Document:

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                                                                   Exhibit 10.27

                           FOURTH AMENDED AND RESTATED

                             SHAREHOLDERS AGREEMENT

                          Dated as of January 18, 2002

                                      Among

                         Monitronics International, Inc.

                                       and

                      The Shareholders and Warrant Holders

                                       of

               Monitronics International, Inc. Referred to Herein

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                                TABLE OF CONTENTS

1. Voting Provisions...........................................................2
   1A. Composition of Board of Directors.......................................2
   1B. Compensation Committee..................................................3
   1C. Vacancies, Removal......................................................4
   1D. Meetings; Quorum........................................................4
   1E. Expenses................................................................5
   1F. Indemnification Agreements..............................................5
   1G. Special Voting Rights of Holders of Series D Preferred Stock............5
   1H. Special Voting Rights of Holders of Series C Preferred Stock............8
   1I. Special Covenant of Shareholders........................................8

2. Provisions Relating to Transfers of Company Securities......................8
   2A. General Restrictions on Transfers.......................................8
   2B. Right of First Refusal..................................................9
   2C. Contractual Preemptive Rights..........................................10
   2D. Transferees of Capital Stock...........................................12

3. Liquidity Rights; Right of First Offer.....................................12
   3A. Sale of the Company....................................................12
   3B. Sale Procedure.........................................................13
   3C. Cessation of Sale Procedure............................................14
   3D. Accepted Sale Proposals................................................14
   3E. Best Efforts...........................................................14
   3F. Initial Public Offering................................................15
   3G. Right of First Offer...................................................15

4. Definitions................................................................16

5. General Provisions.........................................................21
   5A. Transfer Conditions....................................................21
   5B. Legends on Certificates................................................21
   5C. Termination; Amendment and Waiver......................................22
   5D. Notices................................................................23
   5E. Governing Law..........................................................25
   5F. Entire Agreement.......................................................25
   5G. Further Assurances.....................................................25
   5H. Counterparts...........................................................25
   5I. Reorganization.........................................................25
   5J. Descriptive Headings...................................................25
   5K. Severability...........................................................25
   5L. Binding Effect.........................................................26
   5M. Exception for Pledge...................................................26

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                           FOURTH AMENDED AND RESTATED
                             SHAREHOLDERS AGREEMENT

     This Fourth Amended and Restated Shareholders Agreement (the "Agreement")
is entered into as of January 18, 2002 by and among Monitronics International,
Inc., a Texas corporation (the "Company"), the holders of Preferred Stock listed
on the Schedule of Preferred Holders attached hereto (the "Preferred Holders"),
the holders of Warrants listed on the Schedule of Warrant Holders attached
hereto (the "Warrant Holders" and collectively with the Preferred Holders, the
"Purchasers"), the holders of Common Stock of the Company listed on the Schedule
of Common Shareholders attached hereto (the "Common Shareholders" and, together
with the Purchasers and such other parties as may from time to time become
parties hereto, the "Shareholders").

                                    Recitals

     The Company and certain of the Preferred Holders are parties to a Stock
Purchase Agreement, dated as of October 21, 1994, as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of November 10, 1994, that
certain Amendment No. 2 to Stock Purchase Agreement, dated as of May 10, 1996,
that certain Amendment Agreement, dated as of November 22, 1996 (the "First
Amendment Agreement"), that certain Second Amendment Agreement, dated as of May
19, 1997 (the "Second Amendment Agreement"), that certain Transfer, Assignment
and Assumption Agreement and Third Amendment Agreement, dated as of January 1,
1998 (the "Third Amendment Agreement"), that certain Consent to Various Actions
under Various Documents, dated as of May 13, 1998, that certain Consent to
Various Actions under Various Documents and Amendment to Stock Purchase
Agreement, dated as of January 6, 1999, that certain Sixth Amendment Agreement
dated as of April 27, 2001 (the "Sixth Amendment Agreement") and that certain
Seventh Amendment Agreement dated as of January 18, 2002 (the "Seventh Amendment
Agreement") (as so amended, the "Series A Purchase Agreement"), providing, among
other things, for the purchase by such Preferred Holders of 4,000,000 shares of
Series A Preferred Stock of the Company.

     The Company and certain of the Warrant Holders are parties to a Senior
Subordinated Note and Warrant Purchase Agreement, dated as of May 10, 1996, as
supplemented and modified by (i) the Senior Subordinated Note and Warrant
Purchase Agreement, dated as of November 22, 1996, and (ii) the Senior
Subordinated Note and Warrant Purchase Agreement, dated as of May 19, 1997, as
amended by that certain Amendment, dated as of March 13, 1998, that certain
Second Amendment, dated as of January 13, 1999, that certain Termination of Put
Rights, dated as of June 15, 1998, that certain Third Amendment, dated as of
March 9, 1999, and that certain Fourth Amendment, dated as of February 4, 2000,
(iii) the Sixth Amendment Agreement and (iv) the Seventh Amendment Agreement (as
so supplemented and modified, the "Note Agreement"), providing, among other
things, for the purchase by such Warrant Holders of warrants (the "Mezzanine
Warrants") to acquire up to 569,757 shares (subject to adjustment as provided in
such Warrants) of Class A Common Stock of the Company.

     The Company and certain of the Preferred Holders are parties to a Series B
Preferred Stock Purchase Agreement, dated as of May 19, 1997, as amended by the
Third Amendment Agreement, that certain Termination of Put Rights, dated as of
June 15, 1998 and the Seventh Amendment Agreement (as so amended, the "Series B
Purchase Agreement"), providing, among

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other things, for the purchase by such Preferred Holders of 5,000,000 shares of
Series B Preferred Stock and warrants (the "Preferred B Warrants") to acquire up
to 961,700 shares (subject to adjustment as provided in such Warrants) of Class
A Common Stock of the Company.

     The Company and certain of the Preferred Holders are parties to a Series C
Preferred Stock Purchase Agreement (the "Series C Purchase Agreement"), dated as
of February 22, 1999, providing, among other things, for the purchase by certain
Preferred Holders of 1,409,375 shares of Series C Preferred Stock of the
Company.

     The Company and certain of the Preferred Holders are parties to a Series C
Preferred Stock Exchange Agreement (the "Series C Exchange Agreement"), dated as
of April 27, 2001, providing, among other things, for the exchange by certain
Preferred Holders of 1,409,375 shares of Series C Preferred Stock of the Company
for 1,409,375 shares of Series C Preferred Stock and 251,420 shares of Series
C-1 Preferred Stock of the Company.

     The Company and certain of the Preferred Holders have entered into a Series
D-1 Preferred Stock Purchase Agreement, dated as of April 27, 2001, as amended
by that certain First Amendment to Series D-1 Preferred Stock Purchase
Agreement, dated as of January 18, 2002 (the "Series D-1 Purchase Agreement"),
providing, among other things, for the purchase by certain Preferred Holders of
up to 70,000 shares of Series D-1 Preferred Stock.

     The Company, the Preferred Holders named therein, the Warrant Holders named
therein and the Common Shareholders named therein are parties to a Third Amended
and Restated Shareholders Agreement, dated as of April 27, 2001 (the "Third
Amended and Restated Shareholders Agreement").

     The Company and certain of the Warrant Holders are parties to a
Subordinated Note and Warrant Purchase Agreement, dated as of January 18, 2002
("2001 Note Agreement"), providing, among other things, for the purchase by such
Warrant Holder of warrants (the "2001 Warrants" and, together with the Mezzanine
Warrants and the Preferred B Warrants, the "Warrants") to acquire up to
1,133,328 shares (subject to adjustment as provided in such Warrants) of Class A
Common Stock of the Company.

     The parties hereto desire to amend and restate the Third Amended and
Restated Shareholders Agreement in its entirety in order to facilitate the
transactions contemplated by the 2001 Note Agreement.

     Capitalized terms not defined elsewhere herein shall have the respective
meanings assigned to them in Part 4 of this Agreement.

     The parties hereto agree that the Third Amended and Restated Shareholders
Agreement shall be amended and restated in its entirety by this Agreement, and
the parties further agree as follows:

     1. Voting Provisions.

     1A. Composition of Board of Directors. The Shareholders agree that in any
election of directors of the Company, they shall vote or act by written consent,
as the case may be, all shares of capital stock of the Company now or hereafter
owned or controlled by them, including all shares that they are entitled to vote
under any voting trust, voting agreement or proxy, to elect a Board of Directors
comprising eight directors designated as follows:

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               (a) three directors (each a "Series A Director") shall be
designated by the holders of a majority of the Series A Underlying Common Stock;
provided, that Austin Ventures III will designate two Series A Directors for so
long as Austin Ventures III holds any Series A Underlying Common Stock, and the
remaining Series A Director shall be designated by the holders of a majority of
the Series A Underlying Common Stock;

               (b) one director (the "Series B Director") shall be designated by
the holders of a majority of the Preferred B Warrant Shares; provided, that
Austin Ventures V will designate the Series B Director for so long as Austin
Ventures V holds any Preferred B Warrants or Preferred B Warrant Shares;

               (c) one director (the "Series C Director,") shall be designated
by the holders of a majority of the Series C Underlying Common Stock; provided,
that Windward will designate the Series C Director for so long as Windward holds
any Series C Underlying Common Stock;

               (d) one director (the "Series D Director" and, together with the
Series A Directors, the Series B Director and the Series C Director, the
"Purchaser Directors") shall be designated by the holders of a majority of the
Series D Preferred Stock; provided, that ABRY will designate the Series D
Director for so long as ABRY holds any Series D Underlying Common Stock;

               (e) one director (the "President Director") shall be James R.
Hull ("Hull"), for so long as Hull is employed by the Company and, thereafter,
one director shall be designated by the President of the Company; and

               (f) one director shall be designated by the holders of the
Mezzanine Warrants (the "Warrant Director"), as provided in Section 7.01(n) of
the Note Agreement.

     The initial Series A Directors shall be Blaine F. Wesner, Kenneth P.
DeAngelis and Michael Schmitz, the initial Series B Director shall be John
Dirvin, the initial Series C Director shall be Peter S. Macdonald, the initial
Series D Director shall be Jay Grossman and the initial Warrant Director shall
be Stephen M. Jenks. The obligation to vote shares in accordance with this
Paragraph 1A shall be specifically applicable to and enforceable against any
transferees of the parties hereto.

     1B. Compensation Committee. The Board of Directors shall establish and
maintain a compensation committee comprising Blaine F. Wesner (or if he is not a
director, a Purchaser Director designated by a majority of the Purchaser
Directors), the Series D Director, Hull, one other director who is not an
officer or employee of the Company designated by a majority of the Purchaser
Directors and a representative of the holders of Mezzanine Warrants in
accordance with Section 7.01(n) of the Note Agreement. The compensation
committee of the Board of Directors will review and make recommendations to the
Board of Directors regarding salaries, bonuses and other compensation and
benefits of officers and key employees of the Company and its subsidiaries, and
will administer any Approved Plan and any other stock option, incentive or
compensation plans or arrangements.

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     1C. Vacancies, Removal. In the event of any vacancy in the Board of
Directors, each of the Shareholders agrees to vote all shares of capital stock
owned or controlled by them and to otherwise use their best efforts to fill such
vacancy so that the Board of Directors of the Company will include directors
designated as provided in Paragraph 1A of this Agreement. Each of the
Shareholders agree to vote all shares of capital stock owned or controlled by
them for the removal of (a) any director whenever (but only whenever) there
shall be presented to the Board of Directors the written direction that such
director be removed, signed by the party entitled to designate such director
pursuant to Paragraph 1A of this Agreement, (b) Hull, as the President Director,
whenever (but only whenever) Hull is no longer employed by the Company, and (c)
any other President Director, whenever (but only whenever) the individual
serving as the President Director is no longer the President of the Company.
Each of the parties agrees to use its best efforts to cause designees to be
elected to the Board of Directors as provided in Paragraph 1A of this Agreement.

     1D. Meetings; Quorum. The Company agrees to hold meetings of the Board of
Directors at least once quarterly commencing in July 2001. The Company will give
each Preferred Holder (so long as such Preferred Holder holds any Preferred
Stock or Underlying Common Stock) and each Warrant Holder (so long as such
Warrant Holder holds any Warrants or Warrant Shares) written notice at least one
week (72 hours, in the case of a telephone meeting) in advance of all meetings
of the Board of Directors and all meetings of committees of the Board of
Directors, and will permit each such Preferred Holder, Warrant Holder (other
than holders of the 2001 Warrants) and one representative of the holders of the
2001 Warrants, if each such Preferred Holder and Warrant Holder has not
designated a Purchaser Director, to attend meetings of the Board of Directors
and all meetings of committees of the Board of Directors. If a Purchaser
Director designated pursuant to Paragraph 1A of this Agreement is not able to
attend a Board of Directors meeting or a meeting of a committee on which he
serves, the Person(s) entitled to designate such Purchaser Director may
designate any one Person to attend as an observer; provided, however, that (i)
Windward may designate one additional Person to attend as an observer even if
the Series C Director is able to attend the meeting and (ii) ABRY may designate
one additional Person to attend as an observer even if the Series D Director is
able to attend the meeting. Any observer described in either of the two
preceding sentences may be excluded from any meeting to the extent necessary to
preserve any evidentiary privilege. The Company shall furnish each Purchaser
with a copy of the minutes and other records of all meetings and other actions
taken by the Board of Directors and its committees and all written material
given to directors in connection with such meeting at the same time such
materials and information are given to the directors. If the Company proposes to
take any action by written consent in lieu of a meeting of its Board of
Directors or any committee thereof, the Company shall give written notice
thereof to each such Preferred Holder and Warrant Holder prior to the effective
date of such consent describing in reasonable detail the nature and the
substance of such action. The failure of the Company to provide any notice to
any Preferred Holder or Warrant Holder as required pursuant to this Paragraph 1D
shall not have any effect on the validity of any action taken by the Board of
Directors (or committee thereof) at any meeting or by written consent in lieu of
a meeting. The Company will at all times comply with the provisions of Sections
7.01(f), (l) and (n) of the Note Agreement and Sections 7.01(f), (l) and (n) of
the 2001 Note Agreement and the rights of a holder of the 2001 Warrants
contained in this

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Paragraph 1D and Paragraph 1E of this Agreement shall not be duplicative of the
rights of a party to the Note Agreement or the 2001 Note Agreement.

     1E. Expenses. The Company shall reimburse all Persons serving as directors
for their actual and reasonable out-of-pocket expenses incurred in attending
meetings of the Board of Directors and all committees thereof and otherwise
incurred in fulfilling their duties as directors. If a Purchaser has not
designated a Purchaser Director or if a Purchaser Director designated pursuant
to Paragraph 1A of this Agreement is unable to attend a meeting of the Board of
Directors or a committee on which he serves, the Company shall reimburse one
representative of the Person(s) entitled to designate such Purchaser Director
for actual and reasonable out-of-pocket expenses incurred in attending meetings
of the Board of Directors and such committees. The Company shall also reimburse
one observer designated by each of Windward, ABRY and the holders of the 2001
Warrants for actual and reasonable out-of-pocket expenses incurred in attending
meetings of the Board of Directors and such committees thereof. Austin Ventures
shall be considered to be one Purchaser for purposes of this Paragraph 1E (but
not for any other purpose).

     1F. Indemnification Agreements. On the date hereof and on each later date
that a Purchaser Director or any other director is first elected or appointed to
the Board of Directors, the Company shall enter into an indemnification
agreement in substantially the form attached hereto as Exhibit A with each
Purchaser Director and each other director of the Company who is elected or
appointed to the Board of Directors on such date.

     1G. Special Voting Rights of Holders of Series D Preferred Stock. In
addition to any action otherwise required by the Articles of Incorporation or
applicable law, the Company shall not take any of the following actions without
the prior authorization and approval of the holders of a majority of the Series
D Underlying Common Stock (for purpose of this Paragraph 1G only, the
affirmative vote of the Series D Director at a meeting of the Board of Directors
(or his written consent in lieu thereof) shall constitute the authorization and
approval of the holders of a majority of the Series D Underlying Common Stock):

               (a) remove or designate the chief executive officer of the
Company;

               (b) change the nature of the business or operations of the
Company or any of its Subsidiaries or enter into or allow any of its
Subsidiaries to enter into a line of business other than the purchasing,
monitoring and servicing of security alarm contracts;

               (c) authorize or issue, or obligate itself to issue, any Series D
Preferred Stock or any other Company Security (including any Company Security
convertible into or exercisable or exchangeable for any Company Security) that
ranks senior to, or pari passu with, the Series D Preferred Stock as to dividend
or redemption rights or liquidation preferences, other than issuances of Series
D-1 Preferred Stock pursuant to the Series D-1 Purchase Agreement and issuances
of Series D-2 Preferred Stock upon conversion of shares of Series D-1 Preferred
Stock pursuant to the Articles of Incorporation;

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               (d) redeem, purchase or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose), or allow any of its Subsidiaries to
redeem, purchase or otherwise acquire, any Company Security (including any
Company Security convertible into or exercisable or exchangeable for any Company
Security) that ranks junior to the Series D Preferred Stock as to dividend or
redemption rights or liquidation preferences (other than (i) a liquidation of
the Company pursuant to Article IV, Part 2 of the Articles of Incorporation or
(ii) the redemption of Series A Preferred Stock, Series B Preferred Stock or
Series C Stock pursuant to Article IV, Part 3 of the Articles of Incorporation);

               (e) declare or pay a dividend or distribution of any kind on any
Company Security that ranks junior to the Series D Preferred Stock as to
dividend or redemption rights or liquidation preferences (other than (i)
dividends on Series A Preferred Stock or Series C Preferred Stock paid in shares
of Class A Common Stock pursuant to Article IV, Paragraph 5L of the Articles of
Incorporation, (ii) a liquidation of the Company pursuant to Article IV, Part 2
of the Articles of Incorporation or (iii) the redemption of Series A Preferred
Stock, Series B Preferred Stock or Series C Stock pursuant to Article IV, Part 3
of the Articles of Incorporation);

               (f) other than provisions in the definitive documentation
relating to the senior secured credit facility of the Company in effect on the
date hereof, enter into, or allow any of its Subsidiaries to enter into, any
financing transaction or other arrangement with terms and conditions that would
prevent the Company from performing its obligations (other than obligations to
make payments) in respect of the Series D Preferred Stock or Series D Underlying
Common Stock;

               (g) other than a Sale of the Company of a type described in
clause (iii) of the definition of Sale of the Company set forth in Part 4 of
this Agreement in which the holders of the Series D Preferred Stock and Series D
Underlying Common Stock are not shareholders of the surviving corporation,
acquire, or permit any Subsidiary to acquire, any Equity Securities or other
interest in any Person or business (whether by a purchase of assets, purchase of
Equity Securities, merger or otherwise), or enter into any joint venture,
involving an aggregate consideration (including, without limitation, the
assumption of liabilities whether direct or indirect) exceeding $50,000,000 in
any one transaction (or series of related transactions);

               (h) except as expressly contemplated by this Agreement, make any
amendment to the Articles of Incorporation or the Company's bylaws, or file any
resolution of the Board of Directors with the Texas Secretary of State
containing any provisions, which would increase the number of authorized shares
of the Series D Preferred Stock or adversely affect or otherwise impair the
rights or the relative preferences and priorities of the holders of the Series D
Preferred Stock or Series D Underlying Common Stock under this Agreement, the
Articles of Incorporation, the Company's bylaws or the Registration Rights
Agreement;

               (i) enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, employees, stockholders or Affiliates or with any
individual related by blood, marriage or adoption to any such individual or

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with any entity in which any such Person or individual owns a beneficial
interest, except for customary employment arrangements and benefit programs on
reasonable terms and except as otherwise expressly contemplated by this
Agreement;

               (j) establish or acquire any Subsidiaries other than Subsidiaries
which will be wholly owned by the Company;

               (k) permit any of its Subsidiaries to issue, sell or have
outstanding any Equity Securities, or rights to acquire Equity Securities, other
than Equity Securities held by the Company or a direct or indirect wholly-owned
Subsidiary of the Company;

               (l) except as may be required by the senior lenders of the
Company in the enforcement of their rights during the existence of an event of
default that continues after applicable grace and cure periods under any senior
secured credit facility of the Company in effect from time to time, prior to
June 30, 2003, consummate or agree to consummate a Sale of the Company
(including a Sale of the Company of a type described in clause (ii) or (iii) of
the definition of Sale of the Company set forth in Part 4 of this Agreement)
unless, upon the consummation of such Sale of the Company prior to June 30,
2003, the total cash proceeds received (including dividends paid in cash prior
to such sale) in respect of the Series D Preferred Stock and Series D Underlying
Common Stock exceeds (i) in the case of the consummation of such Sale of the
Company during 2001, the product of (A) 1.75 and (B) the Series D Initial
Investment Amount; (ii) in the case of the consummation of such Sale of the
Company during 2002, the product of (A) 2.00 and (B) the Series D Initial
Investment Amount; and (iii) in the case of the consummation of such Sale of the
Company during 2003, the product of (A) 2.25 and (B) the Series D Initial
Investment Amount; or

               (m) except as may be required by the senior lenders of the
Company in the enforcement of their rights during the existence of an event of
default that continues after applicable grace and cure periods under any senior
secured credit facility of the Company in effect from time to time, prior to
June 30, 2003, effect a public offering of Common Stock unless (i) the Common
Stock sold pursuant to such public offering is Class A Common Stock, (ii) the
price per share at which the Class A Common Stock is sold to the public pursuant
to such public offering is not less than $28.00 (as such amount may be adjusted
to reflect any stock split, reverse stock split, stock dividend or other
effective subdivision or combination of Class A Common Stock after the date
hereof) and (iii) the Company redeems the Series D-2 Preferred Stock and, if
required, Series D Underlying Common Stock in accordance with Article IV,
Paragraph 3F of the Articles of Incorporation.

     Without limiting the foregoing, except as may be required by the senior
lenders of the Company in the enforcement of their rights during the existence
of an event of default that continues after applicable grace and cure periods
under any senior secured credit facility of the Company in effect from time to
time, each Shareholder agrees that, prior to June 30, 2003, it or he will not
consummate or agree to consummate, or vote to approve or consent to, any Sale of
the Company (including a Sale of the Company of a type described in clause (i)
of the definition of Sale of the Company set forth in Part 4 of this Agreement)
unless, upon the consummation of such Sale of the Company prior to June 30,
2003, the total cash proceeds received (including

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dividends paid in cash prior to such sale) in respect of the Series D Preferred
Stock and Series D Underlying Common Stock exceeds the applicable amount
described in clause (l)(i), (l)(ii) or (l)(iii) above.

     1H. Special Voting Rights of Holders of Series C Preferred Stock. In
addition to any action otherwise required by the Articles of Incorporation or
applicable law, except as may be required by the senior lenders of the Company
in the enforcement of their rights during the existence of an event of default
that continues after applicable grace and cure periods under any senior secured
credit facility of the Company in effect from time to time, prior to June 30,
2003, the Company shall not consummate or agree to consummate, and each
Shareholder agrees that it or he will not consummate or agree to consummate, or
vote to approve or consent to, without the prior authorization and approval of
the holders of a majority of the Series C Underlying Common Stock (for purpose
of this Paragraph 1H only, the affirmative vote of the Series C Director at a
meeting of the Board of Directors (or his written consent in lieu thereof) shall
constitute the authorization and approval of the holders of a majority of the
Series C Underlying Common Stock), a Sale of the Company (including a Sale of
the Company of a type described in clause (ii) or (iii) of the definition of
Sale of the Company set forth in Part 4 of this Agreement) unless, upon the
consummation of such Sale of the Company prior to June 30, 2003, the total cash
proceeds received (including dividends paid in cash prior to such sale) in
respect of (a) the Series C Preferred Stock exceeds the aggregate Series C
Redemption Price (as defined in the Articles of Incorporation) for all Series C
Preferred Stock and (b) the Series C-1 Preferred Stock equals the aggregate
Series C-1 Redemption Price (as defined in the Articles of Incorporation) for
all Series C-1 Preferred Stock.

     1I. Special Covenant of Shareholders. In the event the Company declares and
pays a dividend or distribution of any kind on any Series C Stock and, as a
result of such dividend or distribution, the definition of each of Applicable
Series C Dividend Rate Per Share and/or the Applicable Revised Series C Dividend
Rate Per Share set forth in Part 8 of the Articles of Incorporation would no
longer be appropriate, each Shareholder (including each holder of the Series C
Stock) shall vote all shares of voting stock held by such Shareholder to approve
an amendment to the Articles of Incorporation to become effective immediately
upon such payment amending the definition of each of Applicable Series C
Dividend Rate Per Share and Applicable Revised Series C Dividend Rate Per Share
set forth in Part 8 of the Articles of Incorporation to change the annual
dividend rate per share payable on each share of Series C Stock consistent with
the intended economics of the Series C Stock.

     2. Provisions Relating to Transfers of Company Securities.

     2A.  General Restrictions on Transfers.

               (a) During the term of this Agreement, no shares of Restricted
Stock may be transferred except pursuant to a (i) Permitted Transfer, (ii) sale
that complies with the provisions of Paragraph 2B of this Agreement or (iii) the
Sale of the Company pursuant to Part 3 of this Agreement. Notwithstanding the
foregoing, any transfer of shares of Restricted Stock must comply with the
provisions of Paragraph 2D of this Agreement.

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               (b) During the term of this Agreement, (i) no Company Securities
held by Austin Ventures, their Permitted Transferees and their respective
Affiliates may be transferred without the prior written consent of the holders
of a majority of the Underlying Common Stock held by ABRY, their Permitted
Transferees and their respective Affiliates (which consent shall not be
unreasonably withheld) and (ii) no Company Securities held by ABRY, their
Permitted Transferees and their respective Affiliates may be transferred without
the prior written consent of the holders of a majority of the Underlying Common
Stock held by Austin Ventures, their Permitted Transferees and their respective
Affiliates (which consent shall not be unreasonably withheld), except, in each
case, pursuant to (x) a Permitted Transfer, (y) the Sale of the Company or (z) a
pledge of Company Securities to the Lenders as acknowledged by the parties
hereto pursuant to Paragraph 5M of this Agreement.

     2B.  Right of First Refusal.

               (a) Except pursuant to a Permitted Transfer or the Sale of the
Company pursuant to Part 3 of this Agreement, a holder of Restricted Stock may
only sell shares of Restricted Stock to another Person if (i) such holder has
received a bona fide written offer to purchase such shares of Restricted Stock
and (ii) such holder has complied with the provisions of this Paragraph 2B.
Whenever and as often as any holder of Restricted Stock desires to sell any
shares of Restricted Stock pursuant to such a bona fide written offer to
purchase such shares, such holder (for purposes of this Paragraph 2B, the
"Selling Shareholder") shall give written notice (the "Selling Shareholder
Notice") to the Company and to each of the other Shareholders (other than
holders of Series B Preferred Stock) (each, an "Offeree Shareholder") to such
effect, enclosing a copy of such offer and specifying the number of shares of
Restricted Stock that the Selling Shareholder desires to sell, the name of the
Person(s) to whom the Selling Shareholder desires to make such sale and the
consideration per share of Restricted Stock that has been offered in connection
with such offer. Upon receipt of a Selling Shareholder Notice, the Company shall
have the right and option to purchase the shares proposed to be sold for cash at
the purchase price per share specified in such Selling Shareholder Notice,
exercisable for 20 days after the receipt of such Selling Shareholder Notice.
Failure of the Company to respond to such Selling Shareholder Notice within such
20-day period shall be deemed to constitute a notification to the Selling
Shareholder of the Company's decision not to exercise the right and option to
purchase such shares under this Paragraph. If the Company fails to exercise its
first right and option, the Selling Shareholder shall promptly give written
notice to each of the Offeree Shareholder(s) of the Company's failure to
exercise its first right and option. The Offeree Shareholder(s), pro rata in
accordance with their ownership of Underlying Common Stock, Warrant Shares and
shares of Common Stock (without duplication), calculated on a fully diluted
basis, shall have the right and option to purchase the remaining shares proposed
to be sold for cash at the purchase price per share specified in such Selling
Shareholder Notice, exercisable for 10 days after the receipt of the
notification of the expiration of the Company's 20-day option period. Failure of
any Offeree Shareholder to respond to such notification within such 10-day
period shall be deemed to constitute a notification to the Selling Shareholder
of such Offeree Shareholder's decision not to exercise such Offeree
Shareholder's right and option to purchase such shares under this Paragraph 2B.
If any Offeree Shareholder fails to exercise its first right and option, the
Selling Shareholder shall give written notice to each of the other Offeree
Shareholders who has elected to purchase its pro rata share of the shares
proposed to be

                                       9

<PAGE>

transferred, and each such Offeree Shareholder shall have the right, exercisable
for a period of five days from the date of the receipt of such notice, to
purchase the remaining shares, pro rata in accordance with their ownership of
Underlying Common Stock, Warrant Shares and shares of Common Stock (without
duplication), calculated on a fully diluted basis, as compared to the Underlying
Common Stock, Warrant Shares and shares of Common Stock (without duplication),
calculated on a fully diluted basis, held by all such electing Offeree
Shareholders, or in such other proportions as they may otherwise agree upon. In
the event the consideration to be paid for each share of Common Stock as set
forth in the Selling Shareholder Notice includes non-cash consideration, the
dollar value of such non-cash consideration shall be its fair market value
("Fair Market Value") as determined by the Company and the holders of a majority
of the outstanding Underlying Common Stock and Warrant Shares. If such parties
are unable to reach an agreement within 15 days after receipt of the Selling
Shareholder Notice, the Fair Market Value of such non-cash consideration will be
determined by an independent appraiser jointly selected by a majority of the
Purchaser Directors and a majority of the remaining directors and the period
within which the Company or an Offeree Shareholder may exercise its right or
option under this Paragraph shall be extended until 10 days after such appraisal
is completed.

               (b) The Company and/or each Offeree Shareholder may exercise the
right and option provided above by giving written notice (the "Offeree
Shareholder Notice") of its decision to exercise such right and option to the
Selling Shareholder within the 20- and 10-day periods specified above,
specifying the date (not later than five days from the date of expiration of all
applicable first right and options to purchase shares under this Paragraph) upon
which payment of the purchase price for the shares purchased pursuant to this
Paragraph shall be made. The Selling Shareholder shall deliver to the Company
and/or each Offeree Shareholder at the Company's principal office, one day prior
to the payment date, wire transfer instructions, and on the payment date
specified in the Offeree Shareholder Notice, the certificate or certificates
representing such shares, properly endorsed for transfer, against payment of the
purchase price therefor by the Company and/or each Offeree Shareholder in
immediately available funds.

               (c) If all the shares proposed to be transferred are not
purchased by the Company and/or the Offeree Shareholder(s) in accordance with
this Paragraph, the Selling Shareholder shall not be required to sell any of
such shares to the Offeree Shareholder(s), and during the 90-day period
commencing on the expiration of the rights and options provided for in this
Paragraph 2B, the Selling Shareholder may sell all (but not less than all) of
such shares to the transferee named in the Selling Shareholder Notice for a
consideration equal to or greater than the consideration specified in the
Selling Shareholder Notice, free of the restrictions contained in this Paragraph
2B (but subject to the other terms and conditions hereof, including Paragraph 2D
of this Agreement).

               (d) For the purposes of calculating the number of shares an
Offeree Shareholder may acquire under this Paragraph 2B, options to acquire
Common Stock pursuant to the Approved Plan held by an Offeree Shareholder shall
be deemed issued and outstanding if such Offeree Shareholder is then an employee
of the Company.

     2C. Contractual Preemptive Rights. Notwithstanding any preemptive or
similar rights that any of the parties hereto may have pursuant to any other
agreement, the parties hereto agree

                                       10

<PAGE>

that their respective preemptive or similar rights with respect to the issuance
of Company Securities by the Company after the date hereof shall be governed
exclusively by this Paragraph 2C, and any such preemptive or similar rights
contained in any other agreement, including without limitation, the Series A
Purchase Agreement, the Series B Purchase Agreement, the Preferred B Warrants,
the Series C Purchase Agreement, the Note Agreement the Mezzanine Warrants, are
hereby terminated and rescinded in their entirety. If prior to a Qualified
Public Offering, the Company shall issue any Company Securities (including any
transfer of previously-issued Company Securities), each holder of Underlying
Common Stock and Warrant Shares and the Hull Family Limited Partnership (the
"Hull Partnership") shall be entitled to purchase the same proportion of such
Company Securities to be issued necessary in order that the aggregate shares of
Common Stock beneficially held by such holder constitute the same percentage of
all Common Stock (assuming, in each case, the conversion, exercise or exchange
of all outstanding Company Securities, including outstanding Company Securities
held by such holder), after the issuance of such Company Securities as before
the issuance thereof; provided, however, (a) if such holder elects to purchase
such Company Securities, such holder shall be required to purchase (i) such
Company Securities on the same terms and conditions as such Company Securities
were issued by the Company and (ii) if more than one type of Company Security is
issued, a pro rata amount of each such Company Security issued and (b) that such
preemptive right shall not apply to (i) Company Securities issued to employees
or consultants to the Company under any Approved Plan, (ii) Company Securities
issued upon the conversion, exercise or exchange of Company Securities to which
the preemptive rights under this Paragraph 2C were previously applicable, (iii)
Company Securities issued in connection with an exercise of the preemptive
rights granted hereunder, (iv) Company Securities issued pursuant to the Series
C Exchange Agreement or the Series D-1 Purchase Agreement, (v) Company
Securities issued upon conversion of the Preferred Stock or exercise of the
Warrants, the 2001 Warrants and the Heller Warrant or upon conversion of Class B
Common Stock issued upon exercise of the Heller Warrant, (vi) Company Securities
issued as consideration in the merger with or acquisition of another Person,
(vii) Company Securities issued in connection with a public offering, or (viii)
shares of Class A Common Stock issued in payment of dividends on Series A
Preferred Stock or Series C Preferred Stock pursuant to Article IV, Paragraph 5L
of the Articles of Incorporation. A holder of Underlying Common Stock or Warrant
Shares or the Hull Partnership may exercise his or its right under this
Paragraph 2C to purchase Company Securities by providing written notice to the
Company within 20 days, and by paying the purchase price therefor at the
principal office of the Company within 30 days, after the receipt of notice from
the Company (which notice by the Company shall be given at least 30 days before
the issuance of the Company Securities) stating the amount of Company Securities
it intends to issue and the price and characteristics thereof. The holder shall
pay such purchase price in immediately available funds. A holder's contractual
preemptive rights hereunder shall be deemed to be exercised immediately prior to
the close of business on the day of payment of the purchase price in accordance
with the foregoing provisions, and at such time such holder shall be treated for
all purposes as the record holder of the Company Securities, as the case may be.
As promptly as practicable (and in any event within 10 days) on or after the
purchase date, the Company shall issue and deliver at its principal office a
certificate or certificates for the number of full shares or amount, whichever
is applicable, of Company Securities together with cash for any fraction of a
share or portion of a Company Security at the purchase price to which the holder
is entitled hereunder.

                                       11

<PAGE>

     2D. Transferees of Capital Stock. Except as otherwise specifically provided
herein, any transferee or other Person who shall acquire (either voluntarily or
involuntarily, by operation of law or otherwise) any Company Securities from any
party to this Agreement shall be bound by all the terms and conditions of this
Agreement to the same extent as the parties hereto. Any attempted transfer of
Company Securities by any party to this Agreement other than in accordance with
this Agreement shall be null and void and the Company shall refuse to recognize
any such transfer and shall not reflect on its records any change in record
ownership of such Company Securities pursuant to any such transfer. The Company
shall not effect any transfer of Company Securities by any party to this
Agreement until: (i) it has received evidence satisfactory to it that all of the
provisions of this Agreement applicable to such transfer have been complied with
and (ii) each transferee or other Person (and such transferee's or other
Person's spouse) of such Company Securities has executed an addendum agreement
with the parties hereto in the form of Exhibit B attached hereto, agreeing to be
bound hereby. Each transferee of Company Securities shall take such Company
Securities subject to, and be fully bound by, this Agreement with the same
effect as if it were a party hereto, with those rights and obligations hereunder
expressly provided herein.

     3. Liquidity Rights; Right of First Offer.

     3A.  Sale of the Company.

               (a) At any time and from time to time after the earlier to occur
of (i) July 31, 2007 or (ii) the receipt by the Company of a Redemption Notice
(as defined in the Articles of Incorporation), the holders of a majority of the
Series D Underlying Common Stock (the "Preferred D Initiating Holders") may
elect, by giving written notice (a "Preferred D Sale Notice") of such election
to the Company to initiate procedures for the Sale of the Company. If a
Preferred D Sale Notice is given in accordance with this Paragraph 3A(a), (A)
all holders of Preferred Stock delivering a Redemption Notice shall be deemed to
have rescinded such Redemption Notice and such Redemption Notice shall have no
further force or effect and (B) the sale procedures set forth below shall apply.

               (b) If (i) the Company fails to redeem any shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock (for any
reason, including that the funds of the Company legally available to make such
redemption are insufficient) after the receipt by the Company of a Redemption
Notice (other than a Redemption Notice rescinded as a result of the delivery of
a Preferred D Sale Notice pursuant to Paragraph 3(A)(a) above) on the applicable
redemption date (such date determined without giving effect to Article IV,
Paragraph 3Q of the Articles of Incorporation) and (ii) the holders of Series D
Underlying Common Stock have not at that time elected to pursue the Sale of the
Company in accordance with this Part 3 pursuant to a Preferred D Sale Notice,
the holders of a majority of the outstanding shares of any such series of
Preferred Stock (the "Non-Preferred D Initiating Holders") may elect, by giving
written notice (a "Non-Preferred D Sale Notice") to the Company and each holder
of Series D Stock within 45 days after such redemption date, to initiate
procedures for the Sale of the Company; provided, however, if, within 30 days
after the receipt of a Non-Preferred D Sale Notice (the "Non-Preferred D Notice
Rescission Period"), the holders of a majority of the Series D Underlying Common
Stock deliver a Preferred D Sale Notice to the Company pursuant to

                                       12

<PAGE>

Paragraph 3(A)(a), the Non-Preferred D Sale Notice shall immediately be deemed
rescinded and of no further force or effect and the Company shall proceed with
the Sale of the Company process pursuant to this Part 3 in accordance with the
procedures governing a Sale of the Company process initiated by a Preferred D
Sale Notice. If a Non-Preferred D Sale Notice is given but not deemed rescinded
in accordance with this Paragraph 3A(b), (A) all holders of Preferred Stock
delivering a Redemption Notice shall be deemed to have rescinded such Redemption
Notice and such Redemption Notice shall have no further force or effect and (B)
the sale procedures set forth below shall apply.

     3B.  Sale Procedure.

               (a) In the event the Company receives a Preferred D Sale Notice
or a Non-Preferred D Sale Notice (a "Sale Notice"), the Board of Directors
shall, in the case of the receipt of a Preferred D Sale Notice, as promptly as
practicable after receipt of such notice, or, in the case of the receipt of a
Non-Preferred D Sale Notice, as promptly as practicable after the expiration of
the Non-Preferred D Notice Rescission Period, pursue a process, the goal of
which is to bring about the Sale of the Company, by engaging a Qualified
Investment Banker, at the Company's expense, to represent the Company and the
Shareholders in connection with the Sale of the Company and seek indications of
interest, proposals and offers regarding the same ("Sale Proposals"). The
Company and the shareholders of the Company shall use their reasonable best
efforts to facilitate the Sale of the Company process, which will be conducted
at the direction of and controlled, at the Company's expense, by the Initiating
Holders. Without limiting the foregoing, the Initiating Holders may negotiate
with prospective parties to a Sale of the Company and any Sale Proposal, as
modified as a result of such negotiations and however embodied (including in the
form of one or more definitive agreements for execution by the Company and/or
the Shareholders), will continue to constitute a Sale Proposal. If the Sale of
the Company process is initiated by delivery of a Preferred D Sale Notice, then
the "Initiating Holders" will be holders of a majority of the Series D
Underlying Common Stock. If the Sale of the Company process is initiated by
delivery of a Non-Preferred D Sale Notice that is not deemed rescinded, then the
"Initiating Holders" will be holders of a majority of the Underlying Common
Stock, other than the Series D Underlying Common Stock.

               (b) During the Sale of the Company process, the Company shall,
from time to time (and not less frequently than once per week), give to each of
the holders of the Underlying Common Stock and 2001 Warrant Shares, a written
update (a "Sale Update") as to the progress of the Sale of the Company process
and describing each Sale Proposal received by the Company or the Qualified
Investment Bank engaged to pursue the Sale of the Company, setting forth the
name of the proposed purchaser, a description of the consideration to be
received upon the Sale of the Company, the proposed date for closing the Sale of
the Company and the other material terms of each Sale Offer. The Company shall
also provide each holder of Underlying Common Stock and 2001 Warrant Shares with
copies of each Sale Proposal together with all such other information pertaining
thereto as may be reasonably be requested by any such holder of Underlying
Common Stock or 2001 Warrant Shares.

               (c) At any time during the Sale of the Company process, the
Initiating Holders may direct the Company and/or the other Shareholders to
pursue, accept, decline to

                                       13

<PAGE>

pursue, cease to pursue or reject any Sale Proposal and otherwise direct and
control the Sale of the Company process. Nothing herein will prohibit the
Initiating Holders from contemporaneously pursuing, or directing that others
pursue, more than one Sale Proposal.

     3C.  Cessation of Sale Procedure.

               (a) At any time after the Sale of the Company process has been
initiated, the Initiating Holders shall have the right to direct the Company to
cease the solicitation of offers for the Sale of the Company.

               (b) If all parties to this Agreement have performed their
obligations under this Part 3 and the Sale of the Company has not been
consummated, the Company (at the election of the Board of Directors) shall have
the right to (i) cease the solicitation of additional Sale Proposals at any time
after the date that is nine months following the date that a Qualified
Investment Banker is engaged and (ii) subject to the terms and conditions of any
agreement into which the Company and/or any Shareholder may have entered into
relating to the Sale of the Company, suspend all efforts to consummate the Sale
of the Company (other than with respect to any Sale Proposal that the Company
and/or the other Shareholders have been directed to pursue or accept pursuant to
Paragraph 3B(c)) at any time after the date that is 12 months following the date
that a Qualified Investment Banker is engaged, in each case by the delivery of
written notice to each Shareholder of the Company's decision. In the event the
Company elects to suspend all effort to consummate the Sale of the Company in
accordance with this Paragraph 3C, the holders of Preferred Stock (as provided
in Paragraphs 3(A)(a) and 3(A)(b)) shall have the right, at any time, to
re-initiate the Sale of the Company process by delivery of a Preferred D Sale
Notice or Non-Preferred D Sale Notice, as applicable, to the Company.

     3D. Accepted Sale Proposals. Subject to Paragraph 3G, at any time during
the Sale of the Company process, the Initiating Holders may give the Company
notice to the effect that they have elected that the Company and/or the
Shareholders accept a Sale Proposal (an "Accepted Proposal"). The Company will
then give notice thereof (the "Acceptance Notice") to the other Shareholders.
Within 10 days following receipt of the Acceptance Notice, the Company (and/or
each Shareholder, if the Accepted Proposal is an offer to acquire Company
Securities by sale, merger or otherwise), must accept the Accepted Proposal,
including entering into any related definitive agreement(s) and consummating the
Sale of the Company in accordance with the terms and conditions thereof;
provided, however, that any obligation or other liability of any Shareholder
will be individual to each Shareholder (and not joint or joint and several) and
will be limited to the net amount of proceeds received by such Shareholder from
such Sale.

     3E.  Best Efforts.

               (a) The Company and each Shareholder agree to use reasonable best
efforts to effect the Sale of the Company pursuant to any Accepted Proposal,
including, without limitation, voting all shares of voting stock held by such
Shareholder to approve a sale of assets by the Company followed by the
liquidation and dissolution of the Company, or to adopt a plan of merger or
consolidation by the Company included in the terms of such Accepted Proposal,
and waiving all related dissenters' appraisal and similar rights.

                                       14

<PAGE>

               (b) During the Sale of the Company process, the Initiating
Holders will act in good faith to conduct such process in a manner designed to
maximize the consideration offered for the equity of the Company; provided,
that, the Initiating Holders may also take into consideration factors such as
the amount and form of consideration to be paid, the timing of, and
contingencies related to, the payment of the consideration to be paid, the
timing of the closing of the Sale of the Company, the likelihood of the
consummation of the Sale of the Company, the nature, type and availability of
financing sources to fund the consideration to be paid and such other reasonable
factors as the Initiating Holders may, in their sole discretion (acting in good
faith as described above), deem to be relevant. Notwithstanding the foregoing,
the Shareholders (other than the Initiating Holders) acknowledge that the
Initiating Holders (i) shall not have any duty to postpone or, once initiated,
suspend the Sale of the Company process and (ii) shall have the sole discretion
(acting in good faith as described above) to (a) take into consideration those
factors set forth in the preceding sentence and such other reasonable factors as
such Initiating Holders deem relevant in evaluating each Sale Proposal and (b)
provided the Initiating Holders have conducted the Sale of the Company process
in the manner described above, accept any Sale Proposal at any time during such
process and to require that the Company and/or the Shareholders agree to
consummate, and consummate, a Sale of the Company pursuant to the provisions of
this Part 3.

     3F. Initial Public Offering. Without the prior written consent of the
Initiating Holders, the Company shall not pursue an initial public offering of
Company Securities during the time the Sale of the Company is being sought
pursuant to this Part 3.

     3G. Right of First Offer. Promptly following the receipt of any Sale
Notice, the Company shall deliver written notice to Windward of the receipt of
such notice and Windward shall have the right to make an offer to purchase the
Company in accordance with this Paragraph 3G. Windward shall have the right,
exercisable within 30 days of the receipt of the Company's notice, to submit an
offer to purchase the Company by delivering a written proposal (the "Windward
Purchase Proposal") to the Company and the other holders of Company Securities,
which proposal will set forth in reasonable detail the terms and conditions upon
which Windward will agree to purchase the Company in a Sale of the Company,
including the Company Securities or assets to be acquired and the consideration
to be paid. If as a result of the consummation of the Sale of the Company
pursuant to the terms of the Sale Proposal that the Initiating Holders intend to
accept pursuant to Paragraph 3D, (a) the holders of Series D Preferred Stock
would receive an aggregate amount equal to the aggregate Series D Liquidation
Value, (b) the holders of Series C Preferred Stock would receive an aggregate
amount less than the aggregate Series C Liquidation Value and (c) the holders of
Series C-1 Preferred Stock would receive an aggregate amount less than the
aggregate Series C-1 Liquidation Value, the Initiating Holders shall deliver
written notice (the "Windward First Offer Notice") to Windward to such effect
and Windward shall have the right (the "Windward First Offer Purchase Right") to
purchase the Company in accordance with the terms set forth in the Windward
Purchase Proposal. Within 10 days following receipt of the Windward First Offer
Notice, Windward may exercise the Windward First Offer Purchase Right by
delivering written notice (the "Windward Purchase Notice") of such election to
the Company and each of the other Shareholders within 10 days following the
receipt of the Windward First Offer Notice. If Windward elects to exercise the
Windward First Offer Purchase Right, (i) within 10 days following receipt of the
Windward Purchase Notice, the

                                       15

<PAGE>

Company (and/or each Shareholder, if the Windward Purchase Proposal is an offer
to acquire Company Securities by sale, merger or otherwise), must accept the
Windward Purchase Proposal, including entering into any related definitive
agreement(s) and consummating the Sale of the Company in accordance with the
terms and conditions thereof and (ii) Windward shall be obligated to purchase
the Company in accordance with the terms set forth in the Windward Purchase
Proposal; provided, however, that any obligation or other liability of any
selling Shareholder will be individual to such Shareholder (and not joint or
joint and several) and will be limited to the net amount of proceeds received by
such Shareholder from such sale; provided, further, that representations, if
any, required by any Shareholder shall be limited to the status of its title to
the interests it is selling. If Windward does not deliver a Windward Purchase
Notice within the 10-day period referred to above, the Initiating Holders shall
have the right to accept any Sale Proposal and effectuate the Sale of the
Company pursuant to this Part 3.

     4. Definitions. For the purposes of this Agreement, the following terms
shall have the meanings set forth below:

          "1999 Stock Plan" means the Company's 1999 Stock Option Plan, dated
November 3, 1999, which provides for issuance of up to 150,000 shares of Class A
Common Stock.

          "2001 Stock Plan" means the Company's 2001 Stock Option Plan, dated
April 27, 2001, which provides for issuance of up to 250,000 shares of Class A
Common Stock.

          "ABRY" means ABRY Partners IV, L.P. and ABRY Investment Partnership,
L.P., collectively.

          "Affiliate" means with respect to any Person, a Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person, and, in the case of an individual,
includes any relative or spouse of such individual, or any relative or such
spouse, who has the same home as such individual. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

          "Approved Plan" means the 1999 Stock Plan, the 2001 Stock Plan and any
other written stock option, stock purchase or similar incentive plan (or options
to purchase up to 400,000 shares of Class A Common Stock) approved by the Board
of Directors (with a majority of the Purchaser Directors concurring).

          "Articles of Incorporation" means the Articles of Incorporation of the
Company, as amended.

          "Austin Ventures" means Austin Ventures III and Austin Ventures V,
collectively.

          "Austin Ventures III" means Austin Ventures III-A, L.P. and Austin
Ventures III-B, L.P., collectively.

                                       16

<PAGE>

          "Austin Ventures V" means Austin Ventures V, L.P. and Austin Ventures
V Affiliates Fund, L.P., collectively.

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

          "Class A Common Stock" means the Company's Class A Common Stock, par
value $.01 per share.

          "Class B Common Stock" means the Company's Class B Common Stock, par
value $.01 per share.

          "Common Stock" means the Company's Common Stock, par value $0.01 per
share, more fully described in the Articles of Incorporation.

          "Company Security" means any Equity Security of the Company.

          "Equity Securities" means any capital stock or similar security,
including without limitation, securities containing equity features and
securities containing profit participation features, or any security convertible
or exchangeable, with or without consideration, into or for any stock or similar
security, or any security carrying any warrant or right to subscribe for or
purchase any stock or similar security, or any such warrant or right.

          "Heller Warrant" means the Company's Warrant for the purchase (subject
to adjustment as provided therein) of 367,238 shares of Class B Common Stock,
issued to Heller Financial, Inc. pursuant to that certain Warrant Agreement, by
and between the Company and Heller Financial, Inc., dated November 10, 1994, as
amended by that certain First Amendment to Warrant Agreement, dated as of June
15, 1998 (the "Heller Warrant Agreement").

          "Mezzanine Warrant Shares" means the shares of Class A Common Stock
issued or issuable upon the exercise of the Mezzanine Warrants and for purposes
of applying this definition only, any Person who holds Mezzanine Warrants shall
be deemed to be the holder of the Mezzanine Warrant Shares obtainable upon the
exercise of such Mezzanine Warrants regardless of any restriction or limitation
on the exercise of such Mezzanine Warrants, such Mezzanine Warrant Shares shall
be deemed to be in existence, and such Person shall be entitled to exercise the
rights of a holder of such Mezzanine Warrant Shares hereunder.

          "Permitted Transfer" means (a) in the case of any Shareholder that is
an individual, a transfer of any or all of the shares of Company Securities
owned by such Shareholder to his spouse or children, or to trusts established
for the benefit of his spouse or children, provided that the transferee grants
to the transferor an irrevocable proxy coupled with an interest to vote all of
the shares of Company Securities so transferred and agrees to be bound by all of
the provisions of this Agreement, including, without limitation, Paragraph 2B of
this Agreement; (b) in the case of any Shareholder that is a partnership,
limited liability company, corporation, trust or other entity other than an
individual, a transfer of any or all of the shares of Company Securities owned
by such Shareholder (i) to its Affiliates, (ii) to its general or limited
partners, members, shareholders or beneficiaries, or (iii) to an entity owned by
or organized for the benefit of the general or limited partners, members,
shareholders, officers, directors,

                                       17

<PAGE>

employees, Affiliates or beneficiaries of such Shareholder, as applicable;
provided that, in each case, the transferee agrees to be bound by all of the
provisions of this Agreement, including, without limitation, Paragraph 2B of
this Agreement, to the same extent as the transferor was bound, and (c) in the
case of any Shareholder, a pledge of any or all of the shares of Company
Securities owned by such Shareholder to secure the repayment of any bona fide
indebtedness owing by such Shareholder, the Company or any Subsidiary of the
Company to a financial institution, provided that such Shareholder retains the
power to vote the shares of Company Securities so pledged until such time as the
pledgee shall have realized upon the pledge and that the provisions of this
Agreement, including, without limitation, Part 2 of this Agreement, shall be
applicable to the shares of Company Securities so pledged to the same extent
applicable to the transferor.

          "Permitted Transferee" means any Person (other than the Company) who
shall acquire any shares of Company Securities in a Permitted Transfer.

          "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, a limited
liability company, an unincorporated organization or other similar entity or
organization or a Governmental Authority.

          "Preferred Stock" means the Company's Preferred Stock, par value $0.01
per share, more fully described in the Articles of Incorporation.

          "Preferred B Warrant Shares" means the shares of Class A Common Stock
issued or issuable upon the exercise of the Preferred B Warrants and for
purposes of applying this definition only, any Person who holds Preferred B
Warrants shall be deemed to be the holder of the Preferred B Warrant Shares
obtainable upon the exercise of such Preferred B Warrants regardless of any
restriction or limitation on the exercise of such Preferred B Warrants, such
Preferred B Warrant Shares shall be deemed to be in existence, and such Person
shall be entitled to exercise the rights of a holder of such Preferred B Warrant
Shares hereunder.

          "Qualified Investment Banker" shall be the investment banking firm
selected by the Initiating Holders from a list of five nationally recognized
investment banking firms (no more than three of which firms, at the time such
list is compiled, shall be engaged, or during the preceding three years shall
have been engaged, by the Company or any Affiliate thereof) compiled by the
Company promptly following the receipt of a Sale Notice.

          "Qualified Public Offering" means the sale of the Common Stock in a
firm commitment, underwritten public offering registered under the Securities
Act (other than a registration relating solely to a transaction under Rule 145
of the Securities Act or to an employee benefit plan of the Company) at a price
(prior to underwriters' commissions and expenses) equal to or exceeding $3.00
per share (as adjusted for subdivisions and combinations of shares of Common
Stock and dividends on Class A Common Stock payable in shares of Class A Common
Stock as provided in the Articles of Incorporation).

                                       18

<PAGE>

          "Restricted Stock" means any Common Stock (other than Underlying
Common Stock or Warrant Shares) now owned or subsequently acquired by any Common
Shareholder or a transferee of a Common Shareholder in a Permitted Transfer.

          "Sale of the Company" means either (i) a sale of all or substantially
all of the issued and outstanding Company Securities, (ii) a sale of all or
substantially all of the assets and business of the Company and a liquidation of
the Company following such sale, or (iii) a merger or consolidation of the
Company with or into another Person, in each case for cash or securities.

          "Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force and the rules promulgated thereunder.

          "Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force and the rules promulgated
thereunder.

          "Series A Preferred Stock" means the Company's Series A Preferred
Stock, par value $0.01 per share, more fully described in the Articles of
Incorporation.

          "Series A Underlying Common Stock" means the shares of Class A Common
Stock issued or issuable upon the conversion of the Series A Preferred Stock and
for purposes of applying this definition only, any Person who holds any Series A
Preferred Stock shall be deemed to be the holder of the Series A Underlying
Common Stock obtainable upon conversion of such Series A Preferred Stock
regardless of any restriction or limitation on the conversion of such Series A
Preferred Stock, such Series A Underlying Common Stock shall be deemed to be in
existence, and such Person shall be entitled to exercise the rights of a holder
of such Series A Underlying Common Stock hereunder.

          "Series B Preferred Stock" means the Company's Series B Preferred
Stock, par value $0.01 per share, more fully described in the Articles of
Incorporation.

          "Series C Preferred Stock" means the Company's Series C Preferred
Stock, par value $0.01 per share, more fully described in the Articles of
Incorporation.

          "Series C-1 Preferred Stock" means the Company's Series C-1 Preferred
Stock, par value $0.01 per share, more fully described in the Articles of
Incorporation.

          "Series C Stock" means either Series C Preferred Stock or Series C-1
Preferred Stock.

          "Series C Underlying Common Stock" means the shares of Class A Common
Stock issued or issuable upon the conversion of the Series C Preferred Stock and
for purposes of applying this definition only, any Person who holds any Series C
Preferred Stock shall be deemed to be the holder of the Series C Underlying
Common Stock obtainable upon conversion of such Series C Preferred Stock
regardless of any restriction or limitation on the conversion of such Series C
Preferred Stock, such Series C Underlying Common Stock shall be deemed to be in
existence, and such Person shall be entitled to exercise the rights of a holder
of such Series C Underlying Common Stock hereunder.

                                       19

<PAGE>

          "Series D Initial Investment Amount" means, as of the date of the
consummation of the Sale of the Company, the aggregate amount paid to the
Company to purchase Series D Preferred Stock pursuant to the Series D-1 Purchase
Agreement.

          "Series D Preferred Stock" means either the Company's Series D-1
Preferred Stock, par value $0.01 per share, or the Company's Series D-2
Preferred Stock, par value $0.01 per share, each as more fully described in the
Articles of Incorporation.

          "Series D Stock" means either Series D Preferred Stock or Series D
Underlying Common Stock.

          "Series D Underlying Common Stock" means the shares of Class A Common
Stock issued or issuable upon the conversion of the Series D-1 Preferred Stock
and for purposes of applying this definition only, any Person who holds any
Series D-1 Preferred Stock shall be deemed to be the holder of the Series D
Underlying Common Stock obtainable upon conversion of such Series D-1 Preferred
Stock regardless of any restriction or limitation on the conversion of such
Series D-1 Preferred Stock, such Series D Underlying Common Stock shall be
deemed to be in existence, and such Person shall be entitled to exercise the
rights of a holder of such Series D Underlying Common Stock hereunder.

          "Subsidiary" means any corporation more than 50% of the outstanding
voting securities of which are owned by the Company or any Subsidiary, directly
or indirectly, or a partnership or limited liability company in which the
Company or any Subsidiary is a general partner or manager or holds interests
entitling it to receive more than 50% of the profits or losses of the
partnership or limited liability company.

          "transfer" means a sale, assignment, transfer, pledge, encumbrance or
other disposition.

          "2001 Warrant Shares" means the shares of Class A Common Stock issued
or issuable upon the exercise of the 2001 Warrants and for purposes of applying
this definition only, any Person who holds 2001 Warrants shall be deemed to be
the holder of the 2001 Warrant Shares obtainable upon the exercise of such 2001
Warrants regardless of any restriction or limitation on the exercise of such
2001 Warrants, such 2001 Warrant Shares shall be deemed to be in existence, and
such Person shall be entitled to exercise the rights of a holder of such 2001
Warrant Shares hereunder.

          "Underlying Common Stock" means the Series A Underlying Common Stock,
Series C Underlying Common Stock and Series D Underlying Common Stock,
collectively, and for purposes of applying this definition only, any Person who
holds any Preferred Stock shall be deemed to be the holder of the Underlying
Common Stock obtainable upon conversion of such Preferred Stock regardless of
any restriction or limitation on the conversion of such Preferred Stock, such
Underlying Common Stock shall be deemed to be in existence, and such Person
shall be entitled to exercise the rights of a holder of such Underlying Common
Stock hereunder.

                                       20

<PAGE>

          "Warrant Shares" means the Mezzanine Warrant Shares, Preferred B
Warrant Shares and 2001 Warrant Shares, collectively, and for purposes of
applying this definition only, any Person who holds Warrants shall be deemed to
be the holder of the Warrant Shares obtainable upon the exercise of such
Warrants regardless of any restriction or limitation on the exercise of such
Warrants, such Warrant Shares shall be deemed to be in existence, and such
Person shall be entitled to exercise the rights of a holder of such Warrant
Shares hereunder.

          "Windward" means Windward Capital L.P. II, LLC and Windward Capital
Partners II, L.P., collectively.

     5. General Provisions.

     5A. Transfer Conditions. Prior to any proposed transfer of any Preferred
Stock, Warrants, Warrant Shares or Common Stock (other than a transfer not
involving a change in beneficial ownership), unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the holder thereof shall give notice to the Company of such holder's intention
to effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer, in reasonable detail, and, if requested
by the Company, shall be accompanied, at such holder's expense, by either (i) a
written opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory to the Company (it being agreed that Testa, Hurwitz &
Thibeault, LLP, Vinson & Elkins L.L.P., Skadden, Arps, Slate, Meagher & Flom
LLP, Kirkland & Ellis and Schiff Hardin & Waite are satisfactory counsel),
addressed to the Company, to the effect that the proposed transfer of the
Preferred Stock, Warrants, Warrant Shares or Common Stock may be effected
without registration under the Securities Act, or (ii) a "no action" letter from
the Securities and Exchange Commission (the "Commission") to the effect that the
transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Preferred Stock, Warrants, Warrant Shares
or Common Stock shall be entitled to transfer such Preferred Stock, Warrants,
Warrant Shares or Common Stock in accordance with the terms of the notice
delivered by the holder to the Company and subject to the other provisions of
this Agreement. Each certificate evidencing the Preferred Stock, Warrants,
Warrant Shares or Common Stock transferred as provided above shall bear, except
if such transfer is made pursuant to Rule 144 under the Securities Act, the
appropriate restrictive legend set forth below, except that such certificate
shall not bear such restrictive legend if in the opinion of counsel for such
holder and the Company such legend is not required in order to establish
compliance with any provision of the Securities Act. Notwithstanding the
foregoing, each holder of Preferred Stock, Warrants, Warrant Shares or Common
Stock agrees that it will not request that a transfer of the Preferred Stock,
Warrants, Warrant Shares or Common Stock be made (or that the appropriate
restrictive legend described below hereof be removed from the certificate
evidencing the Preferred Stock, Warrants, Warrant Shares or Common Stock) solely
in reliance on Rule 144(k) under the Securities Act, if as a result of such
proposed transfer the Company would be rendered subject to the reporting
requirements of the Securities Exchange Act.

     5B. Legends on Certificates.

                                       21

<PAGE>

               (a) During the term of this Agreement, the Company shall affix to
each certificate issued on or after the date hereof to a party hereto and
evidencing Preferred Stock, Warrants, Warrant Shares or Common Stock a legend in
substantially the following form:

     "THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SALE, ASSIGNMENT,
     TRANSFER, PLEDGE OR OTHER DISPOSITION AND VOTING THEREOF ARE SUBJECT TO
     CERTAIN RESTRICTIONS AND AGREEMENTS CONTAINED IN A FOURTH AMENDED AND
     RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF JANUARY 18, 2002, AMONG THE
     COMPANY AND CERTAIN SHAREHOLDERS AND WARRANT HOLDERS. A COPY OF THE
     SHAREHOLDERS AGREEMENT AND ALL APPLICABLE AMENDMENTS THERETO WILL BE
     FURNISHED BY THE COMPANY TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT
     CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF
     BUSINESS OR REGISTERED OFFICE."

               (b) During the term of this Agreement, the Company shall not
effect any transfer of Preferred Stock, Warrants, Warrant Shares or Common Stock
evidenced by a certificate issued prior to the date hereof and held by any party
to this Agreement until it has advised the proposed transferee of such Preferred
Stock, Warrants, Warrant Shares or Common Stock that such Preferred Stock,
Warrants, Warrant Shares or Common Stock are subject to the restrictions on
transfer and voting arrangements set forth in this Agreement and provided such
proposed transferee with a copy of this Agreement and any applicable amendments.
The Company shall make a notation on its records and give instructions to any
transfer agent of the Preferred Stock, Warrants, Warrant Shares or Common Stock
in order to implement the restrictions on transfer established in this
Agreement.

     5C. Termination; Amendment and Waiver.

               (a) This Agreement shall terminate upon the earlier to occur of
(i) the written agreement of (A) the holders of at least 662/3% of the Series A
Underlying Common Stock then outstanding, (B) the holders of at least 662/3% of
the Series C Underlying Common Stock then outstanding, (C) the holders of at
least 662/3% of the Warrant Shares (other than 2001 Warrant Shares), (D) the
holders of at least 662/3% of the Series D Underlying Common Stock then
outstanding, and (E) the holders of at least 662/3% of the 2001 Warrant Shares),
(ii) the acquisition by a single purchaser of all of the issued and outstanding
shares of the Preferred Stock, Underlying Common Stock, Common Stock, Warrants
and Warrant Shares or (iii) the closing of a Qualified Public Offering.

               (b) No amendment, modification or waiver of this Agreement or any
provision hereof shall be effective unless made by the written agreement of (i)
the holders of at least 662/3% of the shares of Restricted Stock and at least
662/3% of the shares of Series A Underlying Common Stock, and (ii) (A) in the
case of any amendment, modification or waiver that adversely affects the rights
and interests of any holder or holders of Series D Preferred Stock or Series D
Underlying Common Stock hereunder, or in the case of any amendment,

                                       22

<PAGE>

modification or waiver to any provision of Part 3 of this Agreement or the
definition of any defined term set forth in Part 4 of this Agreement which is
used (directly or indirectly by use in the definition of a term that itself is
used in the definition of another term) in Part 3 of this Agreement, at least
662/3% of the shares of the Series D Underlying Common Stock, (B) in the case of
any amendment, modification or waiver that adversely affects the rights or
interests of any holder or holders of Warrants (other than 2001 Warrants) or
Warrant Shares (other than 2001 Warrant Shares) hereunder, at least 662/3% of
the Common Stock issued and issuable upon exercise of the Warrants (other than
2001 Warrants), (C) in the case of any amendment, modification or waiver that
adversely affects the rights or interests of any holder or holders of Series C
Underlying Common Stock hereunder, or in the case of any amendment, modification
or waiver to any provision of Part 3 of this Agreement or the definition of any
defined term set forth in Part 4 of this Agreement which is used (directly or
indirectly by use in the definition of a term that itself is used in the
definition of another term) in Part 3 of this Agreement, at least 662/3% of the
Series C Underlying Common Stock, and (D) in the case of any amendment,
modification or waiver that adversely affects the rights or interests of any
holder or holders of 2001 Warrants or 2001 Warrant Shares hereunder, at least
662/3% of the Common Stock issued and issuable upon exercise of the 2001
Warrants.

     5D. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally or by
cable, telex, facsimile transmission, telegram or overnight delivery service, or
72 hours after having been mailed by certified or registered mail, return
receipt requested and postage prepaid, to the recipient. Such notices, demands
and other communications will be sent to each party at the address indicated
below:

     To the Company:   Monitronics International, Inc.
                       12801 Stemmons Freeway
                       Suite 821
                       Dallas, TX 75234
                       Facsimile: (972) 919-1985
                       Attn: James R. Hull

     With a copy to:   Vinson & Elkins L.L.P.
                       2001 Ross Avenue
                       Suite 3700
                       Dallas, TX 75201
                       Facsimile: (214) 999-7714
                       Attn: Christine Hathaway

                                       23

<PAGE>

     To Preferred Holders or Warrant Holders to their addresses set forth on the
Schedule of Preferred Holders or Warrant Holders, as the case may be,

     With a copy to:   If to Austin Ventures:
                       Vinson & Elkins L.L.P.
                       600 Congress Avenue
                       Suite 2700
                       Austin, TX 78701
                       Facsimile: (512) 236-3450
                       Attn: William R. Volk

                       and

                       If to Windward:
                       Skadden, Arps, Slate, Meagher & Flom LLP
                       Four Times Square
                       New York, NY 10036
                       Facsimile: (212) 735-2000
                       Attn: Howard L. Ellin

                       and

                       If to ABRY:
                       Kirkland & Ellis
                       153 East 53rd Street
                       New York, NY 10022
                       Facsimile: (212) 446-4900
                       Attn: John L. Kuehn

                       and

                       If to CRL:
                       Testa, Hurwitz & Thibeault, LLP
                       125 High Street
                       Boston, MA 02110
                       Facsimile: (617) 248-7100
                       Attn: Andrew E. Taylor, Jr.

                                       24

<PAGE>

                       and

                       If to NML:
                       Schiff Hardin & Waite
                       6600 Sears Tower
                       Chicago, IL 60606
                       Facsimile: (312) 258-5600
                       Attn: Andrew A. Kling

     To the Common Shareholders, to their addresses set forth on the Schedule of
Common Shareholders, or to such other address or to the attention of such other
Person as the recipient party has specified by prior written notice to the
sending party.

     5E. Governing Law. The construction, validity and interpretation of this
Agreement will be governed by the internal laws of the State of Texas without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Texas or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Texas.

     5F. Entire Agreement. This Agreement and the addendum, exhibits and
schedules hereto embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings relating to such subject matter.

     5G. Further Assurances. Each party to this Agreement hereby covenants and
agrees, without the necessity of any further consideration, to execute and
deliver any and all such further documents and take any and all such other
actions as may be necessary or appropriate to carry out the intent and purposes
of this Agreement and to consummate the transactions contemplated herein.

     5H. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
be one and the same document.

     5I. Reorganization. The provisions of this Agreement shall apply to any
Equity Securities resulting from any stock split or reverse stock split, stock
dividend, reclassification, subdivision, consolidation or reorganization of any
shares of Company Securities and to any shares of Company Securities or shares
of Equity Securities of any successor company which may be received by any of
the parties hereto by virtue of their respective ownership of any shares of
Company Securities.

     5J. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.

     5K. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will

                                       25

<PAGE>

be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.

     5L. Binding Effect. Except as otherwise expressly provided herein, all
covenants and agreements in this Agreement by or on behalf of any of the parties
hereto will bind and inure to the benefit of the respective heirs, personal
representatives, successors and transferees of the parties hereto whether so
expressed or not. In addition, and whether or not any express assignment has
been made, unless expressly provided otherwise, the provisions of this Agreement
which are (i) for any Preferred Holder's benefit as a purchaser or holder of
shares of Preferred Stock are also for the benefit of, and enforceable by, any
subsequent holder of such Preferred Stock and (ii) for any Warrant Holder's
benefit as a purchaser or holder of Warrants or Warrant Shares are also for the
benefit of, and enforceable by, any subsequent holder of Warrants and Warrant
Shares. Except by operation of law, the Company shall not make any transfer of
any of its rights or obligations hereunder without the prior written consent of
each of the holders of Series A Underlying Common Stock, each of the holders of
the Series C Underlying Common Stock and each of the holders of the Warrants and
Warrant Shares.

     5M. Exception for Pledge. The parties acknowledge that pursuant to the
terms of a (a) Third Amended and Restated Pledge Agreement, dated as of January
13, 1999, as amended to date (the "Pledge Agreement"), by and between Austin
Ventures III, Austin Ventures V, Capital Resource Lenders II, L.P. ("CRL"), Hull
Family Limited Partnership, Robert Sherman, individually, Michael Gregory,
individually, Michael Meyers, individually, and Stephen Hedrick, individually
(collectively, the "Pledgors") and Canadian Imperial Bank of Commerce, as
Administrative Agent, State Street Bank and Trust Company, for itself and as
Documentation and Collateral Agent (the "Secured Party"), CIBC, Inc., Heller
Financial, Inc., Chase Bank of Texas, National Association, Union Bank of Texas,
N.A., Wells Fargo Bank (Texas) National Association, LaSalle National Bank and
BankBoston, N.A. (collectively, the "Lenders"), (b) Pledge Agreement, dated as
of April 27, 2001, as amended to date (the "ABRY/Windward/CRL Pledge
Agreement"), by and between ABRY, Windward, CRL and the Lenders, and (c) Pledge
Agreement, dated as of January 18, 2002 (the "NML Pledge Agreement"), by and
between The Northwestern Mutual Life Insurance Company ("NML") and the Lenders,
certain Company Securities, as identified on Schedule I to the Pledge Agreement,
the ABRY/Windward/CRL Pledge Agreement and the NML Pledge Agreement
(collectively, the "Pledged Securities"), have been pledged by the Pledgors,
ABRY, Windward, CRL and NML to the Secured Party for the benefit of the Lenders.
The parties hereto acknowledge and consent to such pledge of the Pledged
Securities and, notwithstanding any provision in this Agreement to the contrary,
hereby agree that any purchaser of such Pledged Securities, including the
Lenders, who acquires the Pledged Securities pursuant to the terms of the Pledge
Agreement, the ABRY/Windward/CRL Pledge Agreement and the NML Pledge Agreement
shall take the Pledged Securities free and clear of all terms of this Agreement
and neither such Persons nor such Pledged Securities shall thereafter be subject
to any term or condition of this Agreement.

                                     * * * *

                                       26

<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Fourth Amended and
Restated Shareholders Agreement as of the date first above written.

                                       COMPANY:

                                       MONITRONICS INTERNATIONAL, INC.

                                       By: /s/ James R. Hull
                                           -------------------------------------
                                           James R. Hull,
                                           President

                                       PURCHASERS:

                                       AUSTIN VENTURES III-A, L.P.

                                       By: AV Partners III, L.P.,
                                           Its General Partner

                                           By: /s/ Blaine F. Wesner
                                               ---------------------------------
                                               Blaine F. Wesner,
                                               Authorized Signatory

                                       AUSTIN VENTURES III-B, L.P.

                                       By: AV Partners III, L.P.,
                                           Its General Partner

                                           By: /s/ Blaine F. Wesner
                                               ---------------------------------
                                               Blaine F. Wesner,
                                               Authorized Signatory

                                       AUSTIN VENTURES V, L.P.

                                       By: AV Partners V, L.P.,
                                           Its General Partner

                                           By: /s/ Blaine F. Wesner
                                               ---------------------------------
                                               Blaine F. Wesner,
                                               General Partner

<PAGE>

                                       AUSTIN VENTURES V AFFILIATES FUND, L.P.

                                       By: AV Partners V, L.P.,
                                           Its General Partner

                                           By: /s/ Blaine F. Wesner
                                               ---------------------------------
                                               Blaine F. Wesner,
                                               General Partner

                                       CAPITAL RESOURCE LENDERS II, L.P.

                                       By: Capital Resource Partners II, L.P.,
                                           Its General Partner

                                           By: /s/ Stephen M. Jenks
                                               ---------------------------------
                                               General Partner

                                       WINDWARD CAPITAL PARTNERS II, L.P.

                                       By: Windward Capital GP II, LLC,
                                           Its General Partner

                                           By: /s/ Peter S. Macdonald
                                               ---------------------------------
                                               Peter S. Macdonald,
                                               Managing Member

                                       WINDWARD CAPITAL LP II, LLC

                                       By: /s/ Peter S. Macdonald
                                           -------------------------------------
                                           Peter S. Macdonald,
                                           Managing Member

<PAGE>

                                       ABRY PARTNERS IV, L.P.

                                       By: ABRY Capital Partners, L.P.,
                                           Its General Partner

                                           By: ABRY Capital Partners, LLC,
                                               Its General Partner

                                               By: /s/ illegible signature
                                                   -----------------------------
                                                   Name:
                                                   Title: Authorized Agent

                                       ABRY INVESTMENT PARTNERSHIP, L.P.

                                       By: ABRY Investment GP, LLC,
                                           Its General Partner

                                           By: /s/ Jeffrey J. Lueken
                                               -------------------------------
                                               Name:
                                               Title: Authorized Agent

                                       THE NORTHWESTERN MUTUAL LIFE INSURANCE
                                       COMPANY

                                       By: /s/ Jeffrey J. Lueken
                                           -------------------------------------
                                           Name:
                                           Title: Authorized Agent

                                       COMMON SHAREHOLDERS:

                                       HULL FAMILY LIMITED PARTNERSHIP, L.P.

                                       By: James R. Hull Management Trust,
                                           Its General Partner

                                           By: /s/ James R. Hull
                                               ---------------------------------
                                               James R. Hull, Trustee

                                       /s/ Robert N. Sherman
                                       -----------------------------------------
                                       Robert N. Sherman

                                       /s/ Michael Meyers
                                       -----------------------------------------
                                       Michael Meyers

                                       /s/ Stephen Hedrick
                                       -----------------------------------------
                                       Stephen Hedrick

<PAGE>

                                       /s/ Michael Gregory
                                       -----------------------------------------
                                       Michael Gregory

<PAGE>

                       EXHIBIT A TO SHAREHOLDERS AGREEMENT

                            INDEMNIFICATION AGREEMENT

     This Indemnification Agreement (the "Agreement") is executed on and entered
into as of _______________, _____ (the "Effective Date") by and between
Monitronics International, Inc., a Texas corporation (the "Company"), and
________________ ("Director").

     The Company is required or permitted under certain circumstances to
indemnify directors of the Company against liability incurred by them in such
capacities or by reason of occupying such position. The Company desires to have
Director serve as a director of the Company, and Director desires to serve,
provided that he is indemnified by the Company. This is the Indemnification
Agreement referred to in the Fourth Amended and Restated Shareholders Agreement
(the "Shareholders Agreement") entered into on January 18, 2002 by the Company
and the Shareholders named therein.

     The parties agree as follows:

     1. Definitions.

     Unless the context requires otherwise, for purposes of this Agreement:

     (a) "Act" shall mean the Texas Business Corporation Act, as in effect on
the date of this Agreement and as hereafter amended, and any successor statute;
provided that, for purposes of this Agreement, any amendment of such Act that
reduces the rights of Director will be given effect only to the extent required
by such Act as amended;

     (b) the terms "proceedings," "expenses" and other terms defined in Article
2.02-1 of the Act are used herein with the meanings as so defined under the Act;
and

     (c) the phrase "serving in a representative capacity at the request of the
Company" means serving at the request of the Company as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise.

     2. Indemnity.

     (a) The Company agrees to indemnify Director to the fullest extent
permitted by the Act, as soon as practicable but in any event no later than 30
days after receipt by the Company of any claim for indemnity hereunder against
expenses judgments, penalties, fines and amounts paid in settlement (including
all interest, assessments and other charges paid or payable in connection with
or in respect of such expenses, judgments, fines, penalties or amounts paid in
settlement of such proceeding) incurred by or on behalf of Director in
connection with any proceeding in which Director was, is or is threatened to be
a named a party to or witness or other participant in such proceeding because he
is or was a director or officer of the Company or because he is or was serving
in a representative capacity at the request of the Company.

<PAGE>

     (b) Reasonable expenses incurred by Director in connection with a
proceeding referred to in Paragraph 2A in advance of the final disposition of
the proceeding and without the determination specified in Sections F or G of
Article 2.02-1 of the Act, promptly upon receipt by the Company of:

          (i) a written affirmation by Director of his good faith belief that he
has met the standard of conduct necessary for indemnification under the Act; and

          (ii) a written undertaking by or on behalf of the Director to repay
the amount paid or reimbursed pursuant to this Paragraph 2B if it is ultimately
determined that he has not met the standard of conduct necessary for
indemnification under the Act or if it is ultimately determined that
indemnification of Director against expenses incurred by him in connection with
that proceeding is prohibited by Section E of Article 2.02-1 of the Act.

     (c) This Agreement makes mandatory the indemnification permitted under
Section B of Article 2.02-1 of the Act with respect to expenses incurred in
connection with a proceeding described in such provision and shall be deemed to
constitute authorization of indemnification in the manner required by the Act.

     3. Notification and Defense of Claim.

     (a) Promptly after receipt by Director of notice of the commencement of any
proceeding in which Director was, is or is threatened to be a named a party to
or witness or other participant in such proceeding, if a claim for indemnity in
connection with such proceeding is to be made against the Company under this
Agreement, will promptly notify the Company of the commencement thereof. With
respect to any such proceeding other than a proceeding brought by or on behalf
of the Company or as to which Director shall have made the determination
provided for in (ii) below, the Company will be entitled to participate therein
at its own expense, and the Company may assume the defense thereof with counsel
satisfactory to Director. After notice from the Company to Director of its
election to assume the defense thereof, the Company will not be liable to
indemnify Director under this Agreement against expenses subsequently incurred
by Director in connection with the defense thereof other than reasonable costs
of investigation or as otherwise provided below. Director shall have the right
to select and employ counsel in a proceeding, but the fees and expenses of such
counsel incurred after notice from the Company of its assumption of the defense
thereof shall be borne by Director unless (i) the employment of such counsel by
Director has been authorized by the Company, (ii) Director shall have reasonably
concluded that there may be a conflict of interest between the Company and
Director in the conduct of the defense of such proceeding, or (iii) the Company
shall not in fact have employed counsel to assume the defense of such action,
and in each case the fees and expenses of counsel shall be subject to the
indemnity provided hereunder by the Company; provided, however, that in the
event any other person indemnified by the Company (unless Director has
reasonably concluded that there may be a conflict of interest between Director
and such other person) is also named or threatened to be named defendant or
respondent in a proceeding referred to in (ii) above, the fees and expenses of
only one counsel employed by Director and all such other persons shall be
subject to indemnity hereunder.

<PAGE>

     (b) Promptly following receipt by the Company from Director of any claim
for indemnity hereunder, the Company shall in good faith make or cause to be
made any determination as to reasonableness of expenses and determination that
indemnification is permissible as may be required pursuant to the Act and, as
soon as practicable, but in any event no later than 30 days after receipt by the
Company of any claim for indemnity hereunder, following such determination, the
Company shall pay or cause to be paid to Director in cash the amount of the
expenses indemnified hereunder and so determined to be reasonable and
permissible. Such payment shall be made out of the assets of the Company.

     4. Miscellaneous.

     (a) The Company expressly confirms and agrees that it has entered into this
Agreement in order to induce Director to serve or continue to serve as a
director or in a representative capacity at the request of the Company, and
acknowledges that Director is relying upon this Agreement in continuing in such
capacity and in serving as a director of the Company or in a representative
capacity at the request of the Company hereafter, whether or not Director serves
in any such capacity on the date of this Agreement. All agreements and
obligations of the Company contained herein shall continue during the period
that Director serves as a director of the Company or in a representative
capacity at the request of the Company and thereafter so long as Director shall
be subject to any possible claim or pending, threatened or completed proceeding
by reason of the fact that Director was a director or served in any other
representative capacity.

     (b) In the event Director is required to bring any action to enforce his
rights or to collect any amount due him under this Agreement and is successful
in such action, the Company shall reimburse Director for all of Director's fees
and expenses (including, without limitation, reasonable attorney's fees) in
bringing and pursuing such action.

     (c) Each of the provisions (including any provision within a single
Paragraph or sentence) of this Agreement is a separate and distinct agreement
and independent of the others, so that if any provision hereof shall be held to
be invalid, illegal or unenforceable for any reason whatsoever, such invalidity
or unenforceability shall not affect the validity or enforceability of the other
provisions hereof and such remaining provisions shall remain enforceable to the
fullest extent permitted by law.

     (d) This Agreement shall be interpreted and enforced in accordance with the
internal laws but not the law of conflicts of the State of Texas.

     (e) This Agreement and the terms hereof shall be binding upon and inure to
the benefit of the Company and Director, and their respective successors and
assigns.

     (f) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.

<PAGE>

     (g) The-indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which Director may be entitled under any
provision of the Act, the Articles of Incorporation or bylaws of the Company or
of any other corporation, or any other agreement or otherwise. To the extent
that a change in the Act (whether by statute or judicial decision) permits
greater indemnification by agreement than would be affording currently under the
Company's bylaws and this Agreement, it is the intent of parties hereto that
Director shall enjoy by this Agreement the greater benefits so afforded by such
change.

     (h) All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement will be in writing and
will be deemed to have been given when delivered personally or by cable, telex,
facsimile transmission, telegram or overnight delivery service, or 72 hours
after having been mailed by certified or registered mail, return receipt
requested and postage prepaid, to the recipient. Such notices, demands and other
communications will be sent to each party at the address indicated below:

     If to the Director:
                           --------------------

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

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

                           --------------------
                           Facsimile:
                           Attn:

     If to the Company:

                           Monitronics International, Inc.
                           12801 Stemmons Freeway
                           Suite 821
                           Dallas, TX 75234
                           Facsimile: (972) 919-1985
                           Attn: President

or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.

<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the Effective Date.

                                       The Company:

                                       MONITRONICS INTERNATIONAL, INC.

                                       By: _____________________________________
                                           James R. Hull, President

<PAGE>

                       EXHIBIT B TO SHAREHOLDERS AGREEMENT

                      ADDENDUM AGREEMENT TO FOURTH AMENDED
                       AND RESTATED SHAREHOLDERS AGREEMENT

     This Addendum Agreement is executed on and effective as of _______________,
by and among ____________________ (the "New Shareholder"), the New Shareholder's
Spouse (if any), and Monitronics International, Inc., a Texas corporation (the
"Company").

     The Fourth Amended and Restated Shareholders Agreement dated January 18,
2002 (the "Shareholders Agreement") among the Company and certain shareholders
of the Company provides that all persons prior to becoming shareholders of the
Company must enter into an Addendum Agreement binding such person and such
person's spouse (if any) to the Shareholders Agreement to the same extent as if
they were original parties thereto. Capitalized terms used herein but not
otherwise defined shall have the meanings ascribed to them in the Shareholders
Agreement.

     Therefore, the New Shareholder and the spouse of the New Shareholder (if
any) hereby agree to be bound by all terms and conditions of the Shareholders
Agreement to the same extent as if they were original signatories to the
Shareholders Agreement and were a [insert type of holder](*). This Addendum
Agreement shall be attached to and become part of the Shareholders Agreement.

                                       NEW SHAREHOLDER:

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

                                       -----------------------------------------
                                       Spouse of New Shareholder

                                       COMPANY:

                                       MONITRONICS INTERNATIONAL, INC.

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

     *In each case where the New Shareholder is a transferee of Company
Securities from a party to the Shareholders Agreement, based upon the type of
Company Security the New Shareholder has acquired, the New Shareholder shall be
deemed either a Preferred Holder, a Warrant Holder and/or a Common Shareholder
with respect to each such Company Security. In all other cases, the New
Shareholder shall be deemed a Common Shareholder.

<PAGE>

                          SCHEDULE OF PREFERRED HOLDERS

Austin Ventures III-A, L.P.
Austin Ventures III-B, L.P.
Austin Ventures V, L.P.
Austin Ventures V Affiliates Fund, L.P.
701 Brazos
Suite 1400
Austin, TX 78701
Facsimile: (512) 476-3952
Attn: Blaine F. Wesner

Capital Resource Lenders II, L.P.
c/o Capital Resource Partners
85 Merrimac Street
Suite 200
Boston, MA 02114
Facsimile: (617) 723-9819
Attn: Stephen M. Jenks

Windward Capital Partners II, L.P.
Windward Capital L.P. II, LLC
1177 Avenue of the Americas
42nd Floor
New York, NY 10036
Facsimile: (212) 382-6534
Attn: Peter S. Macdonald

ABRY Partners IV, L.P.
ABRY Investment Partnership, L.P.
18 Newbury Street
Boston, MA 02116
Facsimile: (617) 859-7205
Attn: Jay Grossman

<PAGE>

                           SCHEDULE OF WARRANT HOLDERS

Capital Resource Lenders II, L.P.
c/o Capital Resource Partners
85 Merrimac Street
Suite 200
Boston, MA 02114
Facsimile: (617) 723-9819
Attn: Stephen M. Jenks

Austin Ventures III-A, L.P.
Austin Ventures III-B, L.P.
Austin Ventures V, L.P.
Austin Ventures V Affiliates Fund, L.P.
701 Brazos
Suite 1400
Austin, TX 78701
Facsimile: (512) 476-3952
Attn: Blaine F. Wesner

The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
Facsimile: (414) 299-7124
Attn: Securities Department

<PAGE>

                         SCHEDULE OF COMMON SHAREHOLDERS

1.   Hull Family Limited Partnership, L.P.
     c/o Monitronics International, Inc.
     12801 Stemmons Freeway
     Suite 821
     Dallas, TX 75234
     Facsimile: (972) 919-1985

2.   Robert N. Sherman
     c/o Monitronics International, Inc.
     12801 Stemmons Freeway
     Suite 821
     Dallas, TX 75234
     Facsimile: (972) 919-1985

3.   Michael Meyers
     c/o Monitronics International, Inc.
     12801 Stemmons Freeway
     Suite 821
     Dallas, TX 75234
     Facsimile: (972) 919-1985

4.   Stephen Hedrick
     c/o Monitronics International, Inc.
     12801 Stemmons Freeway
     Suite 821
     Dallas, TX 75234
     Facsimile: (972) 919-1985

5.   Michael Gregory
     c/o Monitronics International, Inc.
     12801 Stemmons Freeway
     Suite 821
     Dallas, TX 75234
     Facsimile: (972) 919-1985<PAGE>

                                                                   Exhibit 10.28

                           SERIES D-1 PREFERRED STOCK

                               PURCHASE AGREEMENT

                           Dated as of April 27, 2001

                                      Among

                         Monitronics International, Inc.

                                       and

                             ABRY Partners IV, L.P.

                                       and

                        ABRY Investment Partnership, L.P.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                             Page
                                                                                                             ----
<S>                                                                                                           <C>
1.   Authorization and Sale of Shares..........................................................................1

        1A.    Authorization...................................................................................1
        1B.    Sale of Initial Shares of Series D-l Preferred Stock............................................1
        1C.    Sale of Additional Shares of Series D-1 Preferred Stock at the Option of the Company............1
        1D.    Sale of Additional Shares of Series D-1 Preferred Stock at the Option of the Purchasers.........2
        1E.    Use of Proceeds.................................................................................4
        1F.    HSR Act Matters.................................................................................4

2.   The Closings..............................................................................................4

        2A.    The Initial Closing.............................................................................4
        2B.    The Put Option Closing..........................................................................5
        2C.    The Call Option Closing.........................................................................5

3.   Representations and Warranties of the Company.............................................................6

        3A.    Organization and Standing.......................................................................6
        3B.    Capitalization..................................................................................6
        3C.    Subsidiaries, Etc...............................................................................7
        3D.    Shareholder List and Agreements.................................................................7
        3E.    Issuance of Shares..............................................................................7
        3F.    Authority for Agreement.........................................................................8
        3G.    Governmental Consents...........................................................................8
        3H.    Litigation......................................................................................8
        3I.    Financial Statements............................................................................9
        3J.    Absence of Liabilities..........................................................................9
        3L.    Taxes...........................................................................................9
        3M.    Property and Assets............................................................................10
        3N.    Intellectual Property..........................................................................10
        3O.    Insurance......................................................................................11
        3P.    Material Contracts and Obligations.............................................................11
        3Q.    Compliance.....................................................................................12
        3R.    Absence of Changes.............................................................................12
        3S.    Employees......................................................................................14
        3T.    Employee Benefits..............................................................................14
        3U.    Books and Records..............................................................................15
        3V.    Accounts Receivable............................................................................15
        3W.    Monitoring Contract Data.......................................................................15
        3X.    Disclosures....................................................................................15
</TABLE>

                                       i

<PAGE>

<TABLE>
<S>                                                                                                           <C>
4.   Representations and Warranties of the Purchasers.........................................................16

        4A.    Investment.....................................................................................16
        4B.    Authority......................................................................................16
        4C.    Governmental Consents..........................................................................16
        4D.    Accredited Investor............................................................................16
        4E.    Nature and Relationship of Purchasers..........................................................16

5.   Conditions to the Obligations of the Purchasers..........................................................17

        5A.    Conditions to the Obligations of the Purchasers with Respect to the Initial Closing............17
        5B.    Conditions to the Obligations of the Purchasers with Respect to Each Option Closing............18

6.   Condition to the Obligations of the Company with Respect to each Closing.................................20

7.   Covenants of the Company.................................................................................21

        7A.    Inspection and Observation.....................................................................21
        7B.    Financial Statements and Other Information.....................................................21
        7C.    Material Changes and Litigation................................................................22
        7D.    Proprietary Information Agreements.............................................................22
        7E.    Termination of Covenants.......................................................................22
        7F.    Reservation of Series D-2 Preferred Stock and Common Stock.....................................22

8.   Transfer of Shares.......................................................................................22

        8A.    Restrictions...................................................................................22
        8B.    Legends........................................................................................22

9.   Definitions..............................................................................................23

10.  Miscellaneous............................................................................................27

        10A.   Successors and Assigns.........................................................................27
        10B.   Confidentiality................................................................................27
        10C.   Survival of Representations and Warranties.....................................................27
        10D.   Expenses.......................................................................................27
        10E.   Notices........................................................................................29
        10F.   Brokers........................................................................................29
        10G.   Entire Agreement...............................................................................29
        10H.   Amendments and Waivers.........................................................................29
        10I.   Counterparts...................................................................................30
        10J.   Descriptive Headings...........................................................................30
        10K.   Severability...................................................................................30
        10L.   Governing Law..................................................................................30
        10M.   Further Assurances.............................................................................30
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                                           <C>
        10N.   Indemnification................................................................................30
        10O.   Legal Representation...........................................................................31
</TABLE>

                                    EXHIBITS

Exhibit A   Schedule of Purchasers
Exhibit B   Articles of Amendment
Exhibit C   Exceptions Schedule
Exhibit D   Monitoring Contract Data
Exhibit E   Opinion of Glast, Phillips & Murray, P.C.
Exhibit F   Third Amended and Restated Shareholders Agreement
Exhibit G   Third Amended and Restated Registration Agreement
Exhibit H   Amendment Agreement
Exhibit I   Second Amended and Restated Co-Sale Agreement
Exhibit J   Pledge Agreement
Exhibit K   Affiliate Subordination Agreement

                                      iii

<PAGE>

                           SERIES D-I PREFERRED STOCK
                               PURCHASE AGREEMENT

     This Series D-I Preferred Stock Purchase Agreement (the "Agreement"), dated
as of April 27, 2001, is entered into by and among Monitronics International,
Inc., a Texas corporation (the "Company"), and the Persons listed on Exhibit A
attached hereto (individually, a "Purchaser" and, collectively, the
"Purchasers"). Capitalized terms not defined elsewhere herein shall have the
respective meanings assigned to them in Part 9 of this Agreement.

     In consideration of the mutual promises and covenants contained in this
Agreement, the parties agree as follows:

     1. Authorization and Sale of Shares.

          1A. Authorization. The Company has, or before the Initial Closing (as
defined in Paragraph 2A of this Agreement) will have, duly authorized the
issuance and sale, pursuant to the terms of this Agreement, of up to 70,000
shares of its Series D- 1 Preferred Stock (the "Series D-1 Preferred Stock"),
having the rights, restrictions, privileges and preferences set forth in the
Articles of Amendment to the Articles of Incorporation attached as Exhibit B
(the "Articles of Amendment"). The Company has, or before the Initial Closing
will have, adopted and filed the Articles of Amendment with the Secretary of
State of the State of Texas. The shares of Series DI Preferred Stock being sold
under this Agreement and, unless the context otherwise requires, the shares of
Series D-2 Preferred Stock and Class A Common Stock issued or issuable upon the
conversion of such shares of Series D-1 Preferred Stock are referred to as
"Shares".

          1B. Sale of Initial Shares of Series D-l Preferred Stock. Subject to
the terms and conditions of this Agreement, at the Initial Closing, the Company
will issue and sell to the Purchasers, and each of the Purchasers will purchase,
the number of shares of Series D-l Preferred Stock (the "Initial Shares") set
forth opposite such Purchaser's name on Exhibit A under the heading "Number of
Initial Shares" for the purchase price of $1,000 per share.

          1C. Sale of Additional Shares of Series D-1 Preferred Stock at the
Option of the Company.

               (i) At any time during the 12-month period (the "Put Option
Period") beginning on the Initial Closing Date (as defined in Paragraph 2A of
this Agreement), subject to the terms and conditions of this Agreement, at one
or more Put Option Closings (as defined in Paragraph 2B of this Agreement), the
Company shall have the right (the "Put Rights") to require the Purchasers to
purchase, in the aggregate, up to 20,000 authorized but unissued shares of
Series D- 1 Preferred Stock (the "Put Option Shares") for the purchase price of
$1,000 per share.

               (ii) If the Company chooses to exercise its Put Rights, the
Company shall deliver a notice (each, a "Put Notice") to each Purchaser during
the Put Option Period setting forth (a) the number of Put Option Shares to be
purchased by the Purchasers on the Put Option Closing Date (as defined in
Paragraph 2B of this Agreement) and (b) the date of the Put Option Closing Date
(which shall be no less than 30 days after the date of the receipt by the
Purchasers of such Put Notice and, if the purchase of Put Option Shares by the
Purchasers is subject to a filing under the HSR Act, such specified date shall
be extended up to 15 Business

<PAGE>

Days after any applicable waiting period under the HSR Act shall have expired or
been terminated); provided, however, (1) the number of Put Option Shares set
forth in any Put Notice (other than the final Put Notice) shall not be less than
5,000 and (2) no more than one Put Notice may be delivered during any 30-day
period. No Put Option Closing may occur more than 30 days after the expiration
of the Put Option Period, unless the purchase of Put Option Shares by the
Purchasers is subject to a filing under the HSR Act, in which case such period
shall be extended to 15 Business Days after any applicable waiting period under
the HSR Act shall have expired or been terminated. On each Put Option Closing
Date, the Company will issue and sell to the Purchasers, and the Purchasers will
purchase, the number of Put Option Shares set forth in the Put Notice (which
number, together with all Put Option Shares sold at prior Put Option Closings,
shall not exceed the number of Put Option Shares set forth in Subparagraph (i)
above) for the purchase price of $1,000 per share. The number of Put Option
Shares specified in the Put Notice which the Company has elected to sell shall
be purchased by the Purchasers on a pro rata basis based upon the percentage
that the number of Initial Shares purchased by each Purchaser on the Initial
Closing Date represents out of the total number of Initial Shares purchased by
all of the Purchasers on the Initial Closing Date or in such other proportion as
the Purchasers may specify.

          1D. Sale of Additional Shares of Series D-1 Preferred Stock at the
Option of the Purchasers.

               (i) Within 10 days after the expiration of the Put Option Period,
the Company shall deliver to each of the Purchasers a notice (the "Initial
Financing Notice") setting forth the amount (the "Initial Financing Amount") of
gross proceeds (net of any amount (other than reimbursement of reasonable and
customary expenses) paid to any provider of financing or any Affiliate thereof)
received by the Company from the issuance of Put Option Shares or other debt or
equity securities during the Put Option Period (provided that the Initial
Financing Amount will not include any such gross proceeds that the Company has
used or is permitted to use to repay indebtedness of the Company, other than
indebtedness that the Company may reborrow under revolving debt commitments in
effect at the end of the Put Option Period), along with backup documentation of
the Initial Financing Amount raised by the Company, and absent written objection
by the Purchasers to the Initial Financing Amount specified therein within 15
Business Days of the receipt by the Purchasers of such Initial Financing Notice,
the Initial Financing Amount specified in the Initial Financing Notice shall be
final and conclusive. The Purchasers shall have the right to retain, at their
expense, a certified public accounting firm to inspect the Company's books and
records to make an independent determination of the Initial Financing Amount
specified in the Initial Financing Notice within 30 days of the receipt by the
Purchasers of such Initial Financing Notice. In the event that the Company shall
dispute the conclusions of the Purchasers' certified public accounting firm, the
Company and the Purchasers agree to retain, at the Company's expense, an
internationally recognized accounting firm (the "Deciding Accountant") mutually
acceptable to them to independently determine the Initial Financing Amount
within 30 days and such determination shall be final and conclusive. The "Final
Determination Date" means the earliest of (a) the 30th day after receipt of the
Initial Financing Notice, if the Purchasers have not raised any objection, (b)
the date on which the parties hereto agree upon the Initial Financing Amount,
and (c) the date on which the Deciding Accountant delivers written notice to the
Company and the Purchasers of its decision with respect to the Initial Financing
Amount. During the period (the "Additional Financing Period")

                                       2

<PAGE>

beginning on the expiration of the Put Option Period and ending on the date of
the delivery of a Call Notice (as defined in Paragraph ID(iii) of this
Agreement), the Company shall promptly deliver to each of the Purchasers a
notice (each, an "Additional Financing Notice") setting forth the amount (each,
an "Additional Financing Amount" and, together with the Initial Financing
Amount, the "Financing Amount") of gross proceeds (net of any amount (other than
reimbursement of reasonable and customary expenses) paid to any provider of
financing or any Affiliate thereof) received by the Company from the issuance of
Put Option Shares or other debt or equity securities during the Additional
Financing Period (provided that any Additional Financing Amount will not include
any such gross proceeds that the Company has used or is permitted to use to
repay indebtedness of the Company, other than indebtedness that the Company may
reborrow under revolving debt commitments in effect at the end of the Additional
Financing Period), along with backup documentation of the Additional Financing
Amount raised by the Company. Subject to the rights of the Purchasers to object
to the Additional Financing Amount set forth in any Additional Financing Notice
in accordance with the dispute resolution provisions set forth above, each
Additional Financing Amount shall be included in the Financing Amount.

               (ii) If the Financing Amount (as determined pursuant to
Subparagraph (i) above) is less than $20,000,000, at any time during the 60-day
period (the "Call Option Period") beginning on the Final Determination Date,
subject to the terms and conditions of this Agreement, at the Call Option
Closing (as defined in Paragraph 2C of this Agreement), the Purchasers shall
have a one-time right (the "Call Right") to purchase from the Company up to such
number of authorized but unissued shares of Series D-l Preferred Stock (the
"Call Option Shares" and, together with the Put Option Shares, the "Option
Shares") in an amount equal to (a), $20,000,000 minus the Financing Amount
divided by (b) $1,000, for the purchase price of $1,000 per share.
Notwithstanding the foregoing, the Call Option Period shall be tolled during any
period in which the Purchasers have objected to any Additional Financing Amount
set forth in any Additional Financing Notice until such objection has been
resolved in accordance with the dispute resolution procedures set forth in
Subparagraph (i) above. The number of Call Option Shares specified in the Call
Notice which the Purchasers have elected to purchase shall be purchased by the
Purchasers on a pro rata basis based upon the percentage that the number of
Initial Shares purchased by each Purchaser on the Initial Closing Date
represents out of the total number of Initial Shares purchased by all of the
Purchasers on the Initial Closing Date or in such other proportion as the
Purchasers may specify.

               (iii) If the Purchasers choose to exercise their Call Right, the
Purchasers shall deliver a notice (a "Call Notice") to the Company setting forth
(a) the number of Call Option Shares to be purchased by each Purchaser on the
Call Option Closing Date (as defined in Paragraph 2C of this Agreement) and (b)
the date of the Call Option Closing Date (which shall be no more than 15
Business Days after the delivery of the Call Notice, and, if the purchase of
Call Option Shares by the Purchasers is subject to a filing under the HSR Act,
such specified date shall be extended up to 15 Business Days after any
applicable waiting period under the HSR Act shall have expired or been
terminated). The Call Notice must be given (if at all) prior to the expiration
of the Call Option Period. On the Call Option Closing Date, the Company will
issue arid sell to each of the Purchasers, and each of the Purchasers will
purchase, the number of Call Option Shares set forth in the Call Notice (which
number shall not exceed the

                                       3

<PAGE>

maximum number of Call Option Shares as determined pursuant to Subparagraph (ii)
above) for the purchase price of $1,000 per share.

          1E. Use of Proceeds. The Company will use the proceeds from the sale
of the Series D-l Preferred Stock hereunder solely to fund the operations of the
Company as conducted in the ordinary course of business and in accordance with
past practice.

          1F. HSR Act Matters.

               (a) Notwithstanding the provisions of Paragraphs I C and ID of
this Agreement but subject to Paragraph 1F(b), the Company shall not be required
to sell any Option Shares to the Purchasers hereunder, and the Purchasers shall
not be required to purchase such shares from the Company, unless any filings
under the HSR Act required to be made by the Purchasers and the Company with
respect to any such purchase shall have been made and the waiting period with
respect thereto shall have expired or been terminated. Any sale of Option Shares
by the Company to the Purchasers that is subject to a filing under the HSR Act
shall be made at an Option Closing on a date selected by the Company (in the
case of the Put Option) and the Purchasers (in the case of a Call Option) not
later than 15 Business Days after the waiting period with respect to the HSR Act
shall have expired or terminated.

               (b) As promptly as practicable after the date of delivery of any
Put Notice or Call Notice in which the exercise of a Put Right or Call Right
would require the sale and purchase of Option Shares that is subject to a filing
under the HSR Act, the Purchasers and the Company will each promptly make any
filings required by the HSR Act to be made in order to consummate the sale of
Option Shares by the Company to the Purchasers, and following the date of this
Agreement, each party hereto will cooperate with the other parties hereto in
connection with any such filings required by the HSR Act. The Company will bear
all the filing fees associated with any such filing. Notwithstanding anything to
the contrary contained herein, nothing in this Agreement will require any
Person, whether pursuant to an order of the Federal Trade Commission or the
United States Department of Justice or otherwise, to dispose of any assets,
lines of business or equity interests, or otherwise take any action that would
materially affect its business, in order to obtain the consent of the Federal
Trade Commission or the United States Department of Justice to the transactions
contemplated by this Agreement. The Purchasers shall promptly provide the
Company (or the Company's counsel) copies of all filings made and any materials
submitted by the Purchaser in connection with the HSR Act and the Company shall
promptly provide the Purchasers (or the Purchasers' counsel) copies of all
filings made and any materials submitted by the Company in connection with the
HSR Act, but, in each case, only to the extent such filings are submitted in
connection with the Purchasers' investment in the Company hereunder.

     2. The Closings.

          2A. The Initial Closing. The closing of the issuance, sale and
purchase of the Initial Shares under this Agreement (the "Initial Closing")
shall take place on the date hereof (the "Initial Closing Date"). The Initial
Closing shall be held at the offices of the Company, 12801 Stemmons Freeway,
Suite 821, Dallas, TX at 10:00 a.m., Central Time, on the date specified above
for the Initial Closing, or at such other place or such other time as the
Company and the

                                       4

<PAGE>

Purchasers may agree in writing. At the Initial Closing, the Company shall
deliver to each of the Purchasers a certificate representing the number of
Initial Shares purchased by such Purchaser, registered in the name of such
Purchaser, against payment to the Company of the purchase price therefor, by
wire transfer, check, or other method acceptable to the Company.

          2B. The Put Option Closing. The closing of the issuance, sale and
purchase of the Put Option Shares under this Agreement (each, a "Put Option
Closing") shall take place on the date (each, a "Put Option Closing Date") as
shall be specified in each Put Notice (but not less than 30 days after the date
of the receipt by the Purchasers of such Put Notice and, if the purchase of Put
Option Shares by the Purchasers is subject to a filing under the HSR Act, such
specified date shall be extended up to 15 Business Days after any applicable
waiting period under the HSR Act shall have expired or been terminated). Each
Put Option Closing shall be held at the offices of the Company, 12801 Stemmons
Freeway, Suite 821, Dallas, TX at 10:00 a.m., Central Time, on the date
specified above for such Put Option Closing, or at such other place or such
other time as the Company and the Purchasers may agree in writing. At each Put
Option Closing, the Company shall deliver to each of the Purchasers a
certificate representing the number of Put Option Shares being purchased by such
Purchaser, registered in the name of such Purchaser, against payment to the
Company of the purchase price therefor, by wire transfer, check, or other method
acceptable to the Company. If at any Put Option Closing any of the conditions
specified in Paragraph 5B of this Agreement shall not have been fulfilled, each
of the Purchasers shall, at its election, be relieved of all of its obligations
under this Agreement to be performed at such Put Option Closing without thereby
waiving any other rights it may have by reason of such failure or such
non-fulfillment.

          2C. The Call Option Closing. The closing of the issuance, sale and
purchase of the Call Option Shares under this Agreement (the "Call Option
Closing" and, together with the Put Option Closing, the "Option Closings" and,
together with the Initial Closing, the "Closings") shall take place on a date
(the "Call Option Closing Date" and, together with the Put Option Closing Date,
the "Option Closing Dates" and, together with the Initial Closing Date, the
"Closing Dates") as shall be specified in the Call Notice (but not less than 30
days after the date of the receipt by the Company of such Call Notice and, if
the purchase of Call Option Shares by the Purchasers is subject to a filing
under the HSR Act, such specified date shall be extended up to 15 Business Days
after any applicable waiting period under the HSR Act shall have expired or been
terminated). The Call Option Closing shall be held at the offices of the
Company, 12801 Stemmons Freeway, Suite 821, Dallas, TX at 10:00 a.m., Central
Time, on the date specified above for the Call Option Closing, or at such other
place or such other time as the Company and the Purchasers may agree in writing.
At the Call Option Closing, the Company shall deliver to each of the Purchasers
a certificate representing the number of Call Option Shares being purchased by
such Purchaser, registered in the name of such Purchaser, against payment to the
Company of the purchase price therefor, by wire transfer, check, or other method
acceptable to the Company. If at the Call Option Closing any of the conditions
specified in Paragraph 5B of this Agreement shall not have been fulfilled, each
of the Purchasers shall, at its election, be relieved of all of its obligations
under this Agreement to be performed at the Call Option Closing without thereby
waiving any other rights it may have by reason of such failure or such
nonfulfillment.

                                       5

<PAGE>

     3. Representations and Warranties of the Company. Subject to and except as
disclosed by the Company in the Schedule of Exceptions attached hereto as
Exhibit C (the "Exceptions Schedule"), the Company hereby represents and
warrants to each of the Purchasers as follows:

          3A. Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted by it and to enter into and
perform this Agreement and each of the Ancillary Agreements and to carry out the
transactions contemplated hereby and thereby. The Company is duly qualified and
in good standing to do business as a foreign corporation in each jurisdiction
where the failure to be so qualified would have a Material Adverse Effect. The
Company has furnished to each Purchaser true and complete copies of its Articles
of Incorporation and Bylaws, each as amended to date and currently in effect.

          3B. Capitalization. Immediately after the Initial Closing, the
authorized capital stock of the Company shall consist of (i) 50,000,000 shares
of Class A Common Stock, of which 1,344,782 shares shall be issued and
outstanding, (ii) 700,000 shares of Class B Common Stock, none of which shall be
issued and outstanding, and (iii) 10,800,795 shares of Preferred Stock, of which
4,000,000 shares are designated as Series A Preferred Stock, all of which shares
of Series A Preferred Stock shall be issued and outstanding, 5,000,000 shares
are designated Series B Preferred Stock, all of which shares of Series B
Preferred Stock shall be issued or outstanding, 1,409,375 shares are designated
Series C Preferred Stock, all of which shares of Series C Preferred Stock shall
be issued and outstanding, 251,420 shares are designated Series CI Preferred
Stock, all of which shares of Series C-I Preferred Stock shall be issued and
outstanding, 70,000 shares are designated Series D- I Preferred Stock, 50,000 of
which shares of Series D-1 Preferred Stock shall be issued and outstanding, and
70,000 shares are designated Series D-2 Preferred Stock, none of which shares of
Series D-2 Preferred Stock shall be issued and outstanding. All of the issued
and outstanding shares of Class A Common Stock, Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series C-I Preferred Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
Except (a) pursuant to the Company's 1999 Stock Option Plan, dated November 3,
1999 (the "1999 Stock Option Plan"), which provides for the issuance of up to
150,000 shares of Class A Common Stock, or the Company's 2001 Stock Option Plan,
dated April 27, 2001 (the "2001 Stock Option Plan"), which provides for the
issuance of up to 250,000 shares of Class A Common Stock, (b) upon exercise of
the Mezzanine Warrants, (c) upon exercise of the Heller Warrant, (d) upon
exercise of the Preferred Warrants, (e) as provided in this Agreement or any
Ancillary Agreement, or (f) as set forth in Section 3B of the Exceptions
Schedule: (1) no warrant, option or convertible security or any purchase,
subscription, conversion, exchange or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of the Company is authorized or
outstanding; (2) no stock appreciation, phantom stock, profit participation or
similar right is authorized or outstanding; (3) the Company has no obligation
(contingent or otherwise) to issue any warrant, option or convertible security
or any purchase, subscription, conversion, exchange or other right (contingent
or otherwise) or any commitment or agreement to issue or distribute to holders
of any shares of its capital stock any evidences of indebtedness or assets of
the Company; and (4) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest

                                       6

<PAGE>

therein or to pay any dividend or make any other distribution in respect
thereof. All of the issued and outstanding shares of capital stock of the
Company have been offered, issued and sold by the Company in compliance with all
Applicable Laws.

          3C. Subsidiaries, Etc. The Company has no Subsidiaries and does not
own or control, directly or indirectly, any shares of capital stock of any other
corporation or any interest in any partnership, joint venture or other
non-corporate business enterprise.

          3D. Shareholder List and Agreements. Section 3D of the Exceptions
Schedule sets forth a correct and complete list of the holders of Equity
Securities of the Company, showing (both on a fully diluted basis (including
after giving effect to the conversion, exchange or exercise of any outstanding
Equity Securities of the Company but excluding the issuance of any Equity
Securities of the Company reserved for issuance under the 1999 Stock Plan and
the 2001 Stock Plan and the Option Shares) and non-fully diluted basis, in each
case after giving effect to the issuance, sale and delivery of the Initial
Shares in accordance with this Agreement) (i) the number and percentage of
shares of Class A Common Stock, Class B Common Stock, Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock,
the Mezzanine Warrants, the Heller Warrant, the Preferred Warrants or other
securities of the Company (including, without limitation, options granted under
the 1999 Stock Plan and the 2001 Stock Plan) held by each shareholder as of the
date of this Agreement, (ii) the consideration paid to the Company, if any,
therefor and, (iii) with respect to any holder of preferred stock, warrants,
options or other similar convertible security or conversion or exchange right,
(a) the number of such securities or rights granted, (b) the number and type of
security of the Company into which such securities or rights are exercisable,
convertible or exchangeable for, (c) the conversion or exercise price, if any,
of such securities and (d) the number of such securities or rights that have not
been exercised, converted or exchanged. Except (i) pursuant to the 1999 Stock
Plan and 2001 Stock Plan, (ii) as provided in this Agreement or any Ancillary
Agreement, or (iii) as set forth in Section 3D of the Exceptions Schedule, there
are no agreements, written or oral, between the Company and any holder of its
capital stock, or, to the best of the Company's knowledge, among any holders of
its capital stock, relating to the acquisition (including, without limitation,
rights of first refusal or preemptive rights), disposition, registration under
the Securities Act, or voting of the capital stock of the Company.

          3E. Issuance of Shares. The issuance, sale and delivery of the Series
D-1 Preferred Stock in accordance with this Agreement, and the issuance and
delivery of the shares of Series D-2 Preferred Stock and Class A Common Stock
issuable upon conversion of the shares of Series D-l Preferred Stock, have been,
or will be on or prior to each Closing, duly authorized by all necessary
corporate action on the part of the Company, and all such shares have been duly
reserved for issuance. The shares of Series D-l Preferred Stock, when so issued,
sold and delivered against payment therefor in accordance with the provisions of
this Agreement, and the shares of Series D-2 Preferred Stock and Class A Common
Stock issuable upon conversion of the shares of Series D-1 Preferred Stock, when
issued upon such conversion in accordance with the Articles of Incorporation,
will be duly and validly issued, fully paid and non-assessable, free and clear
of all Liens, and not subject to any preemptive rights of any third party. Based
in part on the representations made by each of the Purchasers in Part 4 of this
Agreement, the offer and sale of the Shares to each of the Purchasers will be in
compliance with all Applicable Laws. Immediately after the Initial Closing, the
Purchasers shall own in the aggregate 18.25% of the

                                       7

<PAGE>

Common Stock, calculated on a fully diluted basis (including after giving effect
to the conversion, exchange or exercise of any outstanding Equity Securities of
the Company but excluding the issuance of any Equity Securities of the Company
reserved for issuance under the 1999 Stock Plan and the 2001 Stock Plan and the
Option Shares) after giving effect to the issuance, sale and delivery of the
Initial Shares in accordance with this Agreement.

          3F. Authority for Agreement. The execution, delivery and performance
by the Company of this Agreement and all Ancillary Agreements, and the
consummation by the Company of the transactions contemplated hereby and thereby,
have been duly authorized by all necessary corporate action. This Agreement and
the Ancillary Agreements have been duly executed and delivered by the Company
and constitute the valid and legally binding obligation of the Company
enforceable against it in accordance with their respective terms. The execution,
delivery and performance of the transactions contemplated by this Agreement and
the Ancillary Agreements and compliance with their provisions by the Company
will not violate any provision of Applicable Law or the Articles of
incorporation or Bylaws (each as amended to date) and will not conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute a default (with or without notice or lapse of time or both) under
which there would arise a right of termination, cancellation or acceleration of
any obligation or the loss of any right, or require a consent or waiver under,
the Articles of Incorporation or Bylaws (each as amended to date) or any
indenture, lease, contract, agreement or other loan document provision or
instrument to which the Company is a party or by which it or any of its assets
or properties is bound, or any Judgment applicable to the Company or its assets
or properties.

          3G. Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Authority is required on the part of the Company
in connection with the execution and delivery of this Agreement and the
Ancillary Agreements, the offer, issuance, sale and delivery of the Shares, or
the other transactions contemplated by this Agreement, except for filings, if
any, required under the HSR Act and such filings as shall have been made prior
to and shall be effective on and as of each Closing.

          3H. Litigation. Except as set forth in Section 3H of the Exceptions
Schedule, (i) there are no Actions or Proceedings pending, or, to the best of
the Company's knowledge, any basis therefor or threat thereof (excluding, in the
case of any threatened Actions or Proceedings only, any claims or complaints by
customers of the Company which individually, and in the aggregate, are not
material), against the Company and (ii) the Company is not subject to any
outstanding Judgments. None of the Actions or Proceedings set forth in Section
3H of the Exceptions Schedule nor any claims or complaints from customers of the
Company excluded from Section 3H of the Exceptions Schedule pursuant to the
foregoing sentence, if adversely decided, would, individually or in the
aggregate, have, and none of the Judgments set forth in Section 3H of the
Exceptions Schedule is, individually or in the aggregate, having or is likely to
have, a Material Adverse Effect. There are no Actions or Proceedings pending,
or, to the best of the Company's knowledge, any basis therefor or threat
thereof, against the Company, nor is the Company subject to any Judgment, which
(a) questions or challenges the validity of this Agreement or any Ancillary
Agreement or the right of the Company to negotiate, enter into or perform any
action to be taken under this Agreement or any Ancillary Agreement or (b) is

                                       8

<PAGE>

having or likely to have the effect of preventing the consummation of the
transactions contemplated by this Agreement or any Ancillary Agreement.

          3I. Financial Statements. The Company has furnished to each of the
Purchasers a complete and correct copy of the following financial statements
(collectively, the "Financial Statements"): (i) the Company's audited balance
sheet, statement of income, changes in shareholders' equity, and cash flows for
the fiscal years ended June 30, 1998, June 30, 1999 and June 30, 2000, and (ii)
the Company's unaudited balance sheet (the "Balance Sheet") as of January 31,
2001 (the "Balance Sheet Date") and the related statement of operations and cash
flow for the seven-month period ended as of the Balance Sheet Date (the "Most
Recent Financial Statements"). The Financial Statements are complete and
correct, are in accordance with the books and records of the Company and present
fairly the financial condition and results of operations of the Company, as at
the dates and for the periods indicated, and have been prepared in accordance
with generally accepted accounting principles consistently applied, except that
the Most Recent Financial Statements lack footnotes and other presentation items
and are subject to normal year-end audit adjustments, which will not be
material, individually or in the aggregate.

          3J. Absence of Liabilities. The Company does not have any Liabilities
and there is no basis for the Company to be subject to any Liability, except for
(i) Liabilities set forth on the face of the Balance Sheet (rather than in any
notes thereto); (ii) Liabilities which have arisen after the Balance Sheet Date
in the ordinary course of business consistent with past practice, none of which
is a Liability resulting from, arising out of, relating to, in the nature of or
caused by any breach of contract, breach of warranty, tort, infringement, or
Action or Proceeding; (iii) Liabilities which, in the aggregate, do not exceed
$150,000; or (iv) Liabilities set forth in Section 3H of the Exceptions
Schedule.

          3L. Taxes.

               (i) The amount shown on the Balance Sheet as provision for taxes
is sufficient in all material respects for payment of all accrued and unpaid
federal, state, county, local and foreign taxes for the period then ended and
all prior periods, and will be adjusted for the passage of time between the
period then ended and each Closing Date in accordance the past custom and
practice of the Company. The Company is not currently the beneficiary of any
extension of time within which to file any tax return. The Company has filed all
federal, state, county, local and foreign tax returns which are required to be
filed by it on or prior to the date of each Closing (other than local, county or
state returns which the failure to file would not, individually, or in the
aggregate, impose a material Liability on the Company), and each such return is
true and correct in all material respects, and all taxes, whether or not shown
thereon, have been timely paid. Except as set forth in Section 3K of the
Exceptions Schedule, no claim has been made in a jurisdiction where the Company
does not file tax returns that the Company is liable for taxes in that
jurisdiction. Except as set forth in Section 3K of the Exceptions Schedule, none
of the tax returns of the Company have been audited by the Internal Revenue
Service or other taxing authority, and no controversy with respect to taxes of
any type is ongoing, pending or, to the best of the knowledge of the officers,
directors and employees responsible for the tax matters of the Company, is there
any basis therefor or threat thereof. Neither the Company nor any of its
shareholders has ever filed (a) an election pursuant to Section 1362 of the
Code, that

                                       9

<PAGE>

the Company be taxed as an S Corporation or (b) a consent pursuant to Section
341 (f) of the Code relating to collapsible corporations.

               (ii) The Company has not waived any statute of limitations in
respect of any taxes and has not agreed to any extension of time with respect to
a tax assessment or deficiency.

               (iii) The Company has not made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Code
(S)2800. The Company is not a party to any tax allocation or sharing agreement.
The Company has not been a member of an affiliated group filing a consolidated
federal income tax return. The Company does not have any Liability for the taxes
of any other Person under Treas. Reg. (S) 1.1502-6, as a transferee, by
contract, or otherwise.

               (iv) The Company has not been a United States real property
holding corporation within the meaning of Code (S)897(c)(2) during the
applicable period specified in Code (S)897(c)(1)(A)(ii). The Company will not be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Initial Closing Date as a result of any change in method of accounting for a
taxable period ending on or prior to the Initial Closing Date under Code
(S)481(c) (or any corresponding or similar provision of Applicable Law).

          3M. Property and Assets. The Company has a good, marketable and
indefeasible title to or a valid leasehold interest in, all of its properties
and assets, which comprise all of the properties and assets reflected in the
Balance Sheet (except those disposed of since the Balance Sheet Date in the
ordinary course of business) and all of the other properties and assets
necessary or useful for the conduct of the Company's business as presently
conducted and as proposed to be conducted and none of such properties or assets
is subject to any Lien of any nature whatsoever other than those the material
terms of which are described in the Balance Sheet or in Section 3L of the
Exceptions Schedule. All such properties and assets have been maintained in the
ordinary course of business in accordance with past practice and such properties
and assets are in good operating condition and repair (subject to normal wear
and tear), considering their age and operational use.

          3N. Intellectual Property. The Company is the sole owner of or
possesses sufficient legal rights to Intellectual Property Rights presently used
by the Company or necessary for the conduct of the Company's business as
currently conducted and as currently proposed to be conducted. The Company has
taken all actions reasonable in light of its financial position to protect the
Intellectual Property Rights and, to~ the best knowledge of the Company, no
Person is infringing or violating any of such rights. The business currently
conducted or currently proposed to be conducted by the Company does not and will
not cause the Company to infringe or violate any of the Intellectual Property
Rights of any other Person, and, except as set forth in Section 3M of the
Exceptions Schedule, does not and will not require the Company to obtain any
license or other agreement to use any Intellectual Property Rights of any other
Person. Except for standard end-user license agreements, or as set forth in
Section 3M of the Exceptions Schedule, there are no outstanding options,
licenses or agreements of any kind relating to the Intellectual

                                       10

<PAGE>

Property Rights, nor is the Company bound by or a party to any options, licenses
or agreements of any kind with respect to the Intellectual Property Rights of
any other Person. The Company has not received any communications alleging that
the Company has violated or, by conducting its business as proposed to be
conducted, would violate any of the Intellectual Property Rights of any other
Person. Section 3M of the Exceptions Schedule contains a complete list of
patents, pending patent applications, trademarks, pending trademark applications
and service marks of the Company. To the best knowledge of the Company, no
employee of the Company is obligated under any agreement or contract (including
any license, covenant or commitment of any nature), or subject to any Judgment,
that would conflict or interfere with (i) the performance of the any employee's
duties as an officer, employee or director of the Company; (ii) the use of any
employee's best efforts to promote the interests of the Company; or (iii) the
Company's business currently conducted or currently proposed to be conducted.
The Company does not believe that it is or will be necessary to use any
inventions or works of authorship of its employees (or persons it currently
intends to hire) made prior to their employment by the Company.

          3O. Insurance. The Company maintains valid policies of insurance with
respect to its properties, assets and business of the kinds and in the amounts
not less than is customarily obtained by corporations engaged in the same or
similar business and similarly situated, including, without limitation, workers
compensation insurance or occupational accident insurance and insurance against
casualty loss, public liability, libel, slander, defamation, advertising injury
and other risks. Section 3N of the Exceptions Schedule sets forth a schedule and
brief description of the policies of insurance currently maintained by the
Company. With respect to each such insurance policy: (i) the policy is in full
force and effect and (ii) the Company is not in breach or default (including
with respect to the payment of premiums or the giving of notices), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default or permit termination, cancellation, modification or denial of
coverage under the policy; and (iii) no party to the policy has repudiated any
of its provisions.

          3P. Material Contracts and Obligations. Section 3O of the Exceptions
Schedule sets forth a list of all material agreements or commitments of any
nature to which the Company is a party or by which it is bound (excluding
agreements to purchase alarm monitoring contracts entered into in the ordinary
course of business and in accordance with past practice pursuant to which the
Company is only granted a right of first refusal to purchase alarm monitoring
contracts and is not obligated to consummate a purchase thereunder), including
without limitation (i) each agreement which requires future expenditures by the
Company in excess of $150,000 or which might result in payments to the Company
in excess of $150,000, (ii) all employment and consulting agreements, collective
bargaining agreements, employee benefit, bonus, pension, profit-sharing, stock
option, stock purchase and similar plans and arrangements, and distributor and
sales representative agreements, (iii) each agreement with any stockholder,
officer or director of the Company, or any "affiliate" or "associate" of such
persons (as such terms are defined in the rules and regulations promulgated
under the Securities Act), including without limitation any agreement or other
arrangement providing for the furnishing of services by, rental of real or
personal property from, or otherwise requiring payments to, any such person or
entity, (iv) each agreement pursuant to which the Company has issued any Equity
Security, including the Series A Purchase Agreement, the Series B Purchase
Agreement, the Series C Purchase Agreement, the Series C Exchange Agreement and
the Note Purchase Agreement, (v) any agreement relating to the Intellectual
Property Rights and (vi) any settlement, conciliation or

                                       11

<PAGE>

similar agreement. The Company has delivered to the Purchaser correct and
complete copies of each of agreement (including any amendments or supplements
thereto) set forth in Section 3O of the Exceptions Schedule. All such agreements
and contracts are valid, legally binding, enforceable, and in full force and
effect. Neither the Company nor, to the best of the Company's knowledge, any
other party thereto is in breach of or default under any of the aforesaid
agreements and contracts in any material respect and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under any such agreements or
contracts. No party has repudiated any provision of any such agreements or
contracts.

          3Q. Compliance. The Company has complied and is in compliance, in all
material respects, with all Applicable Laws and has obtained all material
permits, licenses, variances, exemptive orders and approvals required by
Governmental Authorities for the Company to lawfully monitor security alarms
(the "Security Permits"). The Company has obtained all other material permits,
licenses, variances, exemptive orders and approvals (the "Other Permits") of all
Governmental Authorities necessary for the operation of the business of the
Company as it is currently conducted and as currently proposed to be conducted.
The Company is in material compliance with all such Security Permits and Other
Permits and all such Security Permits and Other Permits are valid and in full
force and effect and will not be terminated or otherwise adversely affected by
the consummation of the transaction contemplated by this Agreement or any of the
Ancillary Agreements. There is no term or provision of any mortgage, indenture,
contract, agreement or instrument to which the Company is a party pr by which it
is bound or of any provision of any existing Judgment or Applicable Law
applicable to or binding upon the Company, which has or could have a Material
Adverse Effect or, so far as the Company may now reasonably foresee, in the
future is reasonably likely to have a Material Adverse Effect. To the best of
the Company's knowledge, no employee of the Company is in violation of any term
of any contract or covenant (either with the Company or with another entity)
relating to employment, patents, proprietary information disclosure,
noncompetition or non-solicitation.

          3R. Absence of Changes. Since the Balance Sheet Date, there has been
no Material Adverse Effect. Without limiting the foregoing and except as set
forth in Section 3O of the Exceptions Schedule, since the Balance Sheet Date:

               (a) the Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair consideration
in the ordinary course of business;

               (b) the Company has not entered into any agreement (other than
agreements to purchase alarm monitoring contracts entered into in the ordinary
course of business and in accordance with past practice pursuant to which the
Company is only granted a right of first refusal to purchase alarm monitoring
contracts and is not obligated to consummate a purchase thereunder), contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $150,000 or outside the ordinary course of
business;

                                       12

<PAGE>

               (c) no party (including the Company) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more than
$150,000 to which the Company is a party or by which the Company or its assets
are bound;

               (d) the Company has not imposed or permitted any other Person to
impose any Lien upon any of its assets, tangible or intangible;

               (e) the Company has not made any capital expenditure (or series
of related capital expenditures) either involving more than $150,000 or outside
the ordinary course of business;

               (f) the Company has not made any capital investment in, any loan
to, or any acquisition of the securities or assets (other than agreements to
purchase alarm monitoring contracts entered into in the ordinary course of
business and in accordance with past practice pursuant to which the Company is
only granted a right of first refusal to purchase alarm monitoring contracts and
is not obligated to consummate a purchase thereunder) of, any other Person (or
series of related capital investments, loans, and acquisitions) either involving
more than $150,000 or outside the ordinary course of business;

               (g) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$37,500 alone or $150,000 in the aggregate;

               (h) the Company has not delayed or postponed the payment of
accounts payable or any other liabilities outside the ordinary course of
business;

               (i) the Company has not engaged in any activity which has
resulted in any acceleration or delay of the collection of its accounts or notes
receivable outside the ordinary course of business;

               (j) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) either
involving more than $150,000 or outside the ordinary course of business;

               (k) the Company has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property Rights except in the
ordinary course of business;

               (l) the Company has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its capital stock;

               (m) the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its properties or assets;

                                       13

<PAGE>

               (n) the Company has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the ordinary course of business;

               (o) the Company has not entered into, modified or terminated any
employment contract or collective bargaining agreement, written or oral;

               (p) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
ordinary course of business;

               (q) the Company has not adopted, amended, modified or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees (or
taken any such action with respect to any other benefit plan), other than the
2001 Stock Option Plan;

               (r) the Company has not made any other change in employment terms
for any of its directors, officers, and employees outside the ordinary course of
business;

               (s) the Company has not made or been subject to any change in its
accounting practices, procedures or methods or in its cash management practices;

               (t) the Company has not made or pledged to make any charitable or
other capital contribution outside the ordinary course of business;

               (u) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the ordinary course of
business involving the Company or its assets or business; and

               (v) the Company has not committed to do any of the foregoing.

          3S. Employees. All employees of the Company whose employment
responsibility requires access to confidential or proprietary information of the
Company have agreed in writing not to disclose any such confidential or
proprietary information to any third party. None of the employees of the Company
is represented by any labor union, and there is no labor strike or other labor
trouble pending with respect to the Company (including, without limitation, any
organizational drive) or, to the best of the Company's knowledge, is there any
basis therefor or threat thereof.

          3T. Employee Benefits.

               (i) Section 3S of the Exceptions Schedule sets forth an accurate
and complete list of each "employee benefit plan" (as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and each other material employee benefit plan, program or arrangement
at any time maintained, sponsored, or contributed to by the Company (each an
"Employee Benefit Plan").

                                       14

<PAGE>

               (ii) The Company does not maintain, contribute to, or have any
Liability or potential Liability under (or with respect to) any "defined benefit
plan" (as defined in Section 3(35) of ERISA), or any "multiemployer plan" (as
defined in Section 3(37) of ERISA). No asset of the Company is subject to any
Lien under ERISA or the Code. There are no pending or, to the best knowledge of
the Company, threatened Actions or Proceedings with respect to any Employee
Benefit Plan (other than routine claims for benefits) which could result in
material Liability to the Company.

               (iii) Each Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code has received a determination from the Internal
Revenue Service that such Employee Benefit Plan is so qualified, and nothing
material has occurred since the date of such determination that could adversely
affect the qualified status of such Employee Benefit Plan.

               (iv) Each of the Employee Benefit Plans and all related trusts,
insurance contracts and funds have been maintained, funded and administered in
compliance with their terms in all material respects and in compliance with the
applicable provisions of ERISA, the Code, and any other Applicable Law, in all
material respects. With respect to each Employee Benefit Plan, all required
payments, premiums, contributions, distributions, or reimbursements for all
periods ending prior to or as of any Closing Date have been made or properly
accrued in all material respects. Each Employee Benefit Plan which is subject to
the health care continuation requirements of Part 6 of Subtitle B of Title I of
ERJSA or Section 4980B of the Code has been administered in compliance with such
requirements in all material respects.

          3U. Books and Records. The minute books of the Company contain
complete and accurate records of all meetings and other corporate actions of its
shareholders and its Board of Directors and committees thereof. The stock ledger
of the Company is complete and reflects all issuances, transfers, repurchases
and cancellations of shares of capital stock of the Company.

          3V. Accounts Receivable. All accounts receivable of the Company are
reflected properly on its books and records, are valid receivables subject to no
setoffs or counterclaims, are current and collectible, subject only to the
reserve for bad debts set forth on the face of the Balance Sheet (rather than in
any notes thereto, if any), as adjusted for operations and transactions through
each Closing Date in accordance with the past custom and practice of the
Company.

          3W. Monitoring Contract Data. Attached hereto as Exhibit D is a
complete and correct copy of data relating to the additions and churn of the
monitoring contracts owned by the Company for the periods indicated (the
"Monitoring Contract Data"). The Monitoring Contract Data is complete and
correct, was prepared from the books and records of the Company in accordance
with past practice and accurately presents such information as of the dates and
for the periods indicated.

          3X. Disclosures. Neither this Agreement, any Ancillary Agreement nor
any exhibit hereto or thereto, nor any report, certificate or instrument
furnished to any of the Purchasers in connection with the transactions
contemplated in this Agreement or the Ancillary

                                       15

<PAGE>

Agreements, when read together, contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading. The Company knows of no information or fact that,
individually or in the aggregate, has or would have a Material Adverse Effect
which has not been disclosed to the Purchasers in this Agreement or any
Ancillary Agreement, including in any exhibit hereto or thereto.

     4. Representations and Warranties of the Purchasers. Each Purchaser
severally represents and warrants to the Company as follows:

          4A. Investment. Such Purchaser is acquiring the Shares for its own
account for investment and not with a view to, or for sale in connection with,
any distribution thereof, nor with any present intention of distributing or
selling the same, and, except as contemplated by this Agreement, the Ancillary
Agreements, and the exhibits hereto and thereto, such Purchaser has no present
or contemplated agreement, undertaking, arrangement, obligation, indebtedness or
commitment providing for the disposition thereof. Such Purchaser acknowledges
the restrictions on transfer of the Shares set forth in Part 8 of this
Agreement. Nothing contained in this Part 4 shall limit or restrict the ability
of a Purchaser from pledging or granting a Lien in respect of any Shares to
secure bona fide obligations or indebtedness of the Purchaser.

          4B. Authority. Such Purchaser has full power and authority to enter
into and to perform this Agreement in accordance with its terms. Such Purchaser
represents that it has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Company.

          4C. Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Authority is required on the part of the Purchaser
in connection with the execution and delivery of this Agreement, the offer,
issuance, sale and delivery of the Shares, or the other transactions to be
consummated at each Closing, as contemplated by this Agreement, except for
filings, if any, required under the HSR Act and such filings as shall have been
made prior to and shall be effective on and as of each Closing.

          4D. Accredited Investor. Such Purchaser has carefully reviewed the
representations concerning the Company contained in this Agreement and has made
detailed inquiry concerning the Company, its business and its personnel; the
officers of the Company have made available to such Purchaser any and all
written information which it has requested and have answered to such Purchaser's
satisfaction all inquiries made by such Purchaser. ABRY IV is an "accredited
investor" as such term is defined in Regulation D promulgated under the
Securities Act.

          4E. Nature and Relationship of Purchasers. ABRY IP, ABRY IV and each
of their general partners are Affiliates of each other. ABRY IP has investments
in Persons other than the Company. ABRY IP has eight limited partners. Each
limited partner of ABRY IP is an Affiliate of ABRY IP or an employee of an
Affiliate of ABRY IP.

                                       16

<PAGE>

     5. Conditions to the Obligations of the Purchasers.

          5A. Conditions to the Obligations of the Purchasers with Respect to
the Initial Closing. The obligation of each of the Purchasers to purchase the
Initial Shares at the Initial Closing is subject to the fulfillment, or the
waiver by such Purchaser, of each of the following conditions on or before the
Initial Closing:

               (i) Accuracy of Representations and Warranties. Each
representation and warranty contained in Part 3 of this Agreement that is not
subject to any materiality qualifier shall be true and correct in all material
respects and those that are subject to any materiality qualifier shall be true
and correct on and as of the Initial Closing Date as if such representations and
warranties were made on and as of the Initial Closing Date.

               (ii) Performance. The Company shall have performed and complied
with all agreements and conditions contained in this Agreement required to be
performed or complied with by the Company prior to or at the Initial Closing.

               (iii) Opinion of Counsel. Each Purchaser shall have received an
opinion from Glast, Phillips & Murray, a Professional Corporation, counsel for
the Company, dated the date of the Initial Closing Date, addressed to the
Purchasers, and satisfactory in form and substance to the Purchasers and their
special counsel, substantially in the form attached as Exhibit E hereto.

               (iv) Ancillary Agreements.

               (a) The Third Amended and Restated Shareholders Agreement
attached hereto as Exhibit F (the "Shareholders Agreement") shall have been
executed and delivered by the Company, the Purchasers, and the requisite holders
of the capital stock of the Company and shall be in full force and effect. All
such actions shall have been taken by the Company as may be necessary to elect a
Board of Directors of the Company, including the Series D Director (as defined
in the Shareholders Agreement), effective upon the Initial Closing, in
accordance with the Shareholders Agreement;

               (b) The Third Amended and Restated Registration Agreement
attached hereto as Exhibit G (the "Registration Agreement") shall have been
executed and delivered by the Company, the Purchasers and each other Person
listed on the signature pages thereto and shall be in full force and effect;

               (c) The Sixth Amendment Agreement attached hereto as Exhibit H
(the "Amendment Agreement") shall have been executed and delivered by the
Company, the Purchasers and each other Person listed on the signature pages
thereto and shall be in full force and effect; and

               (d) The Second Amended and Restated Co-Sale Agreement attached
hereto as Exhibit I (the "Co-Sale Agreement") shall have been executed and
delivered by the Company, the Purchasers and each other Person listed on the
signature pages thereto and shall be in full force and effect.

                                       17

<PAGE>

               (v) Certificates and Documents. The Company shall have delivered
to the Purchasers or special counsel to the Purchasers:

               (a) the Articles of Incorporation, as amended and in effect as of
the Initial Closing Date, certified by the Secretary of State of the State of
Texas;

               (b) certificates, as of the most recent practicable dates, as to
the existence and corporate good standing of the Company issued by the Secretary
of State of the State of Texas;

               (c) Bylaws of the Company, certified by its Secretary as of the
Initial Closing Date;

               (d) resolutions of the Board of Directors of the Company,
authorizing and approving all matters in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated herein and therein,
certified by the Secretary of the Company as of the Initial Closing Date;

               (e) a certificate executed by the President of the Company, in
the name of and on behalf of the Company, at least two business days prior to
the Initial Closing setting forth with respect to any security that is
convertible into or exercisable for shares of Common Stock, the conversion or
exercise price thereof and the Common Stock into which such Security is
convertible or exercisable; and

               (f) such other documents relating to the transactions
contemplated in this Agreement and the Ancillary Agreements as any Purchaser may
reasonably request.

               (vi) Articles of Amendment. The Articles of Amendment shall have
been duly authorized and filed with the Secretary of State of the State of
Texas.

               (vii) Compliance Certificate. The Company shall have delivered to
the Purchasers a certificate, executed by the President of the Company, in the
name of and on behalf of the Company, dated the date of the Initial Closing
Date, certifying to the fulfillment of the conditions specified in Subparagraphs
(i) and (ii) of Paragraph 5A of this Agreement.

               (viii) Actions and Proceedings. No Action or Proceeding shall be
pending or threatened wherein an unfavorable Judgment would prohibit the
consummation of any of the transactions contemplated by this Agreement or any
Ancillary Agreement.

               (ix) Expenses. The Company shall have paid to the Purchasers, in
immediately available funds, the expense reimbursement contemplated by Paragraph
I OD of this Agreement.

          5B. Conditions to the Obligations of the Purchasers with Respect to
Each Option Closing. The obligation of each of the Purchasers to purchase the
Option Shares at an Option Closing is subject to the fulfillment, or the waiver
by such Purchaser, of each of the following conditions on or before each Option
Closing:

                                       18

<PAGE>

               (i) Accuracy of Certain Representations and Warranties. The
representations and warranties of the Company contained in Paragraphs 3E, 3F and
3G of this Agreement shall be true and correct in all material respects as if
such representations and warranties were made on and as of such Option Closing
Date.

               (ii) Performance. The Company shall have performed and complied
with all agreements and conditions contained in this Agreement required to be
performed or complied with by the Company prior to or at such Option Closing.

               (iii) Opinion of Counsel. Each Purchaser shall have received an
opinion from Glast, Phillips & Murray, a Professional Corporation, counsel for
the Company, dated the date of such Option Closing Date, addressed to the
Purchasers, and satisfactory in form and substance to the Purchasers and their
special counsel, confirming (with such changes as may be required as a result of
transactions contemplated by this Agreement) the opinion delivered by such
counsel in accordance with Paragraph 5A of this Agreement.

               (iv) Certificates and Documents. The Company shall have delivered
to the Purchasers or special counsel to the Purchasers:

               (a) the Articles of Incorporation, as amended and in effect as of
such Option Closing, certified by the Secretary of State of the State of Texas;

               (b) certificates, as of the most recent practicable dates, as to
the existence and corporate good standing of the Company issued by the Secretary
of State of the State of Texas;

               (c) Bylaws of the Company, certified by its Secretary as of such
Option Closing Date;

               (d) resolutions of the Board of Directors of the Company,
authorizing and approving all matters in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated herein and therein,
certified by the Secretary of the Company to be in full force and effect as of
such Option Closing Date;

               (e) a certificate executed by the President of the Company, in
the name of and on behalf of the Company, at least two business days prior to
such Option Closing setting forth with respect to any security that is
convertible into or exercisable for shares of Common Stock, the conversion or
exercise price thereof and the Common Stock into which such security is
convertible or exercisable; and

               (f) such other documents relating to the transactions
contemplated in this Agreement and the Ancillary Agreements as any Purchaser may
reasonably request.

               (v) Compliance Certificate. The Company shall have delivered to
the Purchasers a certificate, executed by the President of the Company, in the
name of and on behalf of the Company, dated the date of such Option Closing
Date, certifying to the fulfillment of the conditions specified in Subparagraphs
(i) and (ii) of Paragraph 5B of this Agreement.

                                       19

<PAGE>

               (vi) Actions and Proceedings. No Action or Proceeding shall be
pending or threatened wherein an unfavorable Judgment would prohibit the
consummation of any of the transactions contemplated by this Agreement or any
Ancillary.

               (vii) No Material Adverse Effect. During the period from the date
hereof to such Option Closing Date, no event or events shall have occurred or be
continuing (including any Action or Proceeding) which has had or could
reasonably be expected to have a Material Adverse Effect. For purposes of this
Paragraph 5B(vii) only, the occurrence and/or continuation of the following
events shall not be deemed to have a Material Adverse Effect: (a) the effect of
any amendment, repeal or enactment of any Applicable Law or (b) if, despite of
the conduct of its business in the ordinary course of business as conducted in
accordance with past practice, the Company has limited cash available to fund
its operations; provided, however, if the limited availability of cash is the
result of a deterioration in the financial condition or results of operations of
the Company's business, such limited availability shall be deemed a Material
Adverse Effect.

               (viii) Expenses. The Company shall have paid to the Purchasers,
in immediately available funds, the expense reimbursement contemplated by
Paragraph I OD of this Agreement.

               (ix) HSR Act Waiting Period. Any waiting period imposed by the
HSR Act shall have expired or shall have been terminated.

     6. Condition to the Obligations of the Company with Respect to each
Closing. The obligations of the Company to issue and sell the Initial Shares,
Put Option Shares and Call Option Shares to the Purchasers at the Initial
Closing, Put Option Closing and Call Option Closing, respectively, are subject
to fulfillment, or the waiver by the Company, of the following condition on or
before each such Closing:

               (i) Each representation and warranty of the Purchasers contained
in Part 4 of this Agreement shall be true and correct on and as of such Closing
Date as if such representations and warranties were made on and as of such
Closing Date.

               (ii) The Purchasers shall have tendered at such Closing the
aggregate consideration set forth herein as the purchase price for the Initial
Shares, Put Option Shares and Call Option Shares, as applicable.

               (iii) Security Agreements.

               (a) The Pledge Agreement attached hereto as Exhibit J (the
"Pledge Agreement") shall have been executed and delivered by the Purchasers and
shall be in full force and effect;

               (b) The Affiliate Subordination Agreement attached hereto as
Exhibit K (the "Affiliate Subordination Agreement") shall have been executed and
delivered by the Purchasers and shall be in full force and effect; and

                                       20

<PAGE>

               (c) The Amendment Agreement shall have been executed and
delivered by the Purchasers and shall be in full force and effect.

               (d) HSR Act Waiting Period. Any waiting period imposed by the HSR
Act shall have expired or shall have been terminated.

     7. Covenants of the Company.

          7A. Inspection and Observation. The Company shall permit each Major
Purchaser or any authorized representative thereof, to visit and inspect the
properties of the Company, including its corporate and financial records
(including tax records), and to discuss its business and finances with officers
of the Company, during normal business hours following reasonable notice,
without interference to the conduct of the Company's business and as often as
may be reasonably requested.

          7B. Financial Statements and Other Information. The Company shall
deliver to each Major Purchaser:

               (i) within 100 days after the end of each fiscal year of the
Company, an audited balance sheet of the Company as at the end of such year and
audited statements of operations and of cash flows of the Company for such year,
certified by Arthur Andersen LLP or another firm of certified public accountants
of established national reputation selected by the Board of Directors (with a
majority of the Purchaser Directors concurring), and prepared in accordance with
generally accepted accounting principles;

               (ii) within 30 days after the end of each month, an unaudited
balance sheet of the Company as at the end of such month and unaudited
statements of operations and of cash flows of the Company for such month and for
the current fiscal year to the end of such month, setting forth in comparative
form the Company's operating budget for the corresponding periods for the
current fiscal year, accompanied by an executive summary of the activities of
the Company during such month, signed by the Company's chief executive officer
and chief financial officer;

               (iii) as soon as available, but in any event not later than 30
days prior to the beginning of each new fiscal year, an operating budget for
such fiscal year approved by the Board of Directors (with a majority of the
Purchaser Directors concurring);

               (iv) with reasonable promptness, such other notices, information
and data with respect to the Company as the Company delivers to the holders of
its Class A Common Stock, Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series C-I Preferred Stock, and such other
information and data as the Purchaser may from time to time reasonably request.

     The foregoing financial statements shall be prepared on a consolidated
basis, if the Company then has any Subsidiaries. The financial statements
delivered pursuant to clause (ii) shall be accompanied by a certificate of the
Chief Financial Officer of the Company stating that such statements have been
prepared in accordance with generally accepted accounting principles

                                       21

<PAGE>

consistently applied and fairly present the financial condition and results of
operations of the Company at the date thereof and for the periods covered
thereby.

          7C. Material Changes and Litigation. The Company shall promptly notify
each Purchaser of any material adverse change in the business, operations,
assets, properties, income, prospects or condition (financial or otherwise) of
the Company and of any Action or Proceeding brought or, to the best of the
Company's knowledge, threatened against the Company, or against any officer,
director, key employee or principal shareholder of the Company materially
adversely affecting or which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.

          7D. Proprietary Information Agreements. The Company shall require all
individuals now or hereafter employed by the Company whose employment
responsibility requires their having access to confidential or proprietary
information of the Company to agree in writing not to disclose any such
confidential or proprietary information to any third party.

          7E. Termination of Covenants. The covenants of the Company contained
in Paragraphs 7A through 7D shall terminate, and be of no further force or
effect, at the time of and subject to the closing and funding of the Company's
initial public offering but only for so long as the Company is required to file
reports under, and is in compliance with, Section 13 of the Exchange Act.

          7F. Reservation of Series D-2 Preferred Stock and Common Stock. The
Company shall reserve and maintain a sufficient number of shares of Series D-2
Preferred Stock and Class A Common Stock for issuance upon conversion of all of
the outstanding shares of Series D-l Preferred Stock.

     8. Transfer of Shares.

          8A. Restrictions. The Shares shall be subject to the restrictions on
transfer set forth in the Shareholders Agreement.

          8B. Legends. Each certificate representing Shares shall bear a legend
substantially in the following form:

     "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
     THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
     LAWS AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE
     REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE
     SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM."

     The foregoing legend shall be removed from the certificates representing
any Shares, at the request of the holder thereof, at such time as they become
eligible for resale pursuant to Rule 144(k) under the Securities Act.

                                       22

<PAGE>

     9. Definitions. For the purposes of this Agreement, the following terms
shall have the meanings set forth below:

     "Action or Proceeding" means any (i) action, claim, grievance, hearing,
investigation, proceeding or suit of or by any Person or (ii) audit,
investigation, inquiry or proceeding by any Governmental Authority.

     "Affiliate" means with respect to any Person, a Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such Person, and, in the case of an individual,
includes any relative or spouse of such individual, or any relative or such
spouse, who has the same home as such individual. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

     "Ancillary Agreements" mean any and all agreements other than this
Agreement required to be executed by the parties to this Agreement on or prior
to the Initial Closing pursuant to Paragraph 5A(iv).

     "Applicable Law" means any applicable agreement, authorization, award,
code, constitution, decision, decree, determination, directive, injunction,
interpretation, judgment, order, ordinance, permit, plan, regulation,
requirement, rule, ruling, statute, treaty, writ or other restriction of, by or
with any Governmental Authority.

     "Articles of Incorporation" means the Articles of Incorporation of the
Company, as amended by the Articles of Amendment and in effect at a Closing.

     "ABRY IP" means ABRY Investment Partnership, L.P.

     "ABRY IV" means ABRY Partners IV, L.P.

     "Austin Ventures" means Austin Ventures III and Austin Ventures V,
collectively.

     "Austin Ventures III" means Austin Ventures III-A, L.P. and Austin Ventures
III-B, L.P., collectively.

     "Austin Ventures V" means Austin Ventures V, L.P. and Austin Ventures V
Affiliates Fund, L.P., collectively.

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

     "Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by Applicable Law
to close.

     "Bylaws" means the bylaws of the Company, as amended and in effect at the
Closing.

     "Class A Common Stock" means the Company's Class A Common Stock, par value
$.01 per share.

                                       23

<PAGE>

     "Class B Common Stock" means the Company's Class B Common Stock, par value
$.01 per share.

     "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

     "CRL" means Capital Resource Lenders II, L.P.

     "Equity Securities" means any capital stock or similar security, including
without limitation, securities containing equity features and securities
containing profit participation features, or any security convertible or
exchangeable, with or without consideration, into or for any stock or similar
security, or any security carrying any warrant or right to subscribe for or
purchase any stock or similar security, or any such warrant or right.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal law then in force and the rules promulgated thereunder.

     "Financial Statements" has the meaning set forth in Paragraph 31.

     "Governmental Authority" means any agency, arbitrator, authority,
commission, court, official tribunal or other instrumentality of the United
States of America, any foreign country or any state, county, city or other
political subdivision of the United States of America or any foreign country.

     "Heller Warrant" means the Company's Warrant for the purchase (subject to
adjustment as provided therein) of 367,238 shares of Class B Common Stock,
issued to Heller Financial, Inc. ("Heller") pursuant to that certain Warrant
Agreement, by and between the Company and Heller, dated November 10, 1994, as
amended by that certain First Amendment to Warrant Agreement, dated as of June
15, 1998.

     "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the Pre-merger Notification Rules promulgated thereunder.

     "Intellectual Property Rights" means all (i) patents, patent applications,
patent disclosure and inventions (whether patentable or unpatentable and whether
or not reduced to practice); (ii) trademarks, service marks, trade dress, trade
names, corporate names and Internet domain names and uniform resource locators
("URLs") and registration and applications for registration thereof, together
with all of the goodwill associated therewith; (iii) copyrights, copyrightable
works and industrial designs, and registrations and applications for
registration thereof; (iv) computer soft-ware, data bases and documentation; and
(v) trade secrets and other confidential information (including ideas, formulae
and compositions), know-how, processes, techniques, research and development
information, drawings, specifications, designs, plans, proposals, data,
financial, business and marketing plans and customer and supplier lists and
information.

     "Judgment" means any decision, decree, directive, injunction, judgment,
order, ruling, settlement or other determination of any arbitrator or
Governmental Authority.

     "Liability" means any direct or indirect claim, damage, deficiency,
indebtedness, liability, loss, obligation or responsibility of any nature or
type, whether choate or inchoate, fixed

                                       24

<PAGE>

or unfixed, liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise.

     "Lien" means any lien, security interest, pledge, mortgage, deed of trust,
charge or encumbrance in real, personal or mixed property (tangible or
intangible, and wherever located).

     "Major Purchaser" means a Purchaser holding not less than 10% of the
Underlying Common Stock, and for purposes of determining whether the number of
shares of Underlying Common Stock held by a Purchaser qualifies such Purchaser
as a Major Purchaser, such Purchaser will be deemed to hold Underlying Common
Stock held by Affiliates of such Purchaser and, with respect to a Purchaser that
is a corporation, limited liability company or partnership, shares of Underlying
Common Stock distributed to and held by its shareholders, members or partners.

     "Material Adverse Effect" means any change or changes, circumstance or
circumstances, development or developments, or effect or effects that
individually, or in the aggregate, are or could reasonably be expected to be
materially adverse to the business, operations, assets, properties, income,
prospects or condition (financial or otherwise) of the Company taken or
considered as a whole.

     "Mezzanine Warrants" means the Company's Common Stock Purchase Warrants for
the purchase (subject to adjustment as provided therein) of an aggregate of
569,757 shares of Class A Common Stock, issued to Austin Ventures III and CRL
pursuant to the Note Purchase Agreement.

     "Note Purchase Agreement" means the Senior Subordinated Note and Warrant
Purchase Agreement dated as of May 10, 1996, by and among the Company, Austin
Ventures III and CRL, as supplemented and modified by (i) the Senior
Subordinated Note and Warrant Purchase Agreement, dated as of November 22, 1996,
and (ii) the Senior Subordinated Note and Warrant Purchase Agreement, dated as
of May 19, 1997, as amended by that certain Amendment, dated as of March 13,
1998, that certain Second Amendment, dated as of January 13, 1999, that certain
Termination of Put Rights, dated as of June 15, 1998, that certain Third
Amendment, dated as of March 9, 1999, and that certain Fourth Amendment, dated
as of February 4, 2000.

     "Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, a limited liability company, an
unincorporated organization or other similar entity or organization or a
Governmental Authority.

     "Preferred Stock" means the Company's Preferred Stock, par value 50.01 per
share, more fully described in the Articles of Incorporation.

     "Preferred Warrants" means the Company's Common Stock Purchase Warrants for
the purchase (subject to adjustment as provided therein) of an aggregate of
961,700 shares of Class A Common Stock, issued to Austin Ventures V and CRL
pursuant to the Series B Purchase Agreement.

     "Purchaser Directors" has the meaning set forth in the Shareholders
Agreement.

                                       25

<PAGE>

     "Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force and the rules promulgated thereunder.

     "Series A Preferred Stock" means the Company's Series A Preferred Stock,
par value $0.01 per share, more fully described in the Articles of
Incorporation.

     "Series A Purchase Agreement" means the Stock Purchase Agreement, dated as
of October 21, 1994, among the Company and Austin Ventures III, as amended by
that certain Amendment No. I to Stock Purchase Agreement, dated as of November
10, 1994, that certain Amendment No. 2 to Stock Purchase Agreement, dated as of
May 10, 1996, that certain Consent to Various Actions under Various Documents,
dated as of May 13, 1998, and that certain Consent to Various Actions under
Various Documents and Amendment to Stock Purchase Agreement, dated as of January
6, 1999, providing, among other things, for the purchase and sale of Series A
Preferred Stock.

     "Series B Preferred Stock" means the Company's Series B Preferred Stock,
par value $0.01 per share, more fully described in the Articles of
Incorporation.

     "Series B Purchase Agreement" means the Series B Preferred Stock and
Warrant Purchase Agreement, dated as of May 19, 1997, among the Company, CRL and
Austin Ventures V. as amended by that certain Termination of Put Rights, dated
as of June 15, 1998, providing, among other things, for the purchase and sale of
Series B Preferred Stock and the Preferred Warrants.

     "Series C Exchange Agreement" means the Series C Preferred Stock Exchange
Agreement, dated as of April 27, 2001, among the Company, CRL and Windward,
providing, among other things, for the exchange of 1,409,375 shares of Series C
Preferred Stock for 1,409,375 shares of Series C Preferred Stock arid 251,420
shares of Series C-I Preferred Stock.

     "Series C Preferred Stock" means the Company's Series C Preferred Stock,
par value $0.01 per share, more fully described in the Articles of
Incorporation.

     "Series C-1 Preferred Stock" means the Company's Series C-1 Preferred
Stock, par value $0.01 per share, more fully described in the Articles of
incorporation.

     "Series C Purchase Agreement" means the Series C Preferred Stock Purchase
Agreement, dated as of February 22, 1999, among the Company, CRL and Windward,
providing, among other things, for the purchase and sale of Series C Preferred
Stock.

     "Series D-2 Preferred Stock" means the Company's Series D-2 Preferred
Stock, par value $0.01 per share, more fully described in the Articles of
Incorporation.

     "Subsidiary" means (i) any corporation where more than 50% of the
outstanding voting securities or ordinary voting power to elect a majority of
the board of directors is owned by the Company or any Subsidiary, directly or
indirectly, or (ii) a partnership or limited liability company in which the
Company or any Subsidiary is a general partner or manager or holds interests
entitling it to receive more than 50% of the profits or losses of the
partnership or limited liability company.

                                       26

<PAGE>

     "Underlying Common Stock" means Class A Common Stock issued or issuable
upon the conversion of Series D-1 Preferred Stock issued pursuant to this
Agreement and for purposes of applying this definition only, any Person who
holds any such Series D-1 Preferred Stock shall be deemed to be the holder of
the Underlying Common Stock obtainable upon conversion of such Preferred Stock
regardless of any restriction or limitation on the conversion of such Preferred
Stock, such Underlying Common Stock shall be deemed to be in existence, and such
Person shall be entitled to exercise the rights of a holder of such Underlying
Common Stock hereunder.

     "Windward" means Windward Capital L.P. II, LLC and Windward Capital
Partners II, L.P., collectively.

     10. Miscellaneous.

          10A. Successors and Assigns. The rights and obligations of each
Purchaser under this Agreement may be assigned by such Purchaser to any Person
to whom Shares are transferred by such Purchaser, and such transferee shall be
deemed a "Purchaser" for purposes of this Agreement, provided that the
transferee provides written notice of such assignment to the Company.
Notwithstanding the foregoing, without the prior written consent of the Company,
the Put Rights and Call Right may only be assigned to Affiliates of the
Purchasers.

          10B. Confidentiality. Except as required by Applicable Law, each
Purchaser agrees that it will keep confidential arid will not disclose or
divulge any confidential, proprietary or secret information that such Purchaser
may obtain from the Company pursuant to financial statements, reports and other
materials submitted by the Company to such Purchaser pursuant to this Agreement
or otherwise, or pursuant to visitation or inspection rights granted hereunder,
unless such information is known, or until such information becomes known, to
the public; provided, however, that such Purchaser may disclose such information
(i) to its attorneys, accountants, consultants and other professionals to the
extent necessary to obtain their services in connection with its investment in
the Company, (ii) to any prospective purchaser of any Shares from such Purchaser
as long as such prospective purchaser agrees in writing to be bound by the
provisions of this Paragraph 10B or (iii) to any Affiliate of such Purchaser or
to a member, partner or shareholder of such Purchaser.

          10C. Survival of Representations and Warranties. All agreements,
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
herein, regardless of any investigation by the Purchasers or on behalf of the
Purchasers.

          10D. Expenses.

               (i) Subject to any restrictions in the definitive documentation
relating to the senior secured credit facility (the "Senior Credit Facility") of
the Company in effect on the date hereof, the Company agrees to pay and hold the
Purchasers and holders of the Shares harmless from liability for the payment of:

               (a) the fees and expenses of the Purchaser, including the
reasonable fees and expenses of special counsel and accountants to the
Purchasers, arising in connection with the due diligence, negotiation and
execution of this Agreement, the Ancillary Agreements

                                       27

<PAGE>

and the Articles of Amendment, fees and expenses incurred in connection with
filings under the HSR Act and consummation of the transactions contemplated
herein (including, without limitation, the sale and purchase of the Initial
Shares, the Put Option Shares and the Call Option Shares), including the
reasonable fees and disbursements of Purchasers' certified public accounting
firm described in Section ID and the Deciding Accountant;

               (b) the fees and expenses incurred with respect to the
interpretation of, or any amendments or waivers to this Agreement, the Ancillary
Agreements or the Articles of Incorporation (whether or not the same become
effective);

               (c) if a Purchaser or other holder of Shares desires to sell or
otherwise transfer any or all of the Shares held by it and counsel for the
Company declines to render a legal opinion to such Purchaser or holder, without
cost or expense to such Purchaser or holder, whether or not registration under
the Securities Act will be required for such sale or transfer, the fees and
expenses of counsel for such Purchaser or holder in obtaining such an opinion;

               (d) the fees and expenses incurred in reviewing any registration
statement or prospectus or any amendments or supplements thereto prepared
pursuant to the Registration Agreement;

               (e) the fees and expenses incurred in connection with any
requested waiver of the right of any holder of Shares or the consent of any
holder of Shares to contemplated acts of the Company not otherwise permissible
by the terms of this Agreement, the Ancillary Agreements or the Articles of
Incorporation;

               (f) stamp and other taxes, excluding income taxes, which may be
payable with respect to the execution and delivery of this Agreement or the
issuance, delivery or acquisition of Shares;

               (g) the fees and expenses incurred in respect of the enforcement
of the rights granted under this Agreement, the Ancillary Agreements and the
Articles of Incorporation;

               (h) all costs, fees and expenses incurred by the Company
(including the fees and expenses of Vinson & Elkins L.L.P., special counsel to
Austin Ventures) in its performance of and compliance with this Agreement, the
Ancillary Agreements and the Articles of Incorporation, it being understood and
agreed that such costs, fees and expenses shall be borne solely by the Company;

               (i) fees and expenses incurred by each such Person in any filing
with any Governmental Authority with respect to its investment in the Company or
in any other .filing with any Governmental Authority with respect to the Company
that mentions such Person; and

               (j) all costs and expenses incurred in respect of actions taken
at the request of the Company.

               (ii) To the extent the Company is restricted by the provisions in
the definitive documentation relating to the Senior Credit Facility from paying
any amounts of the type described in Subparagraph (i), such amounts shall be
accrued by the Company and shall be

                                       28

<PAGE>

paid immediately upon the earlier to occur of (a) the repayment in full in cash
of any and all amounts owed by the Company under the Senior Credit Facility and
(b) the first date upon which the payment of such amounts is not restricted by
the Senior Credit Facility.

          10E. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally or by
cable, telex, facsimile transmission, telegram or overnight delivery service, or
72 hours after having been mailed by certified or registered mail, return
receipt requested and postage prepaid, to the recipient. Such notices, demands
and other communications will be sent to each party at the address indicated
below:

     If to the Company, at Monitronics International, Inc., 12801 Stemmons
Freeway, Dallas, TX 75234, Attention: James R. Hull, President (facsimile (972)
919-1985), or at such other address or addresses as may have been furnished in
writing by the Company to the Purchaser, with a copy to Glast, Phillips &
Murray, P.C., Suite 2200, L.B. 48, One Galleria Tower, Dallas, TX 75240-8329,
Attention: Mike Parsons, (facsimile (972) 419-8329).

     If to a Purchaser, at its address set forth on Exhibit A, or at such other
address or addresses as may have been furnished to the Company in writing by
such Purchaser, with a copy to Kirkland & Ellis, 153 East 53rd Street, New York,
NY 10022, Attention John L. Kuehn, (facsimile (212) 446-4900).

          10F. Brokers. The Company and each Purchaser (i) represents and
warrants to the other parties hereto that it has retained no finder or broker in
connection with the transactions contemplated in this Agreement, and (ii) will
indemnify and save the other parties harmless from and against any and all
claims, liabilities or obligations with respect to brokerage or finders, fees or
commissions, or consulting fees in connection with the transactions contemplated
in this Agreement asserted by any Person on the basis of any statement or
representation alleged to have been made by such indemnifying party.

          10G. Entire Agreement. This Agreement, the exhibits hereto and the
Ancillary Agreements embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings relating to such subject matter.

          10H. Amendments and Waivers. Except as otherwise expressly set forth
in this Agreement, any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the holders of at least 66 2/3% of the Shares. Any amendment or
waiver effected in accordance with this Paragraph 1 OH shall be binding upon
each holder of any Shares, each future holder of all such Shares and the
Company. No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.

                                       29

<PAGE>

          10I. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.

          10J. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.

          10K. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under Applicable
Law, but if any provision of this Agreement is held to be prohibited by or
invalid under Applicable Law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.

          10L. Governing Law. The construction, validity and interpretation of
this Agreement will be governed by the internal laws of the State of Texas
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Texas or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Texas.

          10M. Further Assurances. Each party to this Agreement hereby covenants
and agrees, without the necessity of any further consideration, to execute and
deliver any and all such further documents and take any and all such other
actions as may be necessary or appropriate to carry out the intent and purposes
of this Agreement and to consummate the transactions contemplated herein.

          10N. Indemnification. The Company, without limitation as to time, will
indemnify each Purchaser and its agents and representatives against, and hold
each Purchaser and its agents and representatives harmless from, all losses,
claims, damages, liabilities, costs (including the costs of preparation and
attorneys' fees and expenses) (collectively, the "Losses") (i) arising out of or
related to any breach or inaccuracy of any representation or warranty of the
Company contained in this Agreement; (ii) any non-fulfillment or breach of any
covenant or agreement of the Company contained in this Agreement; or (iii)
incurred pursuant to any Action or Proceeding against the Company, any Purchaser
or any of their agents and representatives arising out of or in connection with
this Agreement, any Ancillary Agreement (or any other document or instrument
executed pursuant hereto or thereto), which investigation or proceeding requires
the participation of, or is commenced or filed against, one or more of the
Purchasers and any of their agents because of this Agreement, the Ancillary
Agreements and the transactions contemplated herein and therein, other than any
Losses resulting from action on the part of such Purchaser or its agents or
representatives which is finally determined in such proceeding to be primarily
and directly a result of (a) such Purchaser's gross negligence or willful
misconduct, (b) a breach of a fiduciary duty, if any, owed by such Purchaser to
the Company, (c) an act or omission that involves intentional misconduct or a
knowing violation of Applicable Law by such Purchaser, (d) a transaction from
which such Purchaser received an improper personal benefit, (e) losses incurred
by or on behalf of an agent of a Purchaser that are the subject of the
indemnification agreement entered into by the Company and such agent pursuant to
the Shareholders Agreement, as to which Losses such indemnification agreement,
rather than this Paragraph 10N, shall apply, or (f) Losses incurred by a
Purchaser under the HSR Act. The

                                       30

<PAGE>

Company agrees to reimburse each Purchaser and its agents and representatives
promptly for all such Losses as they are incurred by such Purchaser and its
agents. Each Purchaser agrees to reimburse the Company for any payments made by
the Company to such Purchaser pursuant to Subparagraph (iii) of this Paragraph
10N for Losses which are finally determined in such proceeding to primarily and
directly result from the gross negligence or willful misconduct of such
Purchaser. The obligations of the Company to each Purchaser and its agents and
representatives under this Paragraph 10N will be separate obligations. The
obligations of the Company under this Paragraph 10N will survive any transfer of
securities by any Purchaser and the termination of this Agreement or any
Ancillary Agreement.

          10O. Legal Representation. The Company and each Purchaser acknowledges
that Vinson & Elkins L.L.P., special counsel to Austin Ventures, has been
requested by the Company and the Purchasers to assist in the review and
negotiation of this Agreement, the Ancillary Agreements and the Articles of
Amendment, and the consummation of the transactions contemplated herein. The
Company and each Purchaser acknowledges that Vinson & Elkins L.L.P. represents
Austin Ventures and does not represent the Company or any Purchaser in any
respect. Each Purchaser understands and acknowledges that Vinson & Elkins L.L.P.
is not advising such Purchaser with respect to such Purchaser's decision to
enter into this Agreement and to consummate the transactions contemplated by
this Agreement and the Ancillary Agreements, including without limitation the
purchase of the Shares to be purchased by such Purchaser on the terms and
conditions set forth herein. Each Purchaser acknowledges that such Purchaser has
obtained separate legal representation in connection with such matters.

                                     * * * *

                                       31

<PAGE>

     IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first written above.

                                        COMPANY:

                                        MONITRONICS INTERNATIONAL, INC.

                                        By: /s/ James R. Hull
                                            ------------------------------------
                                            James R. Hull,
                                            President and CEO

                                        PURCHASERS:

                                        ABRY PARTNERS IV, L.P.

                                        By: ABRY Capital Partners, L.P.,
                                             Its General Partner

                                            By: ABRY Capital Partners, LLC,
                                                 Its General Partner

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

                                        ABRY INVESTMENT PARTNERSHIP, L.P.

                                        By: ABRY Investment GP, LLC,
                                            Its General Partner

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

<PAGE>

     IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first written above.

                                        COMPANY:

                                        MONITRONICS INTERNATIONAL, INC.

                                        By:
                                            ------------------------------------
                                            James R. Hull,
                                            President and CEO

                                        PURCHASERS:

                                        ABRY PARTNERS IV, L.P.

                                        By: ABRY Capital Partners, L.P.,
                                             Its General Partner

                                            By: ABRY Capital Partners, LLC,
                                                 Its General Partner

                                                By: /s/ Jay Grossman
                                                    ----------------------------
                                                Name: Jay Grossman
                                                Title: Vice President

                                        ABRY INVESTMENT PARTNERSHIP, L.P.

                                        By: ABRY Investment GP, LLC,
                                            Its General Partner

                                                By: /s/ Jay Grossman
                                                    ----------------------------
                                                Name: Jay Grossman
                                                Title: Vice President

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