POS purchases during the
holiday season and patterns in the capital budgeting and purchasing cycles of
our current and prospective customers. These seasonal variations in our sales
may lead to fluctuations in our quarterly operating results and volatility in
the price of our common stock.

Our results of operations could be harmed if our operating expenses do not
correspond with the timing of our revenue.

Most of our operating expenses, such as employee compensation and rental
expense for properties, are either relatively fixed in the short-term or
incurred in advance of sales. Moreover, our spending levels are based in part
on our expectations regarding future revenue. As a result, if revenue for a
particular quarter is below expectations, we may not be able to proportionately
reduce operating expenses for that quarter. A shortfall in revenue, therefore,
could have a disproportionate effect on our expected operating results for that
quarter and could cause the trading price of our common stock to decline.

Terrorist attacks, such as the attacks that occurred in New York and
Washington, D.C. on September 11, 2001, and other acts of violence or war may
affect the markets in which our common stock trades, the markets in which we
operate and our profitability.

On September 11, 2001, the United States was the target of terrorist attacks of
unprecedented scope. These attacks may lead to armed hostilities or to further
acts of terrorism and civil disturbances in the United States or elsewhere.
The terrorist attacks caused instability in the global financial markets, and
contributed to downward pressure on securities prices of United States publicly
traded companies, such as us. Future terrorist attacks or armed conflict could
result in greater economic instability and further depress securities prices,
including the price of our common stock.

The September 11 attacks disrupted the global insurance and reinsurance
industries, and we may experience delays in renewing some insurance policies
and may not be able to obtain insurance at historical
levels for all of our facilities. Future terrorist attacks and armed conflicts
could affect our domestic and international sales, disrupt our supply chain and
impair our ability to produce and deliver our products. Such attacks and
conflicts could directly impact our physical facilities or those of our
suppliers or customers, both in the United States and elsewhere. Our primary
facilities include administrative, sales and R&D facilities in the United
States, and manufacturing facilities in China and Brazil. In addition,
additional acts of terrorism may make transportation of our supplies and
products more difficult or cost prohibitive. Any impairment of our financial
performance as a result of terrorist attacks or armed hostilities would
increase the risk of non-compliance with the financial covenants under our
senior secured credit facility and other lending arrangements, resulting in
events of default and the possible acceleration of our indebtedness.

We are dependent on current management and key personnel. The loss of certain
of these individuals could cause material harm to the operation and future
prospects of our business.

George Wallner, our Chairman and Chief Strategist, Christopher Alexander, our
President and Chief Executive Officer, John W. Smolak, our Executive Vice
President, Chief Financial Officer, and Chief Administrative Officer, and Jairo
Gonzalez, President of Hypercom Transactions Systems Group, are instrumental in
the development, growth and operations of Hypercom. The loss of any of these
key executives could have a material adverse effect on the operation and future
prospects of our business.

We also believe our future success will depend largely upon our ability to
attract and retain highly-skilled hardware and software engineers, managerial,
and sales and marketing personnel. We compete against numerous companies,
including larger, more





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established companies, for our personnel. We do not
know if we will be successful in attracting or retaining skilled personnel.
Further, the loss of certain key employees or our inability to attract and
retain other qualified employees could negatively affect our financial
performance.

A disruption in the manufacturing capabilities of our third-party manufacturers
or suppliers would negatively impact our ability to meet customer demands.

We rely on third-party manufacturers to manufacture and assemble our products.
We also depend upon third-party suppliers to deliver components that are free
from defects, competitive in functionality and cost and in compliance with our
specifications and delivery schedules. Since we generally do not maintain
large inventories of our products or components, any termination of, or
significant disruption in, our relationship with our third-party manufacturers
or suppliers may prevent us from filling customer orders in a timely manner.

We have occasionally experienced, and may in the future experience, delays in
delivery of products and delivery of products of inferior quality from some of
our third-party manufacturers. Although alternate manufacturers and suppliers
are available to produce our products and product components, the number of
manufacturers or suppliers of some of our products and components is limited,
and qualifying a replacement manufacturer or supplier could take several
months. In addition, our use of third-party manufacturers reduces our direct
control over product quality, manufacturing timing, yields and costs.
Disruption of the manufacture or supply of our products and components or a
third-party manufacturers or suppliers failure to remain competitive in
functionality or price could delay or interrupt our ability to manufacture or
deliver our products to customers on a timely basis, which would have a
material adverse effect on our business.

We face financial losses from our Golden Eagle subsidiary, which could result
in a substantial write-off of our investment in that enterprise.

In January 2000, our wholly-owned subsidiary, Hypercom Financial, Inc.,
purchased substantially all of the assets and business and assumed certain
liabilities of Golden Eagle LLC (now Golden Eagle Leasing, Inc., herein
referred to as Golden Eagle). Golden Eagle is a micro ticket leasing
organization, which advances funds under debt financing leases for
point-of-sale terminals with a retail price of under $5,000. To date, Golden
Eagle has required substantially more operational funding than we had initially
anticipated
and has not performed as expected. Continuing financial losses from this
subsidiary could result in a substantial write-off of our investment in that
enterprise.

Our ePicNetz application services provider may not prove successful.

We established ePicNetz in 2000 as our application service provider unit to
support our ePic corporate initiatives. We have expended substantial sums in
establishing ePicNetz and in developing the software that drives our
comprehensive internet-based retail countertop commerce and information
systems, called ePOS-infocommerce or ePic. Although adoptions by merchants
appears promising, we cannot guarantee that ePicNetz will generate substantial
revenues or achieve profitability. If ePicNetz is not successful, it could
have a material adverse effect on our financial performance and result in our
decision to cancel the ePicNetz program.

We have in the past and may in the future make acquisitions and strategic
investments, which will involve numerous risks. We may not be able to address
these risks without substantial expense, delay or other operational or
financial problems.

We may acquire or make substantial investments in related businesses,
technologies or products in the future. These acquisitions or investments
involve various risks, such as:



| |  |  | the difficulty of assimilating the technologies, operations
and personnel of the acquired business, technology or product;
| | - |  | --------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the potential disruption of our ongoing business, including
the diversion of management attention;                        
|
| |  |  | the possible inability to obtain the desired financial and
strategic benefits from the acquisition or investment;         
|
| |  |  | the loss of key employees of an acquired business; and                                                                    





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| |  |  | the possibility of our entering markets in which we have limited prior experience.
| | - |  | ----------------------------------------------------------------------------------

Future acquisitions and investments could also result in substantial cash
expenditures, potentially dilutive issuance of our equity securities, our
incurring of additional debt and contingent liabilities, and amortization
expenses related to other intangible assets that could adversely affect our
business, operating results and financial condition. Our prior acquisitions
have consumed and will continue to consume substantial management attention and
company resources, and will continue to require substantial efforts and involve
ongoing risks in the integration of these operations. In this regard, to date,
we have not achieved expected results from certain acquisitions, particularly
Golden Eagle. We will be dependent on the retention and performance of these
businesses existing management and employees for the day-to-day management and
future operating results of these businesses.

Our products may contain defects which may be difficult or even impossible to
correct. Product defects could result in sales delays, delays in our
collection of receivables and claims against us.

We offer technically complex products which, when first introduced or released
in new versions, may contain software or hardware defects that are difficult to
detect and correct. The existence of defects and delays in correcting them
could result in negative consequences, including the following:



| |  |  | delays in shipping products;                        
| | - |  | ----------------------------------------------------
|
| |  |  | loss of market acceptance for our products;         
|
| |  |  | additional warranty expenses;                       
|
| |  |  | diversion of resources from product development; and
|
| |  |  | loss of credibility with distributors and customers.

Even though we and our customers test all of these products, it is likely that
defects will continue to be identified after products are shipped. In recent
periods, we have experienced various issues in connection with product
launches, including the need to rework these products and stabilize product
designs. Correcting defects can be a time-consuming or impossible task.
Software errors may take several months to correct, and hardware errors may
take even longer. These issues have resulted in sales delays and delays in the
collection of receivables, which has exacerbated our cash position and could
adversely affect our business in the future.

If we cannot manage the additional challenges presented by our international
operations, our revenues and profitability may suffer.

We derived approximately 52.4% of our total net revenues from sales outside the
United States, principally in Latin America (including Mexico) and Europe, for
the year ended December 31, 2001. We expect that international sales will
continue to account for a significant percentage of our net revenue in the
foreseeable future. Because a substantial percentage of our revenues are
derived from foreign customers, we face numerous risks associated with
conducting international operations, any of which could negatively affect our
financial performance and results of operations. These risks include the
following:



| |  |  | we are subject to foreign regulatory requirements that may change without notice;                                  
| | - |  | -------------------------------------------------------------------------------------------------------------------
|
| |  |  | our expenses related to sales and marketing and research and development may increase;                             
|
| |  |  | we are subject to various export restrictions, and export
licenses may not always be available;                    
|
| |  |  | we are subject to foreign tariffs and other trade barriers;                                                        
|
| |  |  | some of the foreign countries that we deal with suffer from
political and economic instability;                    
|
| |  |  | some of the foreign currencies that we deal with fluctuate
significantly and are subject to inflationary pressures;





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| |  |  | we may have difficulty staffing and managing our foreign
operations;                                                                                                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | there is a tendency for international payment cycles to be
longer than for our North American operations;                                                              
|
| |  |  | we may have difficulty collecting accounts receivable; and                                                                                                             
|
| |  |  | we are subject to the Foreign Corrupt Practices Act, which
may place us at a competitive disadvantage to foreign companies that
are not subject to similar regulations.

If we are unable to adequately protect our proprietary technology, our
competitors may develop products substantially similar to our products and use
similar technologies, which may result in the loss of customers.

We rely on patent, copyright, trademark and trade secret laws, as well as
confidentiality, licensing and other contractual arrangements, to establish and
protect the proprietary aspects of our products. Our efforts may result in
only limited protection, and our competitors may develop, market and sell
products
substantially equivalent to our products, or utilize technologies similar to
those used by us. If we are unable to adequately protect our proprietary
technology, these third parties will be able to compete more effectively
against us, which could result in the loss of customers and affect our business
adversely.

Our products and other proprietary rights may infringe on the proprietary
rights of third parties, which may expose us to litigation.

Although we believe that our products do not infringe on any third partys
patents, we cannot be certain that we will not become involved in litigation
involving patents or proprietary rights. Patent and proprietary rights
litigation entails substantial legal and other costs, and we do not know if we
will have the necessary financial resources to defend or prosecute our rights
in connection with any litigation. Responding to, defending or bringing claims
related to our intellectual property rights may require our management to
redirect our human and monetary resources to address these claims.

Risks Related to the Industry

The markets in which we compete are highly competitive and subject to price
erosion.

The market for our products and services is highly competitive. Increased
competition from manufacturers or distributors of products similar to or
competitive with our products, or from service providers that provide services
similar to our services, could result in price reductions, reduced margins and
a loss of market share or could render our products obsolete.

We expect to continue to experience significant and increasing levels of
competition in the future. In many of our markets, traditional computer
hardware manufacturing, communications and consulting companies provide the
most significant competition. With respect to our POS products, we also
compete with cash registers that provide built in POS capabilities and
producers of software that facilitates electronic payment over the internet, as
well as other manufacturers of POS terminals. We must also compete with
smaller service providers that have been able to develop strong local or
regional customer bases. Most of our competitors and potential competitors are
more established, benefit from greater name recognition and have significantly
greater resources than we do. Moreover, we have little or no proprietary
barriers to entry that could keep our competitors from developing products or
services and technology similar to ours or from selling competing products or
services in our markets.

We are subject to industry and technology changes and are dependent on
development and market acceptance of new products. If we are unable to
adequately respond to these changes and to market demands in a timely manner,
our business will not be successful.

The industry in which we operate is characterized by rapid changes in
technology and numerous new product introductions. Our success, particularly
in this industry, depends to a large degree upon our continued ability to offer
new products and enhancements to our existing products to meet changing market
and industry requirements. The introduction of new products and technologies
by third parties could have an adverse effect on the sales of our existing
products and technologies. We cannot be certain of our ability to
successfully:



| |  |  | identify, develop, or manufacture new products and technologies;
| | - |  | ----------------------------------------------------------------





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| |  |  | market or support these new products and technologies;                                                     
| | - |  | -----------------------------------------------------------------------------------------------------------
|
| |  |  | control delays in introducing new products;                                                                
|
| |  |  | gain market acceptance for the new products and technologies; or                                           
|
| |  |  | respond to technological changes, new industry standards, and
announcements of new products by competitors.

Developing new products and technologies is a complex, uncertain process
requiring innovation and accurate anticipation of technological and market
trends. When changes to the product line are announced, we will be challenged
to manage possible shortened life cycles for existing products, continue to
sell existing products and prevent customers from returning existing products.
Our inability to respond effectively to any of these challenges may have a
material adverse effect on our business and financial success. We may suffer
other business and financial losses if we are not successful in marketing new
products and responding to industry changes and new product introductions or
enhancements by our competitors.

We are subject to extensive industry standards and government regulations. Our
failure to properly comply with these standards and regulations could adversely
affect our production and sales.

Our product sales are subject to a substantial and complex array of industry
driven standards and governmental regulation, both domestic and foreign,
including:



| |  |  | industry standards imposed by VISA, Mastercard, and others;                                
| | - |  | -------------------------------------------------------------------------------------------
|
| |  |  | certification standards required for connection to some
public telecommunications networks;
|
| |  |  | Federal Communications Commission regulations; and                                         
|
| |  |  | Underwriters Laboratories regulations.                                                    

Our failure to properly comply with these standards and regulations could
result in lost product sales, significant costs associated with required
remedial measures or production stoppages, any of which could have a material
adverse effect on our financial condition and future prospects.

Risks Related to Our Common Stock

Certain of our existing stockholders have effective voting control over our
affairs, which substantially limits your rights as a stockholder and may affect
the market value of our stock.

George Wallner, our Chairman and Chief Strategist, and his brother, Paul
Wallner, together own approximately 44.6% of our outstanding common stock.
Accordingly, the Wallners have the ability to effectively control our affairs,
including the election of our Board of Directors. They can also, except as
otherwise provided by law, approve or disapprove other matters submitted to a
vote of our stockholders, including a merger, consolidation, or sale of assets.
This voting control also may have the effect of delaying or preventing a
change of control of Hypercom and may affect the price investors are willing to
pay in the future for shares of our common stock.

Our stock price has been and may continue to be volatile. Your purchase of our
stock will subject you to that volatility and to the risk of a substantial loss
of your investment.

The market price of our common stock has been, and is likely to continue to be,
volatile. When we or our competitors announce new customer orders or services,
change pricing policies, experience quarterly fluctuations in operating
results, announce strategic relationships or acquisitions, change earnings
estimates, experience government regulatory actions or suffer from generally
adverse economic conditions, our stock price is often affected. Recently,
companies similar to ours have experienced extreme price fluctuations, often
for reasons unrelated to their performance.





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We are subject to anti-takeover effects of certain charter and bylaw provisions
and Delaware law.

We have provisions in our certificate of incorporation and bylaws which:



| |  |  | make it more difficult for a third party to acquire control
of us, and discourage a third party from attempting to acquire
control of us;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | may limit the price some investors are willing to pay for our
common stock;                                                              
|
| |  |  | enable us to issue preferred stock without a vote of our
stockholders or other stockholder action;                                       
|
| |  |  | provide for a classified Board of Directors and regulate
nominations for the Board of Directors;                                         
|
| |  |  | make it more difficult for stockholders to take certain corporate actions; and                                                           
|
| |  |  | may delay or prevent a change of control.                                                                                                

These and other provisions of our charter documents, as well as certain
provisions of Delaware law, could delay or make more difficult certain types of
transactions involving a change of control of Hypercom or our management. As a
result, the price of our common stock may be adversely affected.

Our stock price could be affected because a substantial number of shares of our
common stock will be available for sale in the future.

A substantial number of shares of our common stock will be available for future
sale. Sales in the public market of a substantial number of shares of common
stock, or the availability of such shares for sale, could depress the market
price of the common stock and could impair our ability to raise capital through
the sale of additional equity securities.

We do not plan to pay any dividends on our common stock.

We do not anticipate paying any dividends on, or repurchasing shares of, our
common stock for the foreseeable future. Our credit agreements restrict our
ability to pay cash dividends.

Risks Related to Our Indebtedness

Our indebtedness and the restrictions imposed by the terms of our debt could
adversely affect our financial health and our ability to respond to changes in
our business.

As a result of the terms of our senior secured credit facility:



| |  |  | our vulnerability to adverse general economic conditions and
competitive pressures is heightened;                                                                                                                                                                                                                                       
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | we are and will continue to be governed by restrictive
covenants that require us to maintain certain financial ratios and
limit our ability to, among other things, borrow additional funds,
make capital expenditures, pay dividends, make investments, purchase
our stock, consummate asset sales or conduct mergers and
acquisitions;
|
| |  |  | our flexibility in planning for, or reacting to, changes in
our business and industry will be limited;                                                                                                                                                                                                                                  
|
| |  |  | we are sensitive to fluctuations in interest rates because
some of our debt obligations are subject to variable interest rates;
and                                                                                                                                                                                                     
|
| |  |  | our ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, general
corporate purposes or other purposes may be impaired.                                                                                                                                                         





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We cannot assure you that our leverage and such restrictions will not
materially and adversely affect our ability to finance our future operations or
capital needs or to engage in other business activities. In addition, we
cannot assure you that additional financing will be available when required or,
if available, will be on terms satisfactory to us. Further, even if we were
able to obtain additional financing, we may be required to use proceeds to
repay a portion of our debt.

Our loan agreement contains restrictive and financial covenants and, if we are
unable to comply with these covenants, we will be in default. A default could
result in the acceleration of our outstanding indebtedness, which would have an
adverse effect on our business and the price of our common stock.

In August 2001, we entered into a new senior secured credit facility. This new
credit facility and our other financing arrangements contain customary
covenants that require us to maintain certain specified financial ratios and
consolidated net worth and restrict our ability to make certain distributions
with respect to our capital stock, prepay other debt, or undertake various
other corporate activities. For example, our senior secured credit facility
contains covenants that, subject to specified exceptions, prohibit us from:



| |  |  | incurring any additional indebtedness;                                                                                       
| | - |  | -----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | incurring or permitting to exist any additional liens on our assets;                                                         
|
| |  |  | engaging in a change of control transaction or other
fundamental change, such as a merger, recapitalization or
liquidation;  
|
| |  |  | disposing of our assets, including equipment and inventory,
outside the ordinary course of business;                         
|
| |  |  | prepaying or modifying the terms of our existing
indebtedness, except in connection with a permitted refinancing;            
|
| |  |  | redeeming, repurchasing or paying dividends or other distributions on our capital stock;                                     
|
| |  |  | engaging in certain transactions with our affiliates;                                                                        
|
| |  |  | failing to maintain specified levels of EBITDA and tangible
net worth and ratios of senior debt and total debt to EBITDA; and
|
| |  |  | issuing or selling any prohibited preferred stock.                                                                           

If we are unable to comply with any of these covenants, we will be in default,
which could cause cross-defaults under other loans or agreements. A default,
if not waived by our lenders, could result in the acceleration of our
outstanding indebtedness and cause our debt to become immediately due and
payable. If we were required to obtain waivers of defaults, we may incur
significant fees and transaction costs. If waivers of defaults are not
obtained and acceleration occurs, we may not be able to repay our debt and we
may not be able to borrow sufficient additional funds to refinance this debt.
Even if new financing is made available to us, it may not be available on
acceptable terms.