<PAGE>   1
                                                                   EXHIBIT 10.34

                         SERIES A CONVERTIBLE PREFERRED

                            STOCK PURCHASE AGREEMENT



                                   I 3S, INC.



                                  JUNE 25, 1999


<PAGE>   2

<TABLE>
<CAPTION>


                                TABLE OF CONTENTS
                                                                                                               Page
                                                                                                               ----
<S>      <C>                                                                                                   <C>
1.       Purchase and Sale........................................................................................6
2.       Closing of Purchase and Sale.............................................................................6
         2.1      Closing; Closing Date...........................................................................6
         2.2      Transactions at Closing.........................................................................6
3.       Representations and Warranties of Company................................................................6
         3.1      Organization, Standing and Qualification........................................................6
         3.2      Capitalization..................................................................................7
         3.3      Validity of Stock...............................................................................8
         3.4      Subsidiaries....................................................................................8
         3.5      Financial Statements............................................................................8
         3.6      Absence of Undisclosed Liabilities..............................................................8
         3.7      Absence of Certain Changes......................................................................9
         3.8      Authorization; Approvals.......................................................................10
         3.9      No Conflict with Other Instruments.............................................................10
         3.10     Labor Agreements and Actions...................................................................10
         3.11     Employee Matters...............................................................................10
         3.12     Title to Properties; Liens and Encumbrances....................................................11
         3.13     Compliance with Corporate Instruments..........................................................11
         3.14     Patents, Trademarks and Other Intangible Assets................................................11
         3.15     Trade Secrets and Customer Lists...............................................................12
         3.16     Tax Matters....................................................................................12
         3.17     Litigation.....................................................................................13
         3.18     Minute Books...................................................................................14
         3.19     Insurance......................................................................................14
         3.20     Fees and Commissions...........................................................................14
         3.21     Employee Benefit Plans.........................................................................14
         3.22     Material Contracts and Commitments.............................................................16
         3.23     Conflict of Interest Transactions..............................................................17
         3.24     Environmental Matters..........................................................................18
         3.25     Other Transactions.............................................................................18
         3.26     No Bankruptcies................................................................................18
         3.27     Year 2000 Compliance...........................................................................18
         3.28     Disclosure.....................................................................................18
         3.29     Legal Compliance...............................................................................19
         3.30     Small Business Concern.........................................................................19
         3.31     Small Business Administration Documentation....................................................19
4.       Representations, Warranties and Covenants of Purchasers.................................................19
         4.1      Organization and Good Standing.................................................................20
         4.2      Authorization; Approvals.......................................................................20
         4.3      No Conflict with Other Instruments.............................................................20
         4.4      Investment Representations.....................................................................20
         4.5      Investment Experience; Access to Information...................................................20
         4.6      Absence of Registration........................................................................21
         4.7      Restrictions on Transfer.......................................................................21
</TABLE>




                                       ii
<PAGE>   3

<TABLE>

<S>      <C>      <C>                                                                                          <C>
         4.8      Transfer Instructions..........................................................................23
         4.9      Economic Risk..................................................................................23
         4.10     Fees and Commissions...........................................................................23
5.       Conditions to Closing of the Purchasers.................................................................23
         5.1      Representations and Warranties.................................................................23
         5.2      Performance....................................................................................23
         5.3      Company Consents, etc..........................................................................24
         5.4      Compliance Certificates........................................................................24
         5.5      Government Actions.............................................................................24
         5.6      The Statement of Designation...................................................................24
         5.7      The Articles of Incorporation..................................................................24
         5.8      Legal Opinion..................................................................................24
         5.9      Company Deliveries.............................................................................24
         5.10     Total Subscription.............................................................................25
         5.11     Employment Agreements..........................................................................25
6.       Conditions to Closing of Company........................................................................25
         6.1      Representations and Warranties.................................................................25
         6.2      Performance....................................................................................25
         6.3      Purchaser Consents, etc........................................................................25
         6.4      Compliance Certificates........................................................................25
7.       Affirmative Covenants...................................................................................26
         7.1      Financial Information..........................................................................26
         7.2      Use of Proceeds................................................................................26
         7.3      Confidentiality................................................................................26
         7.4      Right of First Refusal.........................................................................27
         7.5      Sale of the Company............................................................................31
         7.6      Right of Co-Sale...............................................................................32
         7.7      Observers......................................................................................32
         7.8      Key Man Insurance..............................................................................32
         7.9      Access to Information..........................................................................32
         7.10     Restricted Corporate Actions...................................................................33
         7.11     Shareholder and Director Information...........................................................34
         7.12     Reserve for Conversion Shares..................................................................34
         7.13     Rule 144A Information..........................................................................34
         7.14     Sale of Series A Convertible Preferred Stock...................................................34
         7.15     Termination of Covenants.......................................................................35
8.       Expenses................................................................................................35
9.       Survival of Agreements..................................................................................35
10.      Notices.................................................................................................36
11.      Modifications; Waiver...................................................................................36
12.      Entire Agreement........................................................................................36
13.      Successors and Assigns..................................................................................37
14.      Enforcement.............................................................................................37
         14.1     Remedies at Law or in Equity...................................................................37
         14.2     Remedies Cumulative; Waiver....................................................................37
15.      Execution and Counterparts..............................................................................37
16.      Governing Law and Severability..........................................................................38
17.      Headings................................................................................................38
</TABLE>




                                      iii
<PAGE>   4



                                    EXHIBITS

Exhibit A - Amended and Restated Articles of Incorporation
Exhibit B - Amended and Restated Bylaws
Exhibit C - Form of Statement of Designation for the Series A Convertible
            Preferred Stock
Exhibit D - Placement Memorandum
Exhibit E - Form of Registration Rights Agreement
Exhibit F - Form of Opinion of Winstead Sechrest &
            Minick, P.C.



                                    SCHEDULES
<TABLE>

<S>                <C>
Schedule 1        Purchasers
Schedule 3.1      Jurisdictions
Schedule 3.2      Capitalization
Schedule 3.4      Subsidiaries
Schedule 3.5      Financial Statements
Schedule 3.7      Absence of Certain Changes
Schedule 3.9      No Conflict with Other Instruments
Schedule 3.11     Employee Matters
Schedule 3.12     Title to Properties; Liens and Encumbrances
Schedule 3.14     Patents, Trademarks and Other Intangible Assets
Schedule 3.15     Trade Secrets and Customer Lists
Schedule 3.16     Tax Matters
Schedule 3.19     Insurance
Schedule 3.21     Employee Benefit Plans
Schedule 3.22     Material Contracts and Commitments
Schedule 3.23     Conflict of Interest Transactions
Schedule 3.29     Legal Compliance
Schedule 4.6      Registration Rights
Schedule 7.5      Prior Stock Purchase Agreements
</TABLE>

                                       iv
<PAGE>   5



             SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT


         This Series A Convertible Preferred Stock Purchase Agreement (this
"AGREEMENT"), dated as of June 25, 1999, is by and among I 3S, Inc., a Texas
corporation (the "COMPANY"), and the purchasers identified in SCHEDULE 1 hereto
(hereinafter referred to individually as a "PURCHASER" and collectively as the
"PURCHASERS").

         NOW, THEREFORE, the Company and the Purchasers agree as follows:

         1. Purchase and Sale. Subject to the provisions of this Agreement, on
the Closing Date (as hereinafter defined), the Company will sell to each of the
Purchasers, severally and not jointly, and each of the Purchasers, severally and
not jointly, will purchase from the Company, the number of shares of Series A
Convertible Preferred Stock, no par value per share (the "SERIES A CONVERTIBLE
PREFERRED STOCK"), set forth opposite each such Purchaser's name in SCHEDULE 1
annexed hereto at a price per share of Eighteen and 80/100 Dollars ($18.80).

         2. Closing of Purchase and Sale.

                  2.1 Closing; Closing Date. The purchase and sale of the Series
         A Convertible Preferred Stock (the "CLOSING") shall take place at the
         offices of the Company at 1440 Corporate Drive, Irving, Texas 75038, at
         10:00 a.m., local time, on June 24, 1999 (the "CLOSING DATE") or at
         such other place or time as may be agreed upon by the Company and the
         Purchasers.

                  2.2 Transactions at Closing. At the Closing, the Company shall
         deliver to each Purchaser a certificate or certificates for the shares
         of Series A Convertible Preferred Stock to be issued and sold to such
         Purchaser at the Closing, duly registered in such Purchaser's name,
         against payment in full by such Purchaser of the aggregate purchase
         price set forth opposite such Purchaser's name in SCHEDULE 1 hereto by
         a wire transfer of funds made to the order of "I 3S, Inc." in the
         amount of such aggregate purchase price. The Company shall also deliver
         to the Purchasers those items required to be delivered to them by the
         Company as described in ARTICLE 5 of this Agreement. The Purchasers
         shall also deliver to the Company those items required to be delivered
         to the Company by the Purchasers as described in ARTICLE 6 of this
         Agreement.

         3. Representations and Warranties of Company. The Company represents
and warrants to the Purchasers that:

                  3.1 Organization, Standing and Qualification. The Company is a
         corporation duly organized, validly existing and in good standing under
         the laws of the State of Texas, has all requisite corporate power and
         authority to own its property and assets and to carry on its business
         as it is presently being conducted and as it proposes to carry on its
         business. The Company has all requisite corporate power and authority
         to execute and deliver this Agreement and the other agreements
         contemplated herein, to issue and sell the Series A Convertible
         Preferred Stock hereunder, to issue shares of Class A Common Stock (as
         hereinafter defined) upon conversion of the Series A Convertible



                                       6
<PAGE>   6

         Preferred Stock, and to carry out the transactions contemplated by this
         Agreement and the other agreements contemplated herein. The Amended and
         Restated Articles of Incorporation and Amended and Restated Bylaws,
         copies of which are attached hereto as EXHIBITS A and B, respectively,
         are true, correct and complete. The Company is duly qualified and in
         good standing as a foreign corporation authorized to do business in
         each of the jurisdictions in which the failure to be so qualified would
         have a material adverse effect on the Company. SCHEDULE 3.1 sets forth
         the jurisdictions in which the Company is qualified.

                  3.2 Capitalization. The authorized capital stock of the
         Company, as of the Closing Date, will consist of: (a) 100,000,000
         shares of Class A Common Stock, no par value per share (the "CLASS A
         COMMON STOCK"), of which 4,655,700 shares are issued and outstanding,
         (b) 25,000,000 shares of Class B Common Stock, no par value per share
         (the "CLASS B COMMON STOCK"), of which 4,979,777 shares are issued and
         outstanding, (c) 25,000,000 shares of Class C Common Stock, no par
         value per share (the "CLASS C COMMON STOCK"), of which 2,074,464 shares
         are issued and outstanding, and (d) 4,200,000 shares of Preferred
         Stock, all of which have been designated as Series A Convertible
         Preferred Stock, of which no shares are issued and outstanding. The
         relative rights, preferences, restrictions and other provisions
         relating to the Series A Convertible Preferred Stock are as set forth
         in the Statement of Designation, attached hereto as EXHIBIT C. The
         Class A Common Stock, Class B Common Stock and Class C Common Stock are
         hereinafter collectively referred to as the "COMMON STOCK". SCHEDULE
         3.2 sets forth the name and, to the Company's knowledge, the current
         address of each holder of Common Stock and number and class of shares
         so held by each holder. Of the Class A Common Stock, (i) 4,979,777
         shares are reserved for issuance on the conversion of the Class B
         Common Stock, (ii) 2,074,464 shares are reserved for issuance on the
         conversion of the Class C Common Stock, (iii) 2,925,532 shares are
         reserved for issuance on the conversion of the Series A Convertible
         Preferred Stock, and (iv) 5,989,920 shares are reserved for issuance
         pursuant to employee stock purchase or stock option plans adopted or to
         be adopted by the Company for key employees and prior stock option
         grants. All of the outstanding shares of the Common Stock are duly
         authorized and validly issued in accordance with applicable law, fully
         paid and non-assessable.

                  Except as set forth on SCHEDULE 3.2 hereto, or as otherwise
         contemplated by this Agreement, as of the date hereof there are, and
         immediately following the Closing, there will be (i) no outstanding
         options, warrants, agreements, conversion rights, preemptive rights or
         other rights to subscribe for, purchase or acquire any issued or
         unissued shares of capital stock of the Company, or any securities
         convertible or exchangeable for such stock, and (ii) no restrictions
         upon the voting or transfer of any shares of capital stock of the
         Company pursuant to its Amended and Restated Articles of Incorporation,
         Amended and Restated Bylaws or other governing documents or any
         agreement or other instruments to which it is a party or by which it is
         bound, and (iii) there are no agreements to which the Company is a
         party or of which the Company has knowledge regarding the issuance,
         registration, voting or transfer of or obligation (contingent or
         otherwise) of the Company to repurchase or otherwise acquire or retire
         or redeem any of its outstanding shares of capital stock. No dividends
         are accrued but unpaid on any capital stock of the Company.

                                       7
<PAGE>   7

                  3.3 Validity of Stock. The Series A Convertible Preferred
         Stock, when issued, sold and delivered in accordance with the terms of
         this Agreement, will be duly and validly authorized and issued, fully
         paid, non-assessable and free and clear of all encumbrances or
         restrictions on transfer except those imposed by applicable securities
         laws, the Amended and Restated Articles of Incorporation, the Statement
         of Designation and this Agreement. The Class A Common Stock issuable
         upon conversion of the Series A Convertible Preferred Stock, when
         issued, sold and delivered in accordance with the terms of this
         Agreement, will be duly and validly authorized and issued, fully paid,
         non-assessable and free and clear of all encumbrances or restrictions
         on transfer except those imposed by applicable securities laws, the
         Amended and Restated Articles of Incorporation, the Statement of
         Designation and this Agreement. All existing Common Stock preemptive
         rights have been waived for purposes of the issuance of the Series A
         Convertible Preferred Stock.

                  3.4 Subsidiaries. Except as set forth on SCHEDULE 3.4 hereto,
         the Company does not control, directly or indirectly, or own any equity
         interest in, any other corporation, partnership, joint venture,
         association or business entity.

                  3.5 Financial Statements. Attached hereto as SCHEDULE 3.5 are
         the unaudited balance sheets as at December 31, 1997, March 31, 1999
         and May 31, 1999 and unaudited statements of income, changes in
         stockholders equity, and cash flow of the Company for the year ended
         December 31, 1997 and the quarter ended March 31, 1999, and the audited
         balance sheet as at December 31, 1998, and audited statements of
         income, changes in stockholders equity, and cash flow of the Company
         for the year ended December 31, 1998 (collectively, the "FINANCIAL
         STATEMENTS"). The Financial Statements have been prepared in accordance
         with the books and records of the Company and generally accepted
         accounting principles ("GAAP") (except the March 31, 1999 financial
         statements and the May 31, 1999 balance sheet are subject to normal and
         recurring year-end audit adjustments which are not expected to be
         material in amount) and fairly and accurately reflect the financial
         condition and the results of operations (except for the year ended
         December 31, 1997) of the Company as of the respective dates thereof or
         for the periods covered in accordance with GAAP.

                  3.6 Absence of Undisclosed Liabilities. Except as provided in
         the Financial Statements, the Company has no material debt, liability
         or obligation, absolute or contingent (including without limitation
         obligations in any capacity as guarantor or surety), other than
         obligations incurred in the ordinary course of business since May 31,
         1999 (the "BALANCE SHEET DATE"). Without limiting the generality of the
         foregoing, the Company knows of no basis for the assertion against the
         Company as of the date hereof of any material liabilities (not
         reflected in the Financial Statements) of the Company.

                  3.7 Absence of Certain Changes. Except as set forth in
         SCHEDULE 3.7, since the Balance Sheet Date, the Company has not:

                           (a) suffered any material adverse change, whether or
                  not caused by any deliberate act or omission of the Company or
                  any shareholder of the



                                       8
<PAGE>   8

                  Company, in its condition (financial or otherwise),
                  operations, assets, liabilities, business or prospects, taken
                  as a whole;

                           (b) contracted for the purchase of any capital assets
                  having a cost in excess of $500,000 or paid any capital
                  expenditures in excess of $500,000;

                           (c) incurred any indebtedness for borrowed money or
                  issued or sold any debt securities in excess of $150,000;

                           (d) incurred or discharged any liabilities or
                  obligations, except in the ordinary course of business;

                           (e) mortgaged, pledged or subjected to any security
                  interest, lien, lease or other charge or encumbrance any of
                  its properties or assets other than equipment financing liens
                  incurred in the ordinary course of business;

                           (f) suffered any damage or destruction to or loss of
                  any assets (whether or not covered by insurance) that has
                  materially and adversely affected, or could reasonably be
                  expected to, materially and adversely affect, its business;

                           (g) acquired or disposed of any assets except in the
                  ordinary course of business;

                           (h) waived any material rights or forgiven any
                  material claims;

                           (i) lost, terminated or, to the Company's knowledge,
                  experienced any change in the relationship with any employee,
                  customer or supplier, which termination or change has
                  materially and adversely affected, or could reasonably be
                  expected to materially and adversely affect, its business or
                  assets;

                           (j) loaned any money to any person or entity in
                  excess of $100,000;

                           (k) redeemed, purchased or otherwise acquired, or
                  sold, granted or otherwise disposed of, directly or
                  indirectly, any of its capital stock or securities or any
                  rights to acquire such capital stock or securities, or agreed
                  to change the terms and conditions of any such rights or paid
                  any dividends or made any distribution to the holders of the
                  Company's capital stock other than stock options granted to
                  employees under the Company's Incentive Stock Option Plan; or

                           (l) committed to do any of the foregoing.

                  3.8 Authorization; Approvals. All corporate action on the part
         of the Company and its shareholders necessary for the authorization,
         execution, delivery, and performance of all its obligations under this
         Agreement, and for the authorization, issuance, and delivery of the
         Series A Convertible Preferred Stock being sold under this Agreement
         and of the Class A Common Stock issuable upon conversion of the Series
         A Convertible Preferred Stock has been taken. This Agreement
         constitutes a valid and legally binding obligation of the Company
         legally enforceable against it in accordance



                                       9
<PAGE>   9

         with its terms, subject as to enforcement to bankruptcy, insolvency,
         reorganization and other laws of general applicability relating to or
         affecting creditors' rights and to general principles of equity. The
         Company has obtained or will obtain prior to the Closing Date all
         necessary consents, authorizations, approvals and orders from any
         federal, state or other relevant governmental authority and from any
         individual, corporation, partnership, trust, incorporated or
         unincorporated association, joint venture, joint stock company or other
         entity, and has made all registrations, qualifications, designations,
         declarations or filings with all federal, state, or other relevant
         governmental authorities, all as may be required on the part of the
         Company in connection with the consummation of the transactions
         contemplated by this Agreement, except for filings pursuant to
         applicable securities laws which will be made after the Closing Date.

                  3.9 No Conflict with Other Instruments. Except as set forth on
         SCHEDULE 3.9, the execution, delivery and performance of this Agreement
         will not result in any violation of, be in conflict with, or constitute
         a default under any terms or provision of (a) the Company's Amended and
         Restated Articles of Incorporation or Amended and Restated Bylaws; (b)
         any Commitments (as hereinafter defined); or (c) any judgment, decree
         or order or any statute, rule or governmental regulation applicable to
         the Company. Subject to the truth and accuracy of each Purchaser's
         representations and warranties herein and the Company making any
         required filings which the Company agrees to do, the offer and sale of
         the Series A Convertible Preferred Stock to each Purchaser will be in
         compliance with all federal and state securities laws.

                  3.10 Labor Agreements and Actions. The Company is not bound by
         or subject to (and none of its assets or properties is bound by or
         subject to) any written or oral, express or implied, contract,
         commitment or arrangement with any labor union, and no labor union has
         requested or, to the Company's knowledge, sought to represent any of
         the employees, representatives or agents of the Company. There is no
         strike or other labor dispute involving the Company pending, or, to the
         Company's knowledge, threatened, which could have a material adverse
         effect on the financial condition, operating results, or business of
         the Company, nor is the Company aware of any labor organization
         activity involving its employees.

                  3.11 Employee Matters. SCHEDULE 3.11 contains a complete and
         accurate list of the names, titles and Cash Compensation (as
         hereinafter defined) of all members of executive management of the
         Company, regardless of compensation levels, and other employees who are
         currently compensated at a rate in excess of $100,000 per year or who
         earned in excess of $100,000 during the Company's preceding fiscal
         year. For purposes of this SECTION 3.11, "CASH COMPENSATION" shall mean
         wages, salaries, bonuses (discretionary or otherwise) and other
         compensation paid or payable in cash. Except as disclosed in SCHEDULE
         3.11, the Company has no employment agreements, employee leasing
         agreements, employee service agreements, or noncompetition agreements
         other than those contemplated by SECTION 5.11 hereof.

                  3.12 Title to Properties; Liens and Encumbrances.


                                       10
<PAGE>   10

                           (a) Except as disclosed on SCHEDULE 3.12(a), the
                  Company has good and marketable title to its assets,
                  including, without limitation, those reflected on the Balance
                  Sheet (other than those since disposed of in the ordinary
                  course of business), free and clear of all security interests,
                  liens, charges and other encumbrances, except for (i) liens
                  for taxes not yet due and payable or being contested in good
                  faith in appropriate proceedings, and (ii) encumbrances that
                  are incidental to the conduct of their respective businesses
                  or ownership of property, not incurred in connection with the
                  borrowing of money or the obtaining of credit, and which do
                  not in the aggregate materially detract from the value of the
                  assets affected or materially impair their use by the Company.
                  With respect to the assets of the Company that are leased, the
                  Company is in compliance with all material provisions of such
                  leases. All facilities, machinery, equipment, fixtures,
                  vehicles and other properties owned, leased or used by the
                  Company are in good operating condition and repair, normal
                  wear and tear excepted, and are adequate and sufficient for
                  the Company's business.

                           (b) The Company enjoys peaceful and undisturbed
                  possession under all real property leases under which the
                  Company is operating, and all such leases are valid and
                  subsisting and none of them is in default. A listing of said
                  real property leases, their terms and total lease payments is
                  attached hereto as SCHEDULE 3.12(b).

                           (c) Except as disclosed in SCHEDULE 3.12(c) the
                  Company does not own any real property.

                  3.13 Compliance with Corporate Instruments. The Company is not
         in violation of any provision of its Amended and Restated Articles of
         Incorporation, Amended and Restated Bylaws of the Company or Statement
         of Designation, and the Company is not in default or violation of any
         Commitment to which the Company is a party or by which any of its
         property is bound, the default or violation of which would materially
         and adversely affect the Company's business, prospects, condition,
         affairs or operations.

                  3.14 Patents, Trademarks and Other Intangible Assets.

                           (a) SCHEDULE 3.14(a) hereto sets forth the true and
                  correct list of all registered patents, trademarks and
                  copyrights (or applications therefor) held by the Company.
                  Except as set forth on SCHEDULE 3.14(a), the Company possesses
                  ownership or has the right to use all patents, copyrights,
                  trademarks, service marks, trade secrets and other proprietary
                  intellectual property rights necessary for the operation of
                  its business except where the failure of the Company to own or
                  have such right to use such intellectual property would not
                  have a material adverse effect on the Company (the
                  "INTELLECTUAL PROPERTY"). To the Company's knowledge, the
                  Company (a) is not infringing upon the intellectual property
                  rights of others in connection with its business; (b) does not
                  require the consent of any person which has not been obtained
                  (all of such consents being set forth in SCHEDULE 3.14(a)) to
                  use the Intellectual Property; (c) may freely transfer the
                  Intellectual Property (other than as set forth in SCHEDULE
                  3.14(a)); or (d) has not



                                       11
<PAGE>   11

                  received any written notice of conflict with respect to the
                  intellectual property rights of any other person or entity.
                  All of the Intellectual Property is valid and subsisting, has
                  not been canceled, abandoned or otherwise terminated and, if
                  applicable, has been duly issued or filed. The employees and
                  consultants of the Company, who, either alone or in concert
                  with others, developed, invested, discovered, derived,
                  programmed or designed any of the Company's owned Intellectual
                  Property have entered into written agreements to protect the
                  confidentiality of the Company's owned Intellectual Property
                  and to assign to the Company all rights therein.

                           (b) The Company has no knowledge of any claim that,
                  or inquiry as to whether, any product, activity or operation
                  of the Company infringes upon or involves, or has resulted in
                  the infringement of, any proprietary right of any other
                  person, corporation or other entity; and no proceedings have
                  been instituted, are pending or are threatened that challenge
                  the rights of the Company with respect thereto. Any agreement
                  of indemnification by the Company for any Intellectual
                  Property as to any license granted by it or any property
                  manufactured, used or sold by it is set forth in SCHEDULE
                  3.14(b).

                  3.15 Trade Secrets and Customer Lists. The Company has the
         right to use, free and clear of any claims or rights of others, except
         claims or rights specifically set forth in SCHEDULE 3.15, all trade
         secrets, customer lists and proprietary information required for the
         marketing of all merchandise and services formerly or presently sold or
         marketed by the Company. To the Company's knowledge, it is not using,
         or in any way making use of, any confidential information or trade
         secrets of any third party, including, without limitation, any past or
         present employee of the Company, except under valid and existing
         license agreements (all such license agreements being set forth in
         SCHEDULE 3.15).

                  3.16 Tax Matters.

                           (a) All required foreign, federal, state, local and
                  other tax returns, notices and reports (including, without
                  limitation, income, property, sales, use, franchise, capital
                  stock, excise, added value, employees' income withholding,
                  social security and unemployment tax returns) of the Company
                  have been accurately prepared in all material respects and
                  duly and timely filed, and all foreign, federal, state, local
                  and other taxes required to be paid with respect to the
                  periods covered by such returns have been paid. The Company is
                  not and has not been delinquent in the payment of any tax,
                  assessment or governmental charge. The Company is not a party
                  to any agreement, contract, arrangement or plan that has
                  resulted or would result, separately or in the aggregate, in
                  the payment of any "excess parachute payments" within the
                  meaning of Section 280G of the Code. The Company does not have
                  and has not had a permanent establishment in any foreign
                  country, as defined in any applicable tax treaty or convention
                  between the United States and such foreign country.

                           (b) Except as set forth in SCHEDULE 3.16, the Company
                  has not had any tax deficiency proposed or assessed against it
                  and has not executed any waiver of



                                       12
<PAGE>   12

                  any statute of limitations on the assessment or collection of
                  any tax or governmental charge. Except as set forth in
                  SCHEDULE 3.16, and except for sales tax audits, none of the
                  Company's franchise tax returns has ever been audited by
                  governmental authorities. No tax audit, action, suit,
                  proceeding, investigation or claim is now pending nor, to the
                  best knowledge of the Company, threatened against the Company,
                  and no issue or question has been raised (and is currently
                  pending) by any taxing authority in connection with any of the
                  Company's tax returns or reports.

                           (c) To the Company's knowledge, the reserves for
                  taxes, assessments and governmental charges reflected on the
                  Balance Sheet are and will be sufficient for the payment of
                  all unpaid taxes and governmental charges payable by the
                  Company with respect to the period ended on the Balance Sheet
                  Date. Since the Balance Sheet Date, the Company has made
                  adequate provisions on its books of account for all taxes,
                  assessments and governmental charges with respect to business,
                  properties and operations for such period. The Company
                  withheld or collected from each payment made to 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 depositories.

                  3.17 Litigation. No action, proceeding or investigation is
         pending or threatened against the Company, or any of its properties
         before any court, arbitration board or tribunal or administrative or
         other governmental agency (including, without limitation, unfair labor
         practices or discrimination charges or complaints), that might result,
         either individually or in the aggregate, in any material adverse change
         in the business, prospects, condition, affairs, operations, or assets
         of the Company or in any material liability on the part of the Company.
         The foregoing includes, without limiting its generality, actions
         pending or threatened involving the prior employment of any of the
         Company's employees or use by any of them in connection with the
         Company's business of any information, property or techniques allegedly
         proprietary to any of their former employers.

                  3.18 Minute Books. The minute books of the Company have been
         made available to the counsel for the Purchasers and contain a complete
         summary of all meetings of directors and shareholders since the time of
         incorporation and reflect all transactions referred to in such minutes
         accurately in all material respects.

                  3.19 Insurance. The Company carries property, liability,
         workers' compensation and such other types of insurance as is customary
         in the Company's industry. A list and brief description of all
         insurance policies of the Company are set forth in SCHEDULE 3.19. All
         of such policies are valid and enforceable policies, issued by insurers
         of recognized responsibility in amounts and against such risks and
         losses as are customary in the Company's industry. All casualty
         insurance is sufficient in amount to allow the Company to replace any
         of its properties that might be damaged or destroyed.

                                       13
<PAGE>   13

                  3.20 Fees and Commissions. The Company has retained Donaldson,
         Lufkin & Jenrette ("DLJ") as financial advisor and placement agent in
         connection with the transactions contemplated by this Agreement and
         Geneva Associates, L.L.C. and its affiliates ("GENEVA") as a financial
         advisor. The Company shall pay all fees owed DLJ and Geneva in
         connection with the transactions contemplated by this Agreement from
         the proceeds of the sale of the Preferred Stock (the "OFFERING")
         pursuant to the Placement Memorandum (as hereinafter defined). The
         Company represents and warrants that other than as stated in this
         SECTION 3.20, it has retained no finder, broker, agent, financial
         adviser or other intermediary in connection with the transactions
         contemplated by this Agreement. The Company agrees to indemnify and
         hold harmless the Purchasers for any brokerage commissions, finder's
         fees or similar compensation in connection with the transactions
         contemplated by this Agreement based on any arrangement or agreement
         made by the Company.

                  3.21 Employee Benefit Plans.

                           (a) SCHEDULE 3.21 contains true, complete and correct
                  information as to any bonus, incentive, insurance (including
                  any self-insured arrangements), compensation plan, welfare,
                  retirement, defined benefit, 401(k), pension, profit sharing,
                  salary reduction, deferred compensation, stock purchase, stock
                  option, workers' compensation, disability benefits,
                  supplemental unemployment benefits (including without
                  limitation any "voluntary employees' beneficiary association"
                  as defined in Section 501(C)(9) of the Code) (as hereinafter
                  defined), vacation, holiday and sick pay or other similar
                  benefit plans, programs or arrangements (whether written or
                  oral) (said plans, programs or arrangements being referred to
                  as the "PLANS") in which any employees of the Company
                  participate. All Plans are listed on the attached SCHEDULE
                  3.21. All obligations of the Company, whether arising by
                  operation of law, by contract or by past custom, for payment
                  by it to trusts, retirement plans or other funds or any
                  governmental agency with respect to unemployment compensation
                  benefits, social security benefits or any other benefits for
                  employees of the Company have been paid or shall be paid by
                  the Company at the time the Company is obligated to make such
                  payments. All benefits payable directly to the Company's
                  employees have been paid or shall be paid by the Company at
                  the time the Company is obligated to make such payments. All
                  reasonably anticipated obligations of the Company, whether
                  arising by operation of law, by contract or by past custom,
                  for vacation and holiday pay, bonuses and other forms of
                  compensation or benefits which are or may become payable to
                  employees or any of them have been paid, or shall be paid, in
                  accordance with the provisions of applicable laws,
                  regulations, benefit plans or policies.

                           (b) True, complete and correct copies of all relevant
                  documents with respect to the Plans, including, but not
                  limited to, each of the following documents: (i) a copy of the
                  Plan and each related trust or other funding agreement,
                  including insurance contracts (and all amendments thereto);
                  (ii) the last filed Form 5500, where applicable; (iii) the
                  most recent determination letter received from the Internal
                  Revenue Service with respect to each Plan that is



                                       14
<PAGE>   14

                  intended to be qualified under Section 401 of the Internal
                  Revenue Code of 1986, as amended (the "CODE"); and (iv) the
                  summary plan descriptions and all material modifications
                  thereto, have been delivered to Purchasers.

                           (c) All Plans, related trust agreements, annuity
                  contracts or other funding arrangements comply in all
                  substantial respects and the Company has administered and
                  operated each such Plan, related trust agreements, annuity
                  contracts or other funding arrangements in substantial
                  compliance with the requirements of applicable law, including,
                  without limitation, the Employee Retirement Income Security
                  Act of 1974 as amended ("ERISA"), and the Code, and no such
                  Plan that is subject to Part 3 of Subtitle B of Title I of
                  ERISA has incurred any "accumulated funding deficiency" within
                  the meaning of Section 302 of ERISA or Section 412 of the
                  Code, whether or not waived.

                           (d) The Company does not maintain and is not required
                  to contribute to any multi-employer plan (as defined in
                  Section 3(37) of ERISA) for the benefit of employees or former
                  employees of the Company. The Company does not maintain a
                  self-insured "multiple employer welfare arrangement" as
                  defined in Section 3(40) of ERISA.

                           (e) The Pension Benefit Guaranty Corporation ("PBGC")
                  has not instituted proceedings to terminate any of the
                  Company's defined benefit plans and no condition exists that
                  presents a risk that such proceedings shall be instituted.
                  There has been no "reportable event" within the meaning of
                  Section 4043(b) of ERISA with respect to any defined benefit
                  plan and no defined benefit plan has been terminated within
                  the preceding six years or is expected to be terminated. No
                  liability (other than for the payment of premiums) to the PBGC
                  has been or is expected to be incurred by the Company or any
                  officer, director, shareholder or employee of the Company with
                  respect to any defined benefit plan.

                           (f) The Company has no liability with respect to any
                  transaction which relates to any Plan and which is in
                  violation of Sections 404 or 406 of ERISA or constitutes a
                  "prohibited transaction," as defined in Section 4975(c)(1) of
                  the Code, and for which no exemption exists under Section 408
                  of ERISA or Section 4975(c)(2) or (d) of the Code. To the
                  Company's knowledge, the Company has not participated in a
                  violation of Part 4 of Title I, Subtitle B of ERISA by any
                  plan fiduciary of any Plan and has no unpaid civil penalty
                  under Section 502(1) of ERISA.

                           (g) There is no material action, order, writ,
                  injunction, judgment or decree outstanding or claim, suit,
                  litigation, proceeding, arbitral action, governmental audit or
                  investigation (including, without limitation, any such audit
                  or investigation by the Internal Revenue Service, Department
                  of Labor, or PBGC) relating to or seeking benefits under any
                  Plan that is pending or, to the Company's knowledge,
                  threatened or anticipated against the Company other than
                  routine claims for benefits.

                                       15
<PAGE>   15

                  3.22 Material Contracts and Commitments.

                           (a) Material Contracts and Commitments. Except as set
                  forth in SCHEDULE 3.22, the Company has not entered into, nor
                  is the capital stock, the assets or the business of the
                  Company bound by, whether or not in writing, any

                                    (i) deed of trust securing a lien in any
                           real property owned by the Company;

                                    (ii) security agreement granting a security
                           interest in connection with the Company's incurrence
                           of indebtedness for borrowed money;

                                    (iii) guaranty or suretyship agreement or
                           performance bond, in each case involving a contingent
                           obligation of the Company in excess of $100,000;

                                    (iv) consulting or compensation agreement or
                           similar arrangement that is not an Employment
                           Agreement and that involves compensation payable by
                           the Company in excess of $100,000 annually or an
                           agreement relating to the election or retention in
                           office of any director or officer;

                                    (v) debt instrument, loan agreement or other
                           obligation relating to indebtedness for borrowed
                           money;

                                    (vi) money lent or to be lent by the Company
                           to another in an amount in excess of $10,000;

                                    (vii) lease of real property, whether as
                           lessor, lessee, sublessor or sublessee (excluding the
                           real estate leases set forth on SCHEDULE 3.12);

                                    (viii) lease of personal property, whether
                           as lessor, lessee, sublessor or sublessee involving
                           lease payments in an annual amount in excess of
                           $50,000;

                                    (ix) any agreement for the acquisition of
                           services, supplies, equipment or other personal
                           property (excluding leases of real or personal
                           property) and involving more than $100,000 in the
                           aggregate;

                                    (x) contracts containing noncompetition
                           covenants restricting the Company's ability to
                           compete in the Telecommunications Business (as
                           hereinafter defined);

                                    (xi) agreement providing for the purchase
                           from a supplier of all or substantially all of the
                           requirements of the Company of a particular product
                           or service; or


                                       16
<PAGE>   16

                                    (xii) agreement or commitment a copy of
                           which would be required to be filed with the
                           Securities and Exchange Commission (the "Commission")
                           as an exhibit to a registration statement on Form
                           S-1, or a successor form, pursuant to Paragraph 10 of
                           Item 601 of Regulation S-K, if the Company were
                           registering securities under the Securities Act of
                           1933, as amended (the "Securities Act") .

                  All of the documents listed on SCHEDULE 3.22 hereof are
                  hereinafter collectively referred to as the "COMMITMENTS."
                  True, correct and complete copies of the written Commitments
                  have heretofore been made available to Purchasers. To the
                  knowledge of the Company, the Commitments are in full force
                  and effect and are valid and enforceable obligations of the
                  parties thereto in accordance with their respective terms
                  (except as may be limited by the laws of bankruptcy,
                  insolvency or creditors rights generally and subject to the
                  enforceability and availability of equitable remedies), and to
                  the knowledge of the Company, no defenses, off-sets or
                  counterclaims have been asserted by any party thereto, nor has
                  the Company waived in writing any rights thereunder, except as
                  described in SCHEDULE 3.22. The Company has not received
                  written notice of any default with respect to any Commitment.

                           (b) No Cancellation or Termination of Commitments.
                  Except as contemplated hereby, the Company has not received
                  written notice of any plan or intention of any other party to
                  any Commitment to exercise any right to cancel or terminate
                  any Commitment.

                  3.23 Conflict of Interest Transactions. Except as set forth on
         SCHEDULE 3.23, no director, Common Stock holder, member of management
         of the Company, or their spouses or children, owns directly or
         indirectly, on an individual or joint basis, any interests, has any
         investment in or serves as an officer, partner or director in any
         corporation, business or other person that is a customer, supplier or
         competitor of the Company, or that has a material contract or
         arrangement with the Company or its competitor, other than the
         ownership of less than one percent (1%) of the securities of any
         company that are publicly traded on any national exchange or over the
         counter market.

                  3.24 Environmental Matters. To the Company's knowledge,
         neither the Company nor any of its assets is currently in material
         violation of, or subject to any material existing, pending or
         threatened investigation or inquiry by any governmental authority or to
         any remedial obligations under any environmental laws, and this
         representation and warranty would continue to be true and correct
         following disclosure to the applicable governmental authorities of all
         relevant facts, conditions and circumstances, if any, pertaining to the
         assets and operations of the Company. To the Company's knowledge, the
         assets of the Company have never been used in a manner that would be in
         material violation of any of the environmental laws. To the Company's
         knowledge, the Company is not required to obtain any permits, licenses
         or similar authorizations to construct, occupy, operate or use any
         buildings, improvements, fixtures and equipment owned or leased by the
         Company by reason of any environmental laws.


                                       17
<PAGE>   17

         None of the assets owned or leased by the Company are on any federal or
         state "Superfund" list or subject to any environmentally related liens.

                  3.25 Other Transactions. Other than the offering and sale of
         the Series A Convertible Preferred Stock hereunder, the Company has not
         entered into any agreements or arrangements and has no knowledge of any
         pending or possible offers or discussions concerning or providing for
         the merger or consolidation of the Company or the sale of all or any
         substantial portion of its assets, the sale by the Company or any
         material shareholder of the Company of any Securities of the Company or
         any similar transaction affecting the Company or its security holders.

                  3.26 No Bankruptcies. For the past five years, neither the
         Company nor any of its officers, directors or affiliates, have
         voluntarily sought, consented to or acquiesced in the benefits of, or
         become the subject of a proceeding under the Bankruptcy Code of the
         United States or any other applicable liquidation, conservatorship,
         bankruptcy, moratorium, rearrangement, receivership, insolvency,
         reorganization or similar debtor relief laws from time to time in
         effect affecting the rights of creditors generally.

                  3.27 Year 2000 Compliance. To the Company's knowledge, the
         computer systems used by the Company are Year 2000 compliant, meaning
         that such systems will continue to function, and functionality and
         accuracy will not be affected as a result of the run date or the dates
         being processed in the twentieth or twenty-first century, including the
         advent of the Year 2000, or from the extra day occurring in any leap
         year.

                  3.28 Disclosure. To the Company's knowledge, this Agreement
         and the exhibits and schedules hereto, when taken as a whole with other
         documents and certificates furnished by the Company to the Purchasers
         or their counsel, do not contain any untrue statement of material fact
         or omit any material fact necessary in order to make the statements
         therein not misleading; provided, however, certain materials provided
         to the Purchasers contain projections and estimates of future events,
         and such projections and estimates are subject to the statements in the
         Placement Memorandum (as hereinafter defined), including, without
         limitation, the statements set forth on page 42 thereof. There is no
         fact known to the Company that has not been disclosed to the Purchasers
         prior to the date of this Agreement that materially and adversely
         affects the business, assets, properties, prospects or condition
         (financial or otherwise) of the Company, taken as a whole, or the
         ability of the Company to perform under this Agreement or the other
         agreements contemplated hereby or to consummate the transactions
         contemplated hereby or thereby. For purposes of this SECTION 3.28 only,
         "to the Company's knowledge" shall include any information the Company
         would have known except for its reckless disregard for the accuracy of
         any material fact.

                  3.29 Legal Compliance. Except as set forth on SCHEDULE 3.29,
         (a) the Company has all material franchises, permits, licenses and
         other rights and privileges necessary to permit them to own their
         respective properties and to conduct their respective businesses as
         presently conducted (all of which such items are set forth on SCHEDULE
         3.29) and (b) the Company, and the business and operations of the
         Company, have been and are being conducted in all material respects in
         accordance with all



                                       18
<PAGE>   18

         applicable laws, rules and regulations (including, without limitation,
         all employment, labor practices, safety and health laws and
         regulations), and the Company is not in violation of any judgment,
         order or decree. There is no existing law, rule, regulation or order
         which would prohibit or restrict the Company from, or otherwise
         materially adversely affect the Company in, conducting its business in
         any jurisdiction in which it is now conducting business or, to the
         Company's knowledge, in which it proposes to conduct business.

                  3.30 Small Business Concern. The Company, taken together with
         its "affiliates" (as that term is defined in Section 121.401 of Title
         13 of the Code of Federal Regulations) is a "Small Business Concern"
         within the meaning of Section 103(5) of the Small Business Investment
         Act of 1958, as amended (the "SBIC Act"), and the regulations
         thereunder, including Title 13, Code of Federal Regulations, ss.121.3,
         and meets the applicable size and eligibility criteria set forth in
         Title 13, Code of Federal Regulations, ss.121.802(a)(2). Neither the
         Company nor any of its subsidiaries, if any, presently engages in any
         activity for which a small business investment company is prohibited
         from providing funds by the SBIC Act and the regulations thereunder,
         including Title 13, Code of Federal Regulations, ss.107.

                  3.31 Small Business Administration Documentation. The Company
         has provided Purchasers, who have requested, a Small Business
         Administration "SBA" Form 480 (Size Status Declaration) and SBA Form
         652 (Assurance of Compliance), of such Forms, which have been completed
         and executed by the Company, and SBA Form 1031 (Portfolio Finance
         Report), Part A of which has been completed by the Company.

         4. Representations, Warranties and Covenants of Purchasers.

                  4.1 Organization and Good Standing. Each Purchaser severally
         represents and warrants that, if a corporation, partnership, trust or
         other form of business entity, it is duly organized, validly existing
         and in good standing under the laws of the state of its organization,
         has all requisite power and authority to own its property and assets
         and to carry on its business as it is presently being conducted and as
         it proposes to carry on its business, is duly qualified and in good
         standing and authorized to do business in each of the jurisdictions in
         which the failure to be so qualified would have a material adverse
         effect on the Purchaser.

                  4.2 Authorization; Approvals. Each Purchaser severally
         represents and warrants that the execution and delivery of this
         Agreement has been duly authorized by such Purchaser and this Agreement
         is a valid and legally binding obligation of such Purchaser legally
         enforceable against it in accordance with its terms, subject as to
         enforcement to bankruptcy, insolvency, reorganization and other laws of
         general applicability relating to or affecting creditor's rights and
         general principles of equity. Each Purchaser, if a corporation,
         partnership, trust or other form of business entity, is duly qualified
         to purchase and hold the Series A Convertible Preferred Stock sold
         hereunder. Each Purchaser represents and warrants that the information
         set forth on SCHEDULE 1 hereto regarding such Purchaser's business and
         residence addresses, telephone numbers, citizenship and taxpayer
         identification number is true, accurate and


                                       19
<PAGE>   19

         complete. Each Purchaser severally represents and warrants that it has
         obtained, or will obtain prior to the Closing Date, all necessary
         consents, authorizations, approvals and orders required on the part of
         such Purchaser in connection with the consummation of the transactions
         contemplated by this Agreement.

                  4.3 No Conflict with Other Instruments. The execution,
         delivery and performance of this Agreement will not result in any
         violation of, be in conflict with, or constitute a default under any
         terms or provisions of (a) if a corporation, partnership, trust or
         other form of business entity, the applicable charter documents of such
         Purchaser; (b) any material contract, indenture or other agreement to
         which the Purchaser is a party; or (c) any judgment, decree or order or
         any material statute, rule or governmental regulation applicable to the
         Purchaser.

                  4.4 Investment Representations. Each Purchaser severally
         represents and warrants that it is acquiring the Series A Convertible
         Preferred Stock to be purchased by it (and any Class A Common Stock
         into which it may be converted) for its own account, for investment and
         not with a view to, or for sale in connection with, any distribution of
         such stock or any part thereof.

                  4.5 Investment Experience; Access to Information. Each
         Purchaser severally represents and warrants that it (a) is an
         "accredited investor" as that term is defined in Rule 501(a)
         promulgated under the Securities Act (or any successor provision), (b)
         has such knowledge and experience in financial and business matters as
         to be capable of evaluating the merits and risks of this investment,
         (c) has the ability to bear the economic risks of this investment for
         an indefinite period of time, and (d) has received a copy of the
         Private Placement Memorandum and any supplements thereto (collectively,
         the "PLACEMENT Memorandum") attached hereto as EXHIBIT D.

                  4.6 Absence of Registration. Each Purchaser understands that:

                           (a) The Series A Convertible Preferred Stock to be
                  sold and issued hereunder and the Class A Common Stock into
                  which it may be converted have not been registered under the
                  Securities Act or any other securities laws on the basis that
                  the sale of such stock to the Purchaser is exempt from
                  registration under the Securities Act and such other
                  securities laws, and the Purchaser may be required to hold
                  such stock indefinitely unless it is subsequently registered
                  under the Securities Act and any other applicable securities
                  laws, or exemptions from such registration are available.

                           (b) The Company's reliance on the exemptions referred
                  to in SECTION 4.6(a) above is predicated in part upon the
                  Purchaser's representations and warranties contained in this
                  ARTICLE 4.

                           (c) Except as provided in that certain Registration
                  Rights Agreement, to be executed at the Closing, by and among
                  the Company and the Purchasers (the "Registration Rights
                  Agreement"), attached hereto as EXHIBIT E and as noted in
                  SCHEDULE 4.6 hereto, the Company is under no obligation to
                  file a registration



                                       20
<PAGE>   20



                  statement with the Commission or any other securities
                  regulatory agency with respect to the Series A Convertible
                  Preferred Stock or the Class A Common Stock into which it may
                  be converted.

                           (d) Rule 144 promulgated under the Securities Act or
                  any successor provision ("RULE 144"), which provides for
                  certain limited sales of unregistered securities, is not
                  presently available with respect to the Series A Convertible
                  Preferred Stock or the Class A Common Stock into which it may
                  be converted, and the Company is under no obligation to make
                  Rule 144 available.

                  4.7 Restrictions on Transfer. Each Purchaser agrees that: (a)
         it will not offer, sell, pledge, hypothecate, or otherwise dispose of
         the Series A Convertible Preferred Stock or the Class A Common Stock
         into which it may be converted unless such offer, sale, pledge,
         hypothecation or other disposition is in accordance with the Statement
         of Designation and this Agreement and is (i) registered under the
         Securities Act and any other applicable securities laws, or (ii) in
         compliance with an opinion of counsel to such Purchaser, delivered to
         the Company and reasonably acceptable to it, to the effect that such
         offer, sale, pledge, hypothecation or other disposition thereof does
         not violate the Securities Act or such other securities laws; and (b)
         the certificate(s) representing the Series A Convertible Preferred
         Stock (and any Class A Common Stock into which it may be converted)
         shall bear a legend stating in substance:

                  THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
                  UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER
                  APPLICABLE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR
                  OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
                  UNTIL REGISTERED UNDER SAID ACT OR SUCH LAWS OR, IN THE
                  OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
                  ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
                  PLEDGE OR HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS
                  THEREOF.

         In addition, the certificates evidencing the Series A Convertible
Preferred Stock shall bear legends stating in substance:

                  THE SECURITIES REPRESENTED BY THIS CERTIFICATE ALSO ARE
                  SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND
                  OBLIGATIONS, TO WHICH ANY TRANSFEREE AGREES BY HIS ACCEPTANCE
                  HEREOF, AS SET FORTH IN THE STOCK PURCHASE AGREEMENT BETWEEN
                  THE ISSUER AND INITIAL PURCHASER, A COPY OF WHICH MAY BE
                  OBTAINED FROM THE COMPANY. NO TRANSFER OF SUCH SHARES WILL BE
                  MADE ON THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY
                  EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT AND BY
                  AN AGREEMENT OF THE TRANSFEREE


                                       21
<PAGE>   21

                  TO BE BOUND BY THE RESTRICTIONS SET FORTH IN SAID STOCK
                  PURCHASE AGREEMENT.

                  THE ISSUER IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OR
                  SERIES OF CAPITAL STOCK. A STATEMENT OF THE POWERS,
                  DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING OPTIONAL
                  OR OTHER SPECIAL RIGHTS OF EACH CLASS OR SERIES OF CAPITAL
                  STOCK AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF
                  SUCH PREFERENCES AND/OR RIGHTS (TO THE EXTENT ESTABLISHED) IS
                  ON FILE WITH THE SECRETARY OF STATE OF THE STATE OF TEXAS. THE
                  ISSUER WILL FURNISH A COPY OF SUCH STATEMENT TO ANY
                  SHAREHOLDER OF RECORD, WITHOUT CHARGE, UPON THE WRITTEN
                  REQUEST TO THE ISSUER AT ITS PRINCIPAL PLACE OF BUSINESS OR
                  REGISTERED OFFICE.

                  Upon request of a holder of Series A Convertible Preferred
         Stock or the Class A Common Stock into which it has been converted, the
         Company shall remove the legend set forth above from the certificates
         evidencing such Series A Convertible Preferred Stock or Class A Common
         Stock or issue to such holder new certificates therefor free of such
         legend, if with such request the Company shall have received an opinion
         of counsel selected by the holder and reasonably satisfactory to the
         Company, in form and substance reasonably satisfactory to the Company,
         to the effect that a transfer by said holder of such Series A
         Convertible Preferred Stock or Class A Common Stock will not violate
         the Securities Act or any other applicable securities laws.

                  Notwithstanding the provisions above, no such registration or
         opinion of counsel shall be necessary for a pro rata transfer by a
         Purchaser which is a partnership to a partner of such partnership or a
         retired partner of such partnership who retires after the date hereof
         without the payment of compensation by such partner, or to the estate
         of any such partner or retired partner or the transfer by gift, will or
         intestate succession of any partner to his spouse or lineal descendants
         or ancestors, if the transferee agrees in writing to be subject to the
         terms hereof to the same extent as if such transferee were an original
         Purchaser hereunder, including without limitation, the representations,
         warranties, covenants and agreements contained in SECTIONS 4.1 to 4.7
         hereto, inclusive.

                  4.8 Transfer Instructions. Each Purchaser agrees that the
         Company may place and make appropriate notations in its record books
         against the transfer of the shares of Series A Convertible Preferred
         Stock to be purchased by it and any Class A Common Stock into which
         such shares may be converted, and may take any other actions which it
         deems necessary to prevent any violations of the Securities Act or any
         other securities laws by reason of the delivery of such stock or any
         subsequent transaction with respect to such stock.

                  4.9 Economic Risk. Each Purchaser understands that it must
         bear the economic risk of the investment represented by the purchase of
         Series A Convertible



                                       22
<PAGE>   22

         Preferred Stock and any Class A Common Stock into which it may be
         converted for an indefinite period.

                  4.10 Fees and Commissions. Each Purchaser represents and
         warrants that it has retained no finder, broker, agent, financial
         advisor or other intermediary (hereinafter collectively referred to as
         "INTERMEDIARY") in connection with the transactions contemplated by
         this Agreement and agrees to indemnify and hold harmless the Company
         from liability for any compensation to any Intermediary retained by
         such Purchaser and the fees and expenses of defending against such
         liability or alleged liability.

         5. Conditions to Closing of the Purchasers. The obligation of each
Purchaser on the Closing Date to consummate the transactions contemplated by
this Agreement shall be subject to each of the following conditions precedent,
any one or more of which may be waived by such Purchaser:

                  5.1 Representations and Warranties. The representations and
         warranties made by the Company herein shall be true and accurate on and
         as of the Closing Date.

                  5.2 Performance. The Company shall have performed and complied
         with all agreements, conditions and covenants contained herein or in
         any other ancillary documents incident to the transactions contemplated
         by this Agreement required to be performed or complied with by it prior
         to or at the Closing.

                  5.3 Company Consents, etc. The Company shall have secured all
         permits, consents and authorizations that shall be necessary or
         required lawfully to consummate this Agreement, to issue the Series A
         Convertible Preferred Stock to be purchased by the Purchasers and to
         issue the Class A Common Stock into which it may be converted.

                  5.4 Compliance Certificates. The Company shall have delivered
         to each Purchaser or its representative at the Closing an Officer's
         Certificate to the effect that the representations and warranties of
         the Company continue to be true and accurate in all material respects
         on the Closing Date, and that all conditions specified in SECTIONS 5.1
         to 5.3 hereof, inclusive, have been fulfilled and that there has been
         no materially adverse change in the business, affairs, prospects,
         operations or condition of the Company since the Balance Sheet Date.

                  5.5 Government Actions. No action, suit or proceeding shall
         have been instituted before any court, governmental or regulatory body
         or arbitral tribunal, or instituted or threatened by any governmental
         or regulatory body to restrain, modify or prevent the carrying out of
         the transactions contemplated hereby or to seek damages or a discovery
         order in connection with such transactions.

                  5.6 The Statement of Designation. Each Purchaser shall have
         received evidence that the Company shall have duly authorized and filed
         the Statement of Designation with the Secretary of State of the State
         of Texas, substantially in the form attached hereto as EXHIBIT C;

                                       23
<PAGE>   23

                  5.7 The Articles of Incorporation. Each Purchaser shall have
         received a copy of the Articles of Incorporation of the Company and all
         amendments thereto, certified by the Secretary of State of Texas, which
         shall include evidence that the Company shall have duly authorized and
         filed the Amended and Restated Articles of Incorporation with the
         Secretary of State of the State of Texas, substantially in the form
         attached hereto as EXHIBIT A;

                  5.8 Legal Opinion. Counsel for the Company, Winstead, Sechrest
         & Minick, P.C., shall have delivered to the Purchasers a legal opinion,
         dated as of the Closing Date and substantially in the form attached
         hereto as EXHIBIT F;

                  5.9 Company Deliveries. The Company shall have delivered to
         the Purchasers:

                           (a) (i) copies of the resolutions of the Company's
                  Board of Directors authorizing and approving this Agreement
                  and all of the transactions and agreements contemplated hereby
                  and thereby, (ii) the Bylaws of the Company and (iii) the
                  names of the officer or officers of the Company authorized to
                  execute this Agreement and any and all documents, agreements
                  and instruments contemplated herein, all certified by the
                  Secretary of the Company to be true, correct, complete and in
                  full force and effect and unmodified as of the Closing Date;

                           (b) a certificate of existence for the Company from
                  the Secretary of State of the State of Texas;

                           (c) a certificate of account status for the Company
                  from the Comptroller of the State of Texas; and

                           (d) certificates from each state where the Company is
                  required to be qualified as a foreign corporation showing such
                  qualification, dated as of a date within ten (10) days of the
                  Closing Date; and

                           (e) a Registration Rights Agreement in substantially
                  the form attached hereto as EXHIBIT E.

                  5.10 Total Subscription. The Company shall have secured
         subscriptions from the Purchasers to purchase an aggregate of at least
         1,861,703 shares of Series A Convertible Preferred Stock for an
         aggregate amount of $35,000,000, pursuant to this Agreement. These
         Purchasers shall purchase their shares contemporaneously at the
         Closing.

                  5.11 Employment Agreements. As of the Closing Date, as a
         condition to the Purchaser's obligation to consummate the transactions
         contemplated herein, James R. Price, Charles W. Price, Matthew
         Hutchins, William H. Anderton and Daniel A. Gillett shall have entered
         into employment agreements with the Company, containing




                                       24
<PAGE>   24

         nondisclosure and noncompete covenants, such agreements to be in form
         and substance reasonably satisfactory to the Purchasers.

         6. Conditions to Closing of Company. The obligation of the Company on
the Closing Date to consummate the transactions contemplated by this Agreement
shall be subject to the following conditions precedent, any one or more of which
may be waived by the Company:

                  6.1 Representations and Warranties. The representations and
         warranties made by the Purchasers herein shall be true and accurate on
         and as of the Closing Date.

                  6.2 Performance. Purchasers shall have performed and complied
         with all agreements and conditions contained herein or in any other
         ancillary documents incident to the transactions contemplated by this
         Agreement required to be performed or complied with by such Purchasers
         prior to or at the Closing.

                  6.3 Purchaser Consents, etc. Purchasers shall have secured all
         permits, consents, waivers and authorizations that shall be necessary
         or required lawfully to consummate this Agreement.

                  6.4 Compliance Certificates. Each Purchaser shall have
         delivered to the Company at the Closing an Officer's Certificate to the
         effect that the representations and warranties of the Purchaser
         continue to be true and accurate in all material respects on the
         Closing Date, and that all conditions specified in SECTIONS 6.1 to 6.3
         hereof, inclusive, have been fulfilled.

         7. Affirmative Covenants.

                  7.1 Financial Information. The Company will deliver to each
         Purchaser:

                           (a) within forty five (45) days of the end of each
                  calendar quarter, quarterly and year-to-date balance sheet and
                  statements of income, changes in stockholders equity, and cash
                  flow prepared in accordance with GAAP and certified by the
                  Company's Chief Financial Officer, except such financial
                  statements shall not contain normal and recurring year-end
                  audit adjustments.

                           (b) within one hundred twenty (120) days after the
                  fiscal year end, an annual independent certified audit from an
                  outside accounting firm reasonably designated by the Company;

                           (c) As soon as practicable, but no later than thirty
                  (30) days after the beginning of each fiscal year, beginning
                  January 1, 2000, the Company shall provide to the Purchasers a
                  copy of the annual budget and plan for such year which shall
                  include, without limitation, plans for incurrences of
                  indebtedness for borrowed money and projections regarding
                  types of sources of funds, monthly projected capital and
                  operating expense budgets and cash flow projections.

                                       25
<PAGE>   25

                  7.2 Use of Proceeds. The Company shall use the proceeds from
         the sale of Series A Convertible Preferred Stock for the purposes of
         capital expenditures and general corporate purposes, including working
         capital.

                  7.3 Confidentiality. Any information provided pursuant to this
         Agreement shall be used by a Purchaser solely in furtherance of its
         interests as an investor in the Company, and each Purchaser shall
         (except as otherwise required by law) maintain the confidentiality of
         all non-public information of the Company obtained under said section.
         Each Purchaser will have no obligation to maintain confidentiality of
         any information which (i) at the time of disclosure or thereafter is
         generally available to and known by the public (other than as a result
         of a disclosure directly or indirectly by a Purchaser or the
         Purchaser's representatives), (ii) was available to a Purchaser on a
         nonconfidential basis from a source other than the Company or its
         advisors, provided that such source is not and was not directly or
         indirectly bound by a confidentiality agreement with the Company or
         otherwise prohibited from transmitting the information to such
         Purchaser or the Purchaser's representatives by a contractual, legal or
         fiduciary obligation, or (iii) has been independently acquired or
         developed by a Purchaser without violating any of such Purchaser's
         obligations under this Agreement or any other agreement such Purchaser
         has with the Company or its agents.

                  7.4 Right of First Refusal. Except in the event of and after
         the consummation of an Approved Offering (as hereinafter defined) and
         with respect to dispositions to any direct or indirect parent or
         subsidiary of a Purchaser who agrees to be bound by the terms of this
         Agreement, no Purchaser shall be permitted to dispose of any shares of
         the Series A Convertible Preferred Stock unless such shares shall have
         been offered for sale in writing first to the Company and then to the
         other shareholders of the Company (including the other Purchasers) pro
         rata as set forth in this SECTION 7.4. In the event a shareholder
         desires to transfer any Series A Convertible Preferred Stock, the
         shareholder desiring to make such transfer (the "TRANSFERRING
         SHAREHOLDER") shall deliver written notice (the "OFFER NOTICE") to the
         Company and to all other shareholders (including the other Purchasers)
         at least ninety (90) days prior to the proposed transfer. The Offer
         Notice will disclose in reasonable detail the proposed number of shares
         to be transferred, the proposed transferee and the proposed price,
         terms and conditions of the transfer.

                           (a) Upon receipt of the Offer Notice, the Company
                  shall have the option (the "COMPANY'S OPTION") for a period of
                  thirty (30) days to purchase or otherwise acquire all or part
                  of the shares described in the Offer Notice for an aggregate
                  amount (such aggregate amount being hereinafter referred to as
                  the "OPTION PRICE") equal to the bona fide purchase price to
                  be paid by the proposed purchaser as described in the Offer
                  Notice (which amount shall be zero if the proposed transfer
                  would take the form of a gift or other gratuitous transfer).
                  The Company shall notify in writing all then current holders
                  of Series A Convertible Preferred Stock as to whether it will
                  exercise, partially exercise or not exercise the Company's
                  Option before the expiration of the Company's Option.

                           (b) In the event that the Company does not elect to
                  fully exercise the Company's Option within thirty (30) days
                  after receipt of the Offer Notice, the



                                       26
<PAGE>   26

                  remaining holders of Series A Convertible Preferred Stock
                  shall have the option (each a "SERIES A SHAREHOLDER'S OPTION")
                  for a period of ten (10) days from the earlier of (i) their
                  receipt of written notice from the Company of its decision not
                  to exercise or to only partially exercise the Company's
                  Option, or (ii) the expiration of the Company's Option (the
                  "SERIES A SHAREHOLDER ELECTION PERIOD"), to purchase or
                  otherwise acquire all or part of the remaining shares which
                  the Company does not choose to purchase pursuant to the
                  Company's Option, in proportion to their respective ownership
                  of shares of Series A Convertible Preferred Stock which, for
                  purposes of such determination, shall include without
                  duplication all outstanding options, warrants or other rights
                  owned by such shareholders that are convertible into shares of
                  Series A Convertible Preferred Stock as of the date of such
                  notice from the Company (or the expiration of the Company's
                  Option), for an amount equal to the applicable portion of the
                  Option Price. Each holder of Series A Convertible Preferred
                  Stock shall notify in writing all then current holders of
                  Series A Convertible Preferred Stock as to whether such
                  shareholder will exercise, partially exercise or not exercise
                  the Series A Shareholder's Option before the expiration of the
                  Series A Shareholder Election Period.

                           (c) For a period of ten (10) days from the earlier of
                  (i) the receipt by the other holders of Series A Convertible
                  Preferred Stock of a written notice from a holder of Series A
                  Convertible Preferred Stock that it does not want to exercise
                  its option or will only partially exercise its option, or (ii)
                  the expiration of the Series A Shareholder Election Period,
                  the other holders of Series A Convertible Preferred Stock
                  shall have the right (the "SERIES A SHAREHOLDER'S SECOND
                  OPTION") to purchase or otherwise acquire such shareholder's
                  portion of the shares described in the Offer Notice in
                  proportion to their respective ownership of shares of Series A
                  Convertible Preferred Stock (determined as described in
                  SECTION 7.4(b) above).

                           (d) In the event that the holders of Series A
                  Convertible Preferred Stock do not elect to fully exercise the
                  Series A Shareholder's Second Option before the expiration of
                  the Series A Shareholder's Second Option, the remaining
                  shareholders shall have the option (each a "SHAREHOLDER'S
                  OPTION") for a period of ten (10) days from the earlier of (i)
                  their receipt of written notice from the holders of the Series
                  A Convertible Preferred Stock of their decision not to
                  exercise or to only partially exercise the Series A
                  Shareholder's Second Option, or (ii) the expiration of the
                  Series A Shareholder's Second Option (the "OTHER SHAREHOLDER
                  ELECTION PERIOD"), to purchase or otherwise acquire all or
                  part of the remaining shares which the holders of Series A
                  Convertible Preferred Stock do not choose to purchase pursuant
                  to the Series A Shareholder's Second Option, in proportion to
                  their respective ownership of shares which, for purposes of
                  such determination, shall include without, duplication all
                  outstanding options, warrants or other rights owned by such
                  shareholders that are convertible into shares as of the date
                  of such notice from the holders of the Series A Convertible
                  Preferred Stock (or the expiration of the Series A
                  Shareholder's Second Option), for an amount equal to the
                  applicable portion of the Option Price. Each shareholder



                                       27
<PAGE>   27

                  shall notify in writing all then current shareholders as to
                  whether such shareholder will exercise, partially exercise or
                  not exercise the Shareholder's Option before the expiration of
                  the Other Shareholder Election Period.

                           (e) For a period of ten (10) days from the earlier of
                  (i) the receipt by the other shareholders of a written notice
                  from a shareholder that it does not want to exercise its
                  option or will only partially exercise its option, or (ii) the
                  expiration of the Other Shareholder Election Period, the other
                  shareholders shall have the right to purchase or otherwise
                  acquire such shareholder's portion of the shares described in
                  the Offer Notice in proportion to their respective ownership
                  of shares (determined as described in SECTION 7.4(d) above).

                           (f) If shares of a Transferring Shareholder remain
                  unsold after compliance with the procedures set forth in this
                  SECTION 7.4, the Company shall have the final option for ten
                  (10) days to purchase or otherwise acquire all of the
                  remaining shares proposed to be transferred for an amount
                  equal to the applicable portion of the Option Price. If,
                  however, the Company and the other shareholders do not
                  individually or collectively elect to purchase all of the
                  shares being offered, the Transferring Shareholder may, within
                  thirty (30) days after the expiration of the Other Shareholder
                  Election Period (subject to the provisions of SECTION 7.4(h)
                  below), transfer all of the shares specified in the Offer
                  Notice to the transferee identified in the Offer Notice at the
                  price and terms stated in the Offer Notice. Any shares so
                  transferred thereupon shall continue to be subject to this
                  Agreement, and the transferee shall have the rights and
                  obligations set forth in this Agreement hereunder with respect
                  to such shares. If the Transferring Shareholder fails to
                  consummate such transfer within the thirty day period after
                  the expiration of the Other Shareholder Election Period, any
                  transfer of the shares thereafter shall again be subject to
                  the provisions of this SECTION 7.4.

                           (g) Unless otherwise agreed in writing, signed by the
                  person against whom such writing is sought to be enforced, the
                  closing of any acquisition of Series A Convertible Preferred
                  Stock hereunder pursuant to the Company's Option, a Series A
                  Shareholder's Option, or a Shareholder's Option shall take
                  place within forty-five (45) days of an applicable option's
                  exercise. If any such closing does not take place within such
                  forty-five day period, then the shares that were to be
                  acquired shall be offered in accordance with this SECTION 7.4
                  as though the applicable option had not been exercised.

                           (h) Notwithstanding the foregoing provisions of this
                  SECTION 7.4, the following shall apply in the event of any
                  Involuntary Transfer of Series A Convertible Preferred Stock.
                  An "INVOLUNTARY TRANSFER" shall mean any transfer caused by
                  the death of a shareholder, as well as any transfer,
                  proceeding or action by, through, as a consequence of, or in
                  which a shareholder shall be deprived or divested of any
                  right, title or interest in or to any of the Series A
                  Convertible Preferred Stock of the Company, including, without
                  limitation, any seizure under levy, attachment or execution,
                  any transfer in connection with bankruptcy (whether pursuant
                  to a filing of a voluntary or an involuntary petition under
                  the




                                       28
<PAGE>   28

                  United States Bankruptcy Code, or any amendments,
                  modifications, revisions or successor statutes thereto) or
                  other court proceeding to a debtor-in-possession, trustee in
                  bankruptcy or receiver or other officer or agency, any
                  transfer to a state or to a public officer or agency pursuant
                  to any statute pertaining to escheat or abandoned property,
                  any transfer pursuant to a separation agreement, equitable
                  distribution agreement or community property distribution
                  agreement, or the entry of a final court order in a divorce
                  proceeding from which there is no further right of appeal.

                           In the event of any Involuntary Transfer, the Company
                  shall give written notice to each shareholder upon the
                  occurrence, or prospective occurrence, of such Involuntary
                  Transfer within fifteen (15) days of the date on which the
                  Company is notified of the occurrence or prospective
                  occurrence of such Involuntary Transfer. The foregoing
                  provisions of this SECTION 7.4 then shall apply, except (i)
                  the Option Price shall be the value of the Company as
                  determined by a qualified representative of a nationally
                  recognized investment banking or accounting firm mutually
                  agreeable to the Company and the shareholder who made, or may
                  make, the Involuntary Transfer, multiplied by the percentage
                  of all equity interests in the Company that is then
                  represented by the shares that are the subject of the
                  Involuntary Transfer, such independent appraised value to take
                  into account the earnings and book value of the Company, and
                  (ii) the appraiser shall deliver written notice of such
                  valuation to the Company and to all other shareholders
                  promptly following his completion of such valuation, and such
                  written notice shall be considered the Option Notice for
                  purposes of this SECTION 7.4. The cost of the appraisal shall
                  be shared equally by the Company and the shareholder who made,
                  or may make, the Involuntary Transfer.

                           At the closing of any purchase by the Company or any
                  shareholders pursuant to this SECTION 7.4(h), the involuntary
                  transferee shall deliver certificates representing the Series
                  A Convertible Preferred Stock being purchased, duly endorsed
                  for transfer and accompanied by all requisite stock transfer
                  taxes, and such shares shall be conveyed free and clear of any
                  liens, claims, options, charges, encumbrances or rights of
                  others arising through the action or inaction of the
                  involuntary transferee, and the involuntary transferee shall
                  so represent and warrant. The involuntary transferee shall
                  further represent and warrant that he is the beneficial owner
                  of such shares.

                           In the event the provisions of this SECTION 7.4(h)
                  shall be held to be unenforceable with respect to any
                  particular Involuntary Transfer of common stock, or if all of
                  the shares subject to the Involuntary Transfer are not
                  purchased by the Company and/or one or more shareholders, and
                  if the involuntary transferee subsequently desires to transfer
                  such common stock, the involuntary transferee shall be deemed
                  to be a "Transferring Shareholder" under this SECTION 7.4 and
                  shall be bound by the other provisions of this Agreement.

                           (i) Notwithstanding anything to the contrary
                  contained in this SECTION 7.4, no shareholder shall transfer
                  any Series A Convertible Preferred



                                       29
<PAGE>   29

                  Stock at any time if such action would constitute a violation
                  of any federal or state securities laws or a breach of the
                  conditions to any exemption from registration of the shares
                  under any such laws or a breach of any undertaking or
                  agreement of such shareholder entered into pursuant to such
                  laws or in connection with obtaining an exemption thereunder.
                  Each shareholder agrees that any shares purchased or acquired
                  by such shareholder shall bear appropriate legends restricting
                  the sale or other transfer of such shares in accordance with
                  applicable federal and state securities laws, in addition to a
                  legend referring, to the restrictions set forth in this
                  Agreement.

                           (j) The Amended and Restated Articles of
                  Incorporation shall contain provisions similar to the
                  foregoing provisions of SECTION 7.4 by which all of the
                  holders of the Common Stock grant a similar right of first
                  refusal to purchase the shares of such holders to the Company
                  and the holders of the Series A Convertible Preferred Stock,
                  and such provisions may not be amended without the consent or
                  approval of the holders of a majority of the outstanding
                  shares of the Series A Convertible Preferred Stock.

                                       30
<PAGE>   30

                  7.5 Sale of the Company. At any time after April 4, 2001, and
         before the consummation of an Approved Offering, if a bona fide offer
         is made by any person (other than I 3S Funding I, L.L.C. ("FUNDING"),
         Blue Ridge Investors Limited Partnership ("BLUE RIDGE") and Spotswood
         Capital, LLC ("SPOTSWOOD"), or any person or entity related to or
         affiliated with Funding, Blue Ridge and Spotswood), to purchase all or
         substantially all of the assets or shares of stock of the Company, and
         Funding gives the Company written notice that it desires such offer to
         be accepted, the Company shall either accept the offer and consummate
         the sale on the terms and conditions of the offer (in which case, if
         the transaction is a stock sale or merger, Spotswood and Blue Ridge
         also shall sell all of their equity interests in the Company on those
         terms and conditions), or, subject to the last paragraph of this
         SECTION 7.5, the Company shall acquire all the equity interests owned
         by Funding, Spotswood and Blue Ridge in the Company on the same terms
         and conditions as the offer; provided, however, that if such offer is
         made prior to April 4, 2003, the Company shall have no such obligation
         unless the total consideration of such offer is at least $350,000,000.
         If at any time Funding approves the sale of substantially all of the
         assets or shares of stock of the Company or if the transaction is a
         stock sale or merger, Blue Ridge and Spotswood shall sell all of their
         equity interests in the Company on the terms and conditions so
         approved. If the Company accepts an offer to sell the Company made
         after April 4, 2001, the Purchasers and any person that acquires the
         Series A Convertible Preferred Stock shall sell their shares of Series
         A Convertible Preferred Stock (and Class A Common Stock, if the shares
         of Preferred Stock have been converted) and/or vote in favor of the
         proposed transaction (as the case may be) so long as the holders of the
         Series A Convertible Preferred Stock shall receive for their shares of
         Preferred Stock an amount in cash equal to the aggregate Liquidation
         Preference (as defined in the Statement of Designation of the Series A
         Convertible Preferred Stock) plus accrued and unpaid dividends for such
         shares of Series A Convertible Preferred Stock, in preference to any
         other holders of capital stock of the Company. At least 20 days prior
         to the consummation of any such sale, the Company shall give the
         holders of the Series A Convertible Preferred Stock written notice of
         the material terms of the proposed sale. The holders of the outstanding
         shares of Series A Convertible Preferred Stock shall have the right to
         convert their shares into shares of Class A Common Stock prior to or
         concurrently with the consummation of any such sale and thereby be
         entitled to receive their pro rata share of the proceeds of the sale
         that would otherwise be payable to the holders of the Class A Common
         Stock (assuming for such calculation the conversion of such shares of
         Series A Convertible Preferred Stock as have exercised such right to
         convert). The exercise of such right to convert by a holder of Series A
         Convertible Preferred Stock shall be in lieu of any right to receive
         such Liquidation Preference plus accrued and unpaid dividends as a
         holder of such Series A Convertible Preferred Stock or otherwise. In
         determining the total consideration for purposes of the foregoing, any
         deferred payment shall be discounted to present value at a discount
         rate of eight percent (8%) per annum.

         Under its agreements with Funding, the Company has the right to avoid
the required sale of the Company, as described in this SECTION 7.5, by redeeming
the outstanding shares of Class B Common Stock and Class C Common Stock held by
Funding, Blue Ridge and Spotswood. The Company acknowledges and agrees that it
may not redeem such shares without first obtaining



                                       31
<PAGE>   31

the consent or approval of the holders of a majority of the outstanding shares
of Series A Convertible Preferred Stock, as required by the Statement of
Designation.

                  7.6 Right of Co-Sale. At any time prior to the consummation of
         an Approved Offering, the Purchasers and the holders of Class B Common
         Stock and Class C Common Stock shall have the right to participate pro
         rata to the fullest extent of their equity interest in the Company in
         any sale or transfer of stock (with each share of Series A Convertible
         Preferred Stock being treated for such purposes as the number of shares
         of Class A Common Stock into which it could then be converted), by any
         holder of shares of Class A Common Stock to any third party.

                  7.7 Observers. Each Purchaser who purchases at least 531,915
         shares of Series A Convertible Preferred Stock, and so long as such
         Purchaser continues to beneficially own at least 531,915 shares of
         Series A Convertible Preferred Stock or Common Stock (as adjusted for
         a Recapitalization Event), may designate one person to serve as an
         observer (an "OBSERVER"). An observer shall be entitled (i) to receive
         the same notice in respect of all meetings (both regular and special)
         of the Board of Directors and each committee thereof (other than the
         Audit Committee and Compensation Committee) as required to be furnished
         to members of the Board of Directors of such committee by law or by the
         Amended and Restated Articles of Incorporation or the Amended and
         Restated Bylaws of the Company, (ii) to attend all meetings of the
         Board of Directors and each committee thereof (other than the Audit
         Committee and Compensation Committee), (iii) to receive all information
         and reports which are furnished to members of the Board of Directors
         and each committee thereof (including the Audit Committee and
         Compensation Committee) at the time so furnished, and (iv) to
         participate in all discussions conducted at meetings of the Board of
         Directors and each committee thereof (other than the Audit Committee
         and Compensation Committee). In the event that the directors are
         discussing or voting on matters that directly relate to any business
         dealings between the Company and (i) any Purchaser beneficially owning
         at least 531,915 shares of Series A Convertible Preferred Stock or (ii)
         any other vendor that competes with a Purchaser that has observer
         rights hereunder, the Board may recuse all (but not less than all) of
         the Observers until such matters have been concluded. An Observer may
         share any information gained from presence at such  meetings with the
         Purchaser that designated such Observer and such Purchaser's employees,
         officers, directors, attorneys and advisors (collectively, the
         "PURCHASER'S REPRESENTATIVES"), but such information shall otherwise be
         kept confidential by the Observer, Purchaser and Purchaser's
         Representatives to the same extent that financial information or other
         confidential information with regard to the Company is required to be
         kept confidential in accordance with SECTION 7.3.

                  7.8 Key Man Insurance. Within 60 days of the Closing, the
         Company will obtain and maintain (so long as they are officers of the
         Company) a "key man life insurance policy" in the amount of $1,000,000
         each on the lives of James R. Price, Charles W. Price, Matthew
         Hutchins, William H. Anderton and Daniel A. Gillett.

                  7.9 Access to Information. The Company will permit the
         Purchasers to inspect at the Purchasers' expense any of the properties
         or books and records of the Company, and to discuss the affairs and
         condition of the Company with representatives



                                       32
<PAGE>   32

         of the Company, except for information that (i) relates to any of the
         business dealings between the Company and any of the Purchasers, (ii)
         relates to any other vendor that competes with any of the Purchasers,
         or (iii) is subject to any obligation of the Company to maintain the
         confidentiality of such information, during normal business hours and
         upon at least 24 hours prior notice to the Company, but no more
         frequent than once each calendar quarter.

                  7.10 Restricted Corporate Actions. The Company will not,
         without the vote or written approval of the holders of a majority of
         the outstanding Series A Convertible Preferred Stock, take any of the
         following actions:

                           (a) engage in any business outside the
                  Telecommunications Business . For purposes of this SECTION
                  7.10(a) and as otherwise used in this Agreement,
                  "TELECOMMUNICATIONS BUSINESS" shall mean the business of (i)
                  transmitting, or providing services relating to the
                  transmission of , voice, data or video through owned or leased
                  transmission facilities, (ii) constructing, creating,
                  developing or marketing communications-related network
                  equipment, software and other devices for use in a
                  telecommunications business or (iii) evaluating, participating
                  or pursuing any other activity or opportunity that is
                  primarily related to those identified in clauses (i) or (ii)
                  above;

                           (b) make any loans to any officers, directors or
                  affiliates of the Company in an aggregate amount exceeding
                  $100,000, other than commission advances and travel or
                  miscellaneous cash advances in the ordinary course of business
                  and loans to employees seeking to exercise stock options
                  issued pursuant to any of the Plans, the proceeds of which are
                  used to exercise such options;

                           (c) enter into any business arrangement or agreement
                  (other than a stock option agreement in accordance with the
                  Plans) with any officer, director or affiliate of the Company
                  on terms less favorable to the Company than an arms-length
                  transaction;

                           (d) acquire substantially all of the assets,
                  properties or capital stock of other persons or entities in
                  one or more transactions for an aggregate total consideration
                  consisting of an amount of cash exceeding ten percent (10%) of
                  the total purchase price paid to the Company for the original
                  issuance of the Series A Convertible Preferred Stock; or

                           (e) issue any stock, options, warrants, or securities
                  convertible into the capital stock of the Company with
                  exercise prices, in the case of options or warrants, or issue
                  prices, in the case of stock or convertible securities, at
                  less than fair market value, as determined in good faith by
                  the Company's Board of Directors, as of the date of grant in
                  the case of options or warrants or the date of issuance in the
                  case of stock or securities convertible into the capital stock
                  of the Company. No such restriction shall apply upon the
                  issuance of capital stock pursuant to the exercise of options
                  or warrants or the conversion of convertible securities of the
                  Company.

                                       33
<PAGE>   33

                  7.11 Shareholder and Director Information. At the request of
         the Purchasers, the Company shall promptly deliver to the Purchasers
         information regarding the security holders, officers and directors of
         the Company, including, without limitation, names, addresses, types of
         securities held and terms of securities held.

                  7.12 Reserve for Conversion Shares. The Company shall at all
         times reserve and keep available out of its authorized but unissued
         shares of Common Stock, for the purpose of effecting the conversion of
         the Series A Convertible Preferred Stock and otherwise complying with
         the terms of this Agreement, such number of its duly authorized shares
         of Common Stock as shall be sufficient to effect the conversion of the
         Series A Convertible Preferred Stock from time to time outstanding or
         otherwise to comply with the terms of this Agreement. If at any time
         the number of authorized but unissued shares of Common Stock shall not
         be sufficient to effect the conversion of the Series A Convertible
         Preferred Stock or otherwise to comply with the terms of this
         Agreement, the Company will forthwith take such corporate action as may
         be necessary to increase its authorized but unissued shares of Common
         Stock to such number of shares as shall be sufficient for such
         purposes. The Company will obtain any authorization, consent, approval
         or other action by or make any filing with any court or administrative
         body that may be required under applicable state securities laws in
         connection with the issuance of shares of Common Stock upon conversion
         of the Series A Convertible Preferred Stock.

                  7.13 Rule 144A Information. The Company shall, at all times
         during which it is neither subject to the reporting requirements of
         Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended
         (the "EXCHANGE ACT"), nor exempt from reporting pursuant to Rule
         12g3-2(b) under the Exchange Act, provide in writing, upon the written
         request of the Purchasers or a prospective buyer of the Series A
         Convertible Preferred Stock or shares of Common Stock issued upon
         conversion of the Series A Convertible Preferred Stock from the
         Purchasers, all information required by Rule 144A(d)(4)(i) of the
         General Regulations promulgated by the Commission under the Securities
         Act ("RULE 144A INFORMATION"). The Company's obligations under this
         SECTION 7.13 shall at all times be contingent upon the Purchasers
         obtaining from the prospective buyer of Series A Convertible Preferred
         Stock or shares of Common Stock issued upon conversion of the Series A
         Convertible Preferred Stock a written agreement to take all reasonable
         precautions to safeguard the Rule 144A Information from disclosure to
         anyone other than a person who will assist such buyer in evaluating the
         purchase of any Series A Convertible Preferred Stock or of Common Stock
         issued upon conversion of the Series A Convertible Preferred Stock.

                  7.14 Sale of Series A Convertible Preferred Stock. The Company
         agrees that any additional shares of Series A Convertible Preferred
         Stock sold by the Company after the Closing will be sold on
         substantially the same terms as set forth in this Agreement for the
         Purchasers.

                  7.15 Termination of Covenants. The covenants set forth in
         SECTIONS 7.1, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13 AND
         7.14 hereof shall terminate and be of no further force or effect on the
         earlier of the consummation of the first underwritten public



                                       34
<PAGE>   34

         offering of common stock of the Company pursuant to a registration
         statement filed with the Commission under the Securities Act with a
         concurrent listing on the New York Stock Exchange, the American Stock
         Exchange, or the Nasdaq Stock Market, Inc. at an initial offering price
         of at least $20.00 per share (as adjusted for a Recapitalization Event)
         that results in gross proceeds to the Company (before deduction of
         underwriting discounts and expenses of sale) of not less than
         $30,000,000 (an "APPROVED OFFERING"). For purposes of this Agreement, a
         "RECAPITALIZATION EVENT" means an event described under Section 2.5 of
         the Statement of Designation of the Series A Convertible Preferred
         Stock.

         8. Expenses. Whether or not the transactions contemplated hereby are
consummated, the Company will pay: (a) all the costs and expenses of the
reproduction of the Placement Memorandum, this Agreement, of all agreements and
documents referred to herein and of the certificates for the Series A
Convertible Preferred Stock and the Class A Common Stock into which it may be
converted; (b) all taxes (if any) payable with respect to this Agreement and the
issuance of the Series A Convertible Preferred Stock and the Class A Common
Stock into which it may be converted; (c) all costs of complying with the
securities or Blue Sky laws of any jurisdiction with respect to the offering or
sale of the Series A Convertible Preferred Stock and the Class A Common Stock
into which it may be converted; (d) the cost of delivering to such address as
each Purchaser shall specify the certificates for the Series A Convertible
Preferred Stock purchased by each such Purchaser and the certificates for the
Class A Common Stock into which the Series A Convertible Preferred Stock may be
converted; (e) the fees, expenses and disbursements of the Company's counsel in
connection with the Closing; and (f) the fees and expenses incurred with respect
to any amendments to this Agreement or the Amended and Restated Articles of
Incorporation of the Company proposed by the Company (whether or not the same
become effective). If the transactions contemplated hereby are consummated, the
Company will reimburse each of Nortel Networks Inc. and Ascend Communications,
Inc. for up to $10,000 of the actual legal counsel fees, expenses and
disbursements incurred by Nortel Networks Inc. in connection with the
negotiation and execution of this Agreement and the related documents.

         9. Survival of Agreements. All agreements, representations and
warranties contained herein or made in writing in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement (despite any investigation at any time made by the parties hereto
or on their behalf) and any disposition of the Series A Convertible Preferred
Stock or of the Class A Common Stock issued upon conversion thereof and shall
continue to survive for a period of time expiring on the earlier of (a) the
consummation of an Approved Offering, or (b) June 30, 2001. All statements
contained in any certificate or other instrument executed and delivered by the
parties hereto or their duly authorized officers or representatives pursuant
hereto in connection with the transactions contemplated hereby shall be deemed
representations hereunder, and no officer or representative of such parties
shall have personal liability for such statements unless such officer or
representative shall make such statement in a grossly negligent manner, in bad
faith, fraudulently or pursuant to willful misconduct.

         10. Notices. All notices, requests, consents and other communications
herein (except as stated in the last sentence of this SECTION 10) shall be in
writing and shall be mailed by first



                                       35
<PAGE>   35

class or certified mail, postage prepaid, sent by a nationally recognized
overnight delivery service, or personally delivered, as follows:

                           (a) If to the Company:

                           I 3S, Inc.
                           1440 Corporate Drive
                           Irving, Texas  75038
                           Attn:  Matthew Hutchins, President

                           with a copy which shall not constitute notice to:

                           Winstead Sechrest & Minick, P.C.
                           1201 Elm Street
                           5400 Renaissance Tower
                           Dallas, Texas  75270
                           Attn:  Thomas W. Hughes, Esq.

                           (b) If to the Purchasers at the address set forth on
                  SCHEDULE 1 hereto.

or such other addresses as each of the parties hereto may provide from time to
time in writing to the other parties. For purposes of computing the time periods
set forth in ARTICLE 7 hereof, the date of mailing shall be deemed to be the
delivery date. The financial statements required by ARTICLE 7 hereof may be
mailed by first-class regular mail.

         11. Modifications; Waiver. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally or in writing,
except that any provision of this Agreement may be amended and the observance of
any such provision may be waived (either generally or in a particular instance
and either retroactively or prospectively) with (but only with) the written
consent of (a) the Company, and (b) holders of at least 66 2/3 % of the
outstanding shares of the Series A Convertible Preferred Stock acting together
as a single class. Additionally, SECTION 9 of this Agreement may not be amended,
in any manner, without the unanimous consent of the holders of the outstanding
shares of the Series A Convertible Preferred Stock.

         12. Entire Agreement. This Agreement and the Registration Rights
Agreement contain the entire agreement between the parties with respect to the
transactions contemplated hereby, and supersedes all negotiations, agreements,
representations, warranties and commitments relating to the transactions
contemplated hereby, whether in writing or oral, prior to the date hereof,
except for those certain Confidentiality Agreements entered into by the
Purchasers with Donaldson, Lufkin & Jenrette on behalf of the Company.

         13. Successors and Assigns. The Company may not assign or delegate any
of its rights or duties under this Agreement. Except as otherwise provided in
this Agreement, all of the terms of this Agreement including the agreements,
representations and warranties set forth herein shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, except that the rights set forth in the Registration Rights



                                       36
<PAGE>   36

Agreement may only be transferred in accordance with Section 12 of the
Registration Rights Agreement.

         14. Enforcement.

                  14.1 Remedies at Law or in Equity. If any party shall default
         in any of its obligations under this Agreement or if any representation
         or warranty made by or on behalf of such party in this Agreement or in
         any certificate, report or other instrument delivered under or pursuant
         to any term hereof shall be untrue or misleading in any material
         respect as of the date of this Agreement or as of the Closing Date or
         as of the date it was made, furnished or delivered, any party damaged
         may proceed to protect and enforce its rights by suit in equity or
         action at law, whether for the specific performance of any term
         contained in this Agreement or the Amended and Restated Articles of
         Incorporation of the Company (including the Statement of Designation)
         or for an injunction against the breach of any such term or in
         furtherance of the exercise of any power granted in this Agreement or
         such Amended and Restated Articles (including the Statement of
         Designation), or to enforce any other legal or equitable right of such
         party or to take any one or more of such actions. The prevailing party
         in such dispute shall be entitled to recover from the losing party all
         fees, costs and expenses of enforcing any right of such prevailing
         party under or with respect to this Agreement or the Amended and
         Restated Articles of Incorporation (including the Statement of
         Designation) of the Company, including without limitation reasonable
         fees and expenses of attorneys and accountants, which shall include,
         without limitation, all fees, costs and expenses of appeals.

                  14.2 Remedies Cumulative; Waiver. No remedy referred to herein
         is intended to be exclusive, but each shall be cumulative and in
         addition to any other remedy referred to above or otherwise available
         at law or in equity. No express or implied waiver of any default shall
         be a waiver of any future or subsequent default. The failure or delay
         in exercising any rights granted hereunder shall not constitute a
         waiver of any such right and any single or partial exercise of any
         particular right shall not exhaust the same or constitute a waiver of
         any other right provided herein.

         15. Execution and Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument. Each party shall receive a duplicate original of the counterpart
copy or copies executed by it and by the Company.

         16. Governing Law and Severability. THIS AGREEMENT SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF TEXAS AS APPLIED TO AGREEMENTS ENTERED INTO AND TO BE
PERFORMED ENTIRELY WITHIN TEXAS. To the maximum extent practicable, this
Agreement will be deemed to call for performance in Dallas County, Texas. In the
event any provision of this Agreement or the application of any such provision
to any party shall be held by a court of competent jurisdiction to be contrary
to law, the remaining provisions of this Agreement shall remain in full force
and effect.

                                       37
<PAGE>   37

         17. Headings. The descriptive headings of the Sections hereof and the
Schedules and Exhibits hereto are inserted for convenience only and do not
constitute a part of this Agreement.

         This Agreement is hereby executed as of the date first above written.


                                THE COMPANY

                                I 3S, INC.


                                By:
                                   ---------------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                THE PURCHASERS:

                                NORTEL NETWORKS INC.


                                By:
                                   ---------------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------

                                ASCEND COMMUNICATIONS INC.


                                By:
                                   ---------------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------


                                BLUE RIDGE INVESTORS II LIMITED
                                PARTNERSHIP

                                By:  Blue Ridge Investors Group II, L.L.C.,
                                     General Partner


                                By:
                                   ---------------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------


                                       38
<PAGE>   38



                                I(3)S FUNDING I, LLC

                                By:   Geneva Associates, L.L.C., Manager


                                By:
                                    --------------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------


                                BLUE RIDGE INVESTORS LIMITED
                                PARTNERSHIP

                                By:   Blue Ridge Investors Group, Inc.,
                                      General Partner


                                By:
                                    --------------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------




                                       39
<PAGE>   39





                                    EXHIBIT A


                 AMENDED AND RESTATED ARTICLES OF INCORPORATION


<PAGE>   40



                                    EXHIBIT B


                           AMENDED AND RESTATED BYLAWS


<PAGE>   41



                                    EXHIBIT C


                    FORM OF STATEMENT OF DESIGNATION FOR THE
                      SERIES A CONVERTIBLE PREFERRED STOCK


<PAGE>   42



                                    EXHIBIT D


                              PLACEMENT MEMORANDUM


<PAGE>   43



                                    EXHIBIT E


                      FORM OF REGISTRATION RIGHTS AGREEMENT


<PAGE>   44



                                    EXHIBIT F


               FORM OF OPINION OF WINSTEAD SECHREST & MINICK, P.C.


<PAGE>   45



<TABLE>
<CAPTION>


                                   SCHEDULE I

                                 THE PURCHASERS

                                                                    No. of
                                                                   Shares of      Aggregate
                                                                   Series A        Purchase                  Copy of Notices
   Name of Purchasers               Notice Address                Convertible       Price              Must be sent to
------------------------  -----------------------------------      Preferred     -----------     -----------------------------------
                                                                     Stock
                                                                  ----------
<S>                       <C>                                     <C>            <C>            <C>
Nortel Networks Inc.      Nortel Networks Inc.                     1,063,829      $20,000,000    Jenkens & Gilchrist, a Professional
                          8 Federal Street                                                       Corporation
                          Billerica, Massachusetts 01821                                         1445 Ross Avenue, Suite 3200
                          Attention: Vice President, Finance,                                    Dallas, TX  75202
                          Carrier Packet Solutions                                               Attention:  Daryl Robertson
                          Telephone: (978) 916-1751                                              Telephone:  (214) 855-4500
                          Telecopy: (978) 916-4755                                               Telecopy:  (214) 855-4300
                                           and                                                   E-Mail: drobertson@jenkens.com
                          Nortel Networks Inc.
                          GMS 991 15 A40
                          2221 Lakeside Boulevard
                          Richardson, TX  75082-4399
                          Attention: Vice President, Customer
                          Finance North America
                          Telephone: (972) 684-2271
                          Telecopy:  (972) 684-3679


Ascend                    Ascend Communications, Inc.                531,915      $10,000,000    Gary Cary Ware & Freidenrich LLP
Communications Inc.       1701 Harbor Bay Parkway                                                400 Hamilton Avenue
                          Alameda, CA 94502                                                      Palo Alto, California 94301-1825
                          Attn: Maribeth Harper, General                                         Attention: Thomas W. Furlong
                          Counsel                                                                Telephone: (650) 328-6561
                          Telephone: (510) 747-6687                                              Telecopy: (650) 327-3699
                          Telecopy: (510) 747-6621                                               E-Mail: tfurlong@gcwf.com
                          Federal Tax ID 94-3092033


Blue Ridge Investors II   Blue Ridge Investors II                    127,128       $2,390,000    Brooks, Pierce, McLendon, Humphrey
Limited Partnership       Limited Partnership                                                    & Leonard, L.L.P.
                          P.O. Box 21962                                                         2000 Renaissance Tower
                          Greensboro, N.C. 27420                                                 230 North Elm Street
                          Telephone: (336) 275-7002                                              Greensboro, NC 27401
                          Telecopy: (336) 275-9155                                               Attention:  Marc Bishop
                                                                                                 Telephone:  (336)  373-8850
                                                                                                 Telecopy:  (336)  378-1001
                                                                                                 E-Mail: mbishop@brookspierce.com
</TABLE>

<PAGE>   46

<TABLE>
<CAPTION>

                                                                  No. of
                                                                 Shares of      Aggregate
                                                                  Series A       Purchase                  Copy of Notices
   Name of Purchasers               Notice Address              Convertible       Price              Must be sent to
------------------------  -----------------------------------    Preferred     -----------       --------------------------
                                                                   Stock
                                                                 ----------


<S>                       <C>                                     <C>              <C>            <C>
I(3)S Funding I, LLC      I(3)S Funding I, LLC                       127,128       $2,390,000    Brooks, Pierce, McLendon, Humphrey
                          P.O. Box 21962                                                         & Leonard, L.L.P.
                          Greensboro, N.C. 27420                                                 2000 Renaissance Tower
                          Telephone: (336) 275-7002                                              230 North Elm Street
                          Telecopy: (336) 275-9155                                               Greensboro, NC 27401
                                                                                                 Attention:  Marc Bishop
                                                                                                 Telephone:  (336)  373-8850
                                                                                                 Telecopy:  (336)  378-1001
                                                                                                 E-Mail: mbishop@brookspierce.com


Blue Ridge Investors      Blue Ridge Investors                        11,702         $220,000    Brooks, Pierce, McLendon, Humphrey
Limited Partnership       Limited Partnership                                                    & Leonard, L.L.P.
                          P.O. Box 21962                                                         2000 Renaissance Tower
                          Greensboro, N.C. 27420                                                 230 North Elm Street
                          Telephone: (336) 275-7002                                              Greensboro, NC 27401
                          Telecopy: (336) 275-9155                                               Attention:  Marc Bishop
                                                                                                 Telephone:  (336)  373-8850
                                                                                                 Telecopy:  (336)  378-1001
                                                                                                 E-Mail: mbishop@brookspierce.com
</TABLE>



<PAGE>   47





                                  SCHEDULE 3.1


                                  JURISDICTIONS


Arizona
California
Colorado
Georgia
Minnesota
Texas
Virginia