Document:

Exhibit 10.2

                              EMPLOYMENT AGREEMENT

     THIS  EMPLOYMENT  AGREEMENT  (the  "Agreement"),  dated as of September 22,
1999,  between Donald S. Shaffer (the "Executive") and Heilig-Meyers  Company, a
Virginia corporation (the "Company"), recites and provides as follows:

     WHEREAS,  the Board of Directors of the Company (the "Board")  expects that
the Executive will continue to make substantial  contributions to the growth and
prospects of the Company; and

     WHEREAS,  the Board  desires  that the Company  retain the  services of the
Executive,  and the  Executive  desires  to  continue  his  employment  with the
Company, all on the terms and subject to the conditions set forth herein.

     NOW,  THEREFORE,  in consideration of the foregoing premises and the mutual
covenants herein contained, the Company and the Executive agree as follows:

     1. Employment  Period.  The Company hereby agrees to continue the Executive
in its employ,  and the  Executive  hereby agrees to remain in the employ of the
Company, in accordance with the terms and provisions of this Agreement,  for the
period  commencing  on the date of this  Agreement  (the  "Effective  Date") and
ending on the third anniversary of such date (the "Employment Period").  Subject
to the provisions of Section 3 hereof, the Employment Period shall be a constant
rolling period of three (3) years,  commencing on the Effective  Date,  with the
result  that,  for each day after the  Effective  Date the  Executive's  term of
employment  shall be  extended  for an  additional  day so that at all times the
remaining  period  of the  Executive's  term of  employment  shall be three  (3)
years.

     2. Terms of Employment.

          a) Position and Duties.

               i) During the Employment  Period,  (A) the  Executive's  position
          (including  status,  offices,  titles  and  reporting   requirements),
          authority,  duties and responsibilities shall be at least commensurate
          in all  material  respects  with the most  significant  of those held,
          exercised   and  assigned  at  any  time  during  the  90-day   period
          immediately  preceding  the  Effective  Date  and (B) the  Executive's
          services  shall be performed at the location  where the  Executive was
          employed immediately  preceding the Effective Date or any office which
          is less than 35 miles from such location.

               ii) During the  Employment  Period,  and excluding any periods of
          vacation and leave to which the  Executive is entitled,  the Executive
          agrees to devote reasonable  attention and time during normal business
          hours to the  business  and affairs of the Company  and, to the extent
          necessary to discharge the responsibilities  assigned to the Executive
          hereunder,  to use the Executive's  reasonable best efforts to perform
          faithfully  and   efficiently   such   responsibilities.   During  the
          Employment  Period it shall not be a violation of this  Agreement  for
          the Executive to (A) serve on corporate, civic, charitable,  furniture
          industry association or professional  association boards or committees
          (provided the Executive  obtains prior approval by the Chief Executive
          Officer  of the  Company),  (B)  deliver  lectures,  fulfill  speaking
          engagements  or  teach  at  educational  institutions  and (C)  manage
          personal investments,  so long as such activities do not significantly
          interfere with the performance of the Executive's  responsibilities as
          an employee of the Company in accordance  with this  Agreement.  It is
          expressly  understood  and  agreed  that to the  extent  that any such
          activities have been conducted by the Executive prior to the Effective
          Date,  the  continued  conduct of such  activities  (or the conduct of
          activities  similar in nature  and scope  thereto)  subsequent  to the
          Effective  Date shall not  thereafter be deemed to interfere  with the
          performance of the Executive's  responsibilities  to the  Company.

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          b) Compensation.

               i) Base Salary. During the Employment Period, the Executive shall
          receive an annual base salary  ("Annual Base Salary"),  which shall be
          paid in equal  installments  on a  monthly  basis,  at least  equal to
          twelve  times the highest  monthly  base salary paid or payable to the
          Executive  by the Company and its  affiliated  companies in respect of
          the twelve-month  period immediately  preceding the month in which the
          Effective Date occurs.  During the Employment  Period, the Annual Base
          Salary  shall be reviewed at least  annually and shall be increased at
          any time and from  time to time as shall be  substantially  consistent
          with increases in base salary generally awarded in the ordinary course
          of business to other peer executives of the Company and its affiliated
          companies. Any increase in Annual Base Salary shall not serve to limit
          or reduce any other  obligation to the Executive under this Agreement.
          Annual Base Salary  shall not be reduced  after any such  increase and
          the term Annual Base Salary as utilized in this Agreement  shall refer
          to Annual Base Salary as so increased. As used in this Agreement,  the
          term "affiliated  companies" shall include any company  controlled by,
          controlling   or  under   common   control   with   the   Company.

               ii)  Annual  Bonus.  In  addition  to  Annual  Base  Salary,  the
          Executive shall be awarded, for each fiscal year during the Employment
          Period,  an annual bonus  opportunity  (the "Annual  Bonus") under the
          Company's  Annual  Performance-Based  Bonus Plan at least equal to his
          bonus opportunity immediately preceding the Effective Date or, if more
          favorable to the Executive,  under any plans, practices,  programs and
          policies of the Company and its affiliates in effect  generally at any
          time after the Effective Date with respect to other peer executives of
          the Company and its affiliated companies.

               iii)  Incentive,   Savings  and  Retirement  Plans.   During  the
          Employment  Period,  the Executive shall be entitled to participate in
          all  incentive  (including,   without  limitation,  stock  incentive),
          savings  and  retirement  plans,  practices,   policies  and  programs
          applicable  generally to other peer  executives of the Company and its
          affiliated  companies,  but in no event shall such  plans,  practices,
          policies   and  programs   provide  the   Executive   with   incentive
          opportunities  (measured  with  respect to both  regular  and  special
          incentive opportunities,  to the extent, if any, that such distinction
          is  applicable),   savings   opportunities   and  retirement   benefit
          opportunities,  in each case, less favorable,  in the aggregate,  than
          the most favorable of those provided by the Company and its affiliated
          companies for the Executive under such plans, practices,  policies and
          program as in effect at any time during the 90-day period  immediately
          preceding the Effective  Date or if more  favorable to the  Executive,
          those provided generally from time to time after the Effective Date to
          other peer executives of the Company and its affiliated companies.

               iv) Welfare  Benefit  Plans.  During the Employment  Period,  the
          Executive and/or the Executive's  family, as the case may be, shall be
          eligible for  participation  in and shall  receive all benefits  under
          welfare benefit plans,  practices,  policies and programs  provided by
          the  Company  and  its  affiliated   companies   (including,   without
          limitation,   medical,   prescription,   dental,  disability,   salary
          continuance,  employee life,  group life,  accidental death and travel
          accident  insurance  plans  and  programs)  to the  extent  applicable
          generally to other peer  executives of the Company and its  affiliated
          companies,  but in no event shall such plans, practices,  policies and
          programs provide the Executive with benefits which are less favorable,
          in the aggregate,  than the most  favorable of such plans,  practices,
          policies and  programs in effect for the  Executive at any time during
          the 90-day period immediately preceding the Effective Date or, if more
          favorable to the Executive,  those provided  generally at from time to
          time after the Effective Date to other peer  executives of the Company
          and  its  affiliated  companies.

               v) Expenses. During the Employment Period, the Executive shall be
          entitled to receive prompt reimbursement for all reasonable employment
          expenses  incurred  by the  Executive  in  accordance  with  the  most
          favorable  policies,  practices and  procedures of the Company and its
          affiliated  companies  in effect for the  Executive at any time during
          the 90-day period immediately preceding the Effective Date or, if more
          favorable to the Executive,  as in effect  generally from time to time
          after the Effective Date with respect to other peer  executives of the
          Company  and its  affiliated  companies.

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               vi) Fringe Benefits.  During the Employment Period, the Executive
          shall be  entitled  to fringe  benefits  in  accordance  with the most
          favorable plans,  practices,  programs and policies of the Company and
          its  affiliated  companies  in effect  for the  Executive  at any time
          during the 90-day period immediately  preceding the Effective Date or,
          if more favorable to the Executive,  as in effect  generally from time
          to time after the Effective Date with respect to other peer executives
          of the Company and its  affiliated  companies.

               vii) Office and Support Staff.  During the Employment Period, the
          Executive shall be entitled to an office or offices of a size and with
          furnishings  and  other   appointments,   and  to  exclusive  personal
          secretarial and other assistance, at least equal to the most favorable
          of the  foregoing  provided  to the  Executive  by the Company and its
          affiliated  companies at any time during the 90-day period immediately
          preceding the Effective  Date or, if more  favorable to the Executive,
          as provided  generally from time to time after the Effective Date with
          respect to other peer  executives  of the Company  and its  affiliated
          companies.

               viii) Vacation. During the Employment Period, the Executive shall
          be entitled to paid  vacation in  accordance  with the most  favorable
          plans,  policies,  programs  and  practices  of the  Company  and  its
          affiliated companies as in effect for the Executive at any time during
          the 90-day period immediately preceding the Effective Date or, if more
          favorable to the Executive,  as in effect  generally from time to time
          after the Effective Date with respect to other peer  executives of the
          Company and its affiliated companies.

          3. Termination of Employment.

               a)  Death  or  Disability.   The  Executive's   employment  shall
          terminate   automatically   upon  the  Executive's  death  during  the
          Employment  Period.  If the Company  determines in good faith that the
          Disability of the Executive has occurred during the Employment  Period
          (pursuant to the  definition  of Disability  set forth below),  it may
          give to the Executive  written notice in accordance with Section 11(b)
          of its  intention to terminate  the  Executive's  employment.  In such
          event,  the  Executive's  employment  with the Company shall terminate
          effective  on the  30th  day  after  receipt  of  such  notice  by the
          Executive (the "Disability Effective Date"), provided that, within the
          30 days after such receipt,  the Executive  shall not have returned to
          full-time  performance of the Executive's duties. For purposes of this
          Agreement,  "Disability"  shall mean the absence of the Executive from
          the  Executive's  duties with the Company on a full-time basis for 180
          consecutive  business days as a result of incapacity  due to mental or
          physical  illness  which is  determined to be total and permanent by a
          physician  selected by the Company or its insurers and  acceptable  to
          the Executive or the Executive's legal  representative (such agreement
          as   to   acceptability   not   to  be   withheld   unreasonably).

               b) Cause.  The Company may terminate the  Executive's  employment
          during  the  Employment   Period  for  Cause.  For  purposes  of  this
          Agreement,  "Cause" shall mean (i) a material  breach by the Executive
          of the  Executive's  obligations  under  Section 2(a) (other than as a
          result of  incapacity  due to  physical  or mental  illness)  which is
          demonstrably  willful and deliberate on the Executive's part, which is
          committed in bad faith or without  reasonable  belief that such breach
          is in the best interests of the Company and which is not remedied in a
          reasonable  period of time after  receipt of written  notice  from the
          Company specifying such breach or (ii) the conviction of the Executive
          of  a  felony  involving  moral  turpitude.

               c) Notice of  Termination.  Any  termination  by the  Company for
          Cause,  or by the  Executive,  shall  be  communicated  by  Notice  of
          Termination to the other party hereto given in accordance with Section
          11(b). For purposes of this Agreement, a "Notice of Termination" means
          a  written  notice  which  (i)  indicates  the  specific   termination
          provision  in  this  Agreement   relied  upon,   (ii)  to  the  extent
          applicable,   sets   forth  in   reasonable   detail   the  facts  and
          circumstances  claimed  to  provide  a basis  for  termination  of the
          Executive's  employment  under the provision so indicated and (iii) if
          the Date of  Termination  (as defined below) is other than the date of
          receipt of such notice,  specifies  the  termination  date (which date
          shall be not more than 15 days after the giving of such  notice).  The
          failure by the  Executive or the Company to set forth in the Notice of
          Termination any fact or circumstance  shall not waive any right of the
          Executive or the Company  hereunder  or preclude the  Executive or the
          Company from  asserting  such fact or  circumstance  in enforcing  the
          Executive's or the Company's rights hereunder.

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               d) Date of Termination.  "Date of  Termination"  means (i) if the
          Executive's  employment is terminated by the Company for Cause,  or by
          the Executive, the date of receipt of the Notice of Termination or any
          later  date  specified  therein,  as the  case  may  be,  (ii)  if the
          Executive's  employment  is  terminated  by the Company other than for
          Cause  or  Disability,  the Date of  Termination  shall be the date on
          which the Company notifies the Executive of such termination and (iii)
          if the  Executive's  employment  is  terminated  by reason of death or
          Disability,  the Date of Termination shall be the date of death of the
          Executive or the  Disability  Effective  Date,  as the case may be.

          4.   Obligations of the Company upon Termination.

               a) Other than for Cause or Death.  The Company may  terminate the
          Executive's  employment  during the  Employment  Period for other than
          Cause or death.  If, during the Employment  Period,  the Company shall
          terminate the Executive's  employment other than for Cause or death or
          the Executive shall terminate employment:

                    i) The Company  shall pay to the  Executive in a lump sum in
               cash within 30 days after the Date of Termination  the sum of (1)
               the   Executive's   Annual  Base  Salary   through  the  Date  of
               Termination to the extent not theretofore paid; (2) to the extent
               not  theretofore  paid, the product of (A) the greater of (x) the
               Annual  Bonus  paid  or  payable,  including  by  reason  of  any
               deferral,  to the Executive  (and  annualized for any fiscal year
               consisting  of less  than  twelve  full  months  or for which the
               Executive has been employed for less than twelve full months) for
               the most  recently  completed  fiscal year during the  Employment
               Period,  if any, and (y) the average  annualized  (for any fiscal
               year  consisting  of less than twelve full months or with respect
               to which the  Executive  has been  employed  for less than twelve
               full  months)  bonus paid or payable,  including by reason of any
               deferral,  to the  Executive  by the Company  and its  affiliated
               companies  in  respect  of the  three  fiscal  years  immediately
               preceding the fiscal year in which the Date of Termination occurs
               (such  greater  amount  shall be  hereinafter  referred to as the
               "Highest  Annual  Bonus") and (B) a fraction,  the  numerator  of
               which is the number of days in the current  fiscal  year  through
               the Date of Termination, the denominator of which is 365; (3) any
               compensation  previously deferred by the Executive (together with
               any  accrued  interest  or  earnings  thereon)  to the extent not
               therefore  paid; and (4) any accrued  vacation pay, to the extent
               not therefore  paid (the sum of the amounts  described in clauses
               (1),  (2),  (3) and (4) shall be  hereinafter  referred to as the
               "Accrued Obligations"); and

                    ii) The Company  shall pay to the Executive in a lump sum in
               cash within 30 days after the Date of Termination  the sum of the
               Executive's  Annual Base Salary and Highest  Annual Bonus payable
               to the Executive  from the Date of  Termination to the end of the
               Employment Period; and

                    iii) For the  remainder of the  Employment  Period,  or such
               longer  period  as any plan,  program,  practice  or  policy  may
               provide,  the Company  shall  continue  benefits to the Executive
               and/or the Executive's family at least equal to those which would
               have  been  provided  to  them  in  accordance  with  the  plans,
               programs, practices and policies described in Section 2(b)(iv) if
               the Executive's  employment had not been terminated in accordance
               with the most favorable plans, practices, programs or policies of
               the  Company  and  its  affiliated  companies  as in  effect  and
               applicable  generally to other peer executives and their families
               during the 90-day period immediately preceding the Effective Date
               or, if more favorable to the Executive, as in effect generally at
               any time  thereafter with respect to other peer executives of the
               Company  and  its  affiliated   companies  and  their   families,
               provided,  however, that if the Executive becomes reemployed with
               another  employer  and is  eligible  to receive  medical or other
               welfare  benefits  under another  employer - provided  plan,  the
               medical and other  welfare  benefits  described  herein  shall be
               secondary  to those  provided  under such other plan  during such
               applicable  period  of  eligibility  (such  continuation  of such
               benefits  for the  applicable  period  herein set forth  shall be
               hereinafter referred to as "Welfare Benefit  Continuation").  For
               purposes of determining  eligibility of the Executive for retiree
               benefits  pursuant  to  such  plans,   practices,   programs  and
               policies,  the  Executive  shall be  considered  to have remained
               employed  until  the  end of the  Employment  Period  and to have
               retired on the last day of such period; and

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                    iv) To the  extent not  theretofore  paid or  provided,  the
               Company shall timely pay or provide to the  Executive  and/or the
               Executive's  family any other amounts or benefits  required to be
               paid or provided or which the  Executive  and/or the  Executive's
               family is eligible  to receive  pursuant  to this  Agreement  and
               under any  plan,  program,  policy or  practice  or  contract  or
               agreement  of the  Company  and its  affiliated  companies  as in
               effect and  applicable  generally  to other peer  executives  and
               their families during the 90-day period immediately preceding the
               Effective  Date or, if more  favorable  to the  Executive,  as in
               effect generally thereafter with respect to other peer executives
               of the Company and its  affiliated  companies and their  families
               (such other amounts and benefits shall be hereinafter referred to
               as the "Other  Benefits").

               b) Death. If the  Executive's  employment is terminated by reason
          of the Executive's death during the Employment Period,  this Agreement
          shall terminate  without further  obligations to the Executive's legal
          representatives  under  this  Agreement,  other  than for  payment  of
          Accrued  Obligations (which shall be paid to the Executive's estate or
          beneficiary,  as  applicable,  in a lump sum in cash within 30 days of
          the Date of  Termination)  and the timely  payment or provision of the
          Welfare Benefit Continuation and Other Benefits.

               c) Cause. If the Executive's  employment  shall be terminated for
          Cause during the Employment  Period,  this Agreement  shall  terminate
          without further obligations to the Executive other than the obligation
          to pay to the  Executive  his Annual Base  Salary  through the Date of
          Termination plus the amount of any compensation previously deferred by
          the  Executive,  in each case to the  extent  theretofore  unpaid.

               d) Time of Payment.  The Company shall make all payments required
          by this Section 4 within the time periods  provided in Sections  4(a),
          4(b) and 4(c);  provided,  however,  that in the  event  that any such
          payments would be  non-deductible  to the Company under the provisions
          of Section  162(m) of the Internal  Revenue  Code of 1986,  as amended
          (the "Code"),  and the Executive is a "covered employee" as defined in
          Treas. Reg. Section 1.162-27(c)(2) for the taxable year of the Company
          during which the Date of Termination  occurred or for the  immediately
          preceding  year,  the Company  shall make any such payment not earlier
          than 90 days  following the end of the  Company's  taxable year during
          which the Executive last was a "covered  employee."

          5. Nonexclusivity of Rights. Expect as provided in Sections 4(a)(iii),
     4(b) and  4(c),  nothing  in this  Agreement  shall  prevent  or limit  the
     Executive's continuing or future participation in any plan, program, policy
     or practice provided by the Company or any of its affiliated  companies and
     for which the Executive  may qualify,  nor shall  anything  herein limit or
     otherwise  affect such rights as the  Executive may have under any contract
     or agreement with the Company or any of its affiliated  companies.  Amounts
     which are vested  benefits or which the Executive is otherwise  entitled to
     receive under any plan,  policy,  practice or program of or any contract or
     agreement  with  the  Company  or  any of its  affiliated  companies  at or
     subsequent to the Date of Termination  shall be payable in accordance  with
     such plan,  policy,  practice or program or contract or agreement except as
     explicitly  modified by this  Agreement.

          6. Full  Settlement;  Resolution or  Disputes.

               a) The Company's  obligation to make the payments provided for in
          this  Agreement  and  otherwise to perform its  obligations  hereunder
          shall  not be  affected  by  any  set-off,  counterclaim,  recoupment,
          defense or other  claim,  right or action  which the  Company may have
          against the  Executive or others.  In no event shall the  Executive be
          obligated to seek other  employment or take any other action by way of
          mitigation of the amounts  payable to the  Executive  under any of the
          provisions  of this  Agreement  and,  except as  provided  in  Section
          4(a)(iii)  with respect to Welfare  Benefit  Continuation  and Section
          8(a)  with  respect  to  non-competition,  such  amounts  shall not be
          reduced  whether or not the Executive  obtains other  employment.  The
          Company  agrees  to pay to the  full  extent  permitted  by  law,  all
          reasonable  legal fees and expenses  which the  Executive may incur to
          enforce this Agreement and that result from a breach of this Agreement
          by the Company;  provided however, that the reasonableness of the fees
          and expenses must be determined by an  independent  arbitrator,  using
          standard legal principles, mutually agreed upon by the Company and the
          Executive  in  accordance   with  rules  set  forth  by  the  American
          Arbitration  Association.

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               b) If there  shall be any  dispute  between  the  Company and the
          Executive  in  the  event  of  any   termination  of  the  Executive's
          employment by the Company or by the Executive,  then, unless and until
          there  is a final,  nonappealable  judgment  by a court  of  competent
          jurisdiction  declaring  that  such  termination  was for  Cause,  the
          Company  shall pay all  amounts,  and  provide  all  benefits,  to the
          Executive and/or the Executive's family or other beneficiaries, as the
          case may be,  that the  Company  would be  required  to pay or provide
          pursuant  to  Section  4(a) as  though  such  termination  were by the
          Company without Cause or by the Executive; provided, however, that the
          Company shall not be required to pay any disputed  amounts pursuant to
          this  paragraph  except upon receipt of an  undertaking  (which may be
          unsecured)  by or on behalf of the Executive to repay all such amounts
          to which the Executive is ultimately  adjudged by such court not to be
          entitled.

          7. Confidential  Information.

               a) The  Executive  shall  hold in a  fiduciary  capacity  for the
          benefit  of  the  Company  all  secret  or  confidential  information,
          knowledge  or data  relating to the  Company or any of its  affiliated
          companies,  and their  respective  businesses,  which  shall have been
          obtained b the  Executive  during the  Executive's  employment  by the
          Company or any of its  affiliated  companies and which shall not be or
          become  public  knowledge  (other  than by acts  by the  Executive  or
          representatives  of the  Executive in  violation  of this  Agreement).
          After termination of the Executive's  employment with the Company, the
          Executive shall not,  without the prior written consent of the Company
          or  except  as may  otherwise  be  required  by law or legal  process,
          communicate  or divulge  any such  information,  knowledge  or data to
          anyone other than the Company and those  designated by it. In no event
          shall an  asserted  violation  of the  provisions  of this  Section  7
          constitute a basis for deferring or withholding any amounts  otherwise
          payable to the Executive under this  Agreement.

          8.  Non-Compete;  Non-Solicitation.

               a) Except as is set forth below,  for a period  commencing on the
          date  hereof  and  ending  on the date 36 months  after the  Executive
          ceases to be employed by the Company (the  "Non-Competition  Period"),
          the Executive  shall not in the United States of America,  directly or
          indirectly,  either for  himself  or any other  person,  own,  manage,
          control,  materially  participate in, invest in, permit his name to be
          used by, act as consultant or advisor to, render material services for
          (alone or in association with any person,  firm,  corporation or other
          business  organization)  or otherwise  assist in any manner any entity
          that engages in or owns,  invests in,  manages or controls any venture
          or enterprise  engaged in the retail furniture  industry (or any other
          business of the type that  constitutes  a  substantial  portion of the
          Company's  business at the date the Executive ceases to be employed by
          the Company) (collectively,  a "Competitor");  provided, however, that
          the restrictions set forth above shall immediately terminate and shall
          be of no further  force or effect (i) in the event of a default by the
          Company in the  payment of any  compensation  or benefits to which the
          Executive is entitled hereunder, which default is not cured within ten
          (10) days after written notice thereof, or (ii) at the election of the
          Executive if the  Executive's  employment  has been  terminated by the
          Company  other than for Cause and if the  Executive  (A) gives written
          notice  to the  Company  during  the  Non-Competition  Period  that he
          desires to accept  employment  with a Competitor;  and (B) agrees that
          the  severance  payment  specified in Section  4(a)(i) and (ii) hereof
          shall be  mitigated  by the amount of salary and pro rata target bonus
          payable  to  the  Executive  by the  Competitor  and  attributable  to
          employment during the Non-Competition Period (it being understood that
          the amount of such mitigated  severance shall be paid by the Executive
          to the Company in a lump-sum payment within thirty (30) days after the
          Executive  commences  employment with the Competitor).  Nothing herein
          shall  prohibit the  Executive  from being a passive owner of not more
          than 2% of the  equity  securities  of a  corporation  engaged in such
          business  which  is  publicly  traded,  so  long  as he has no  active
          participation in the business of such corporation.

               b) During the  Non-Competition  Period,  the Executive shall not,
          directly or indirectly,  (i) induce or attempt to induce or aid others
          in  inducing  an  employee  of the  Company to leave the employ of the
          Company,  or in any way interfere  with the  relationship  between the
          Company and an employee of the Company  except in the proper  exercise
          of the  Executive's  authority,  or (ii) in any way interfere with the
          relationship between the Company and any customer,  supplier, licensee
          or other  business  relation  of the  Company.

                                       35
<PAGE>
             c) If,  at the time of  enforcement  of this  Section  8, a court
          shall hold that the duration, scope, area or other restrictions stated
          herein are unreasonable under circumstances then existing, the parties
          agree that the maximum  duration,  scope,  area or other  restrictions
          reasonable  under  such  circumstances  shall be  substituted  for the
          stated duration, scope, area or other restrictions.

               d) The covenants  made in this Section 8 shall be construed as an
          agreement  independent of any other provisions of this Agreement,  and
          shall  survive  the  termination  of  this  Agreement.  Moreover,  the
          existence of any claim or cause of action of the Executive against the
          Company or any of its  affiliates,  whether or not predicated upon the
          terms  of this  Agreement,  shall  not  constitute  a  defense  to the
          enforcement  of these  covenants.

          9.  Indemnity.  The  Company  will  indemnify  the  Executive,  in his
     capacity as an officer and director of the Company,  to the fullest  extent
     permitted  by  the  Company's  Articles  of  Incorporation  and  Bylaws.

          10. Successors.

               a) This  Agreement is personal to the  Executive  and without the
          prior  written  consent of the Company  shall not be assignable by the
          Executive   otherwise  than  by  will  or  the  laws  of  descent  and
          distribution.  This  Agreement  shall  inure to the  benefit of and be
          enforceable   by   the    Executive's    legal    representatives.

               b) This  Agreement  shall  inure to the benefit of and be binding
          upon the Company and its successors and assigns.

               c) The Company  will  require any  successor  (whether  direct or
          indirect, by purchase,  merger,  consolidation or otherwise) to all or
          substantially  all of the  business  and/or  assets of the  Company to
          assume  expressly  and agree to  perform  this  Agreement  in the same
          manner and to the same extent  that the  Company  would be required to
          perform  it if no such  succession  had taken  place.  As used in this
          Agreement,  "Company" shall mean the Company as  hereinbefore  defined
          and any  successor to its business  and/or  assets as aforesaid  which
          assumes and agrees to perform  this  Agreement by operation of law, or
          otherwise.

          11.  Miscellaneous.

               a)  This  Agreement   shall  be  governed  by  and  construed  in
          accordance  with the laws of the  Commonwealth  of  Virginia,  without
          reference  to  principles  of conflict of laws.  The  captions of this
          Agreement  are not part of the  provisions  hereof  and shall  have no
          force  or  effect.  This  Agreement  may not be  amended  or  modified
          otherwise than by a written  agreement  executed by the parties hereto
          or  their   respective   successors  and  legal   representatives.

               b) All notices  and other  communications  hereunder  shall be in
          writing  and shall be given by hand  delivery to the other party or by
          registered  or  certified  mail,  return  receipt  requested,  postage
          prepaid,  addressed  as  follows:

          If to the Executive to:               If to the Company to:

          Donald S. Shaffer                     Heilig-Meyers Company
                                                12560 West Creek Parkway
                                                Richmond, Virginia  23238

                                                Attention:  Corporate Secretary

          or to such other  address as either party shall have  furnished to the
          other in writing in  accordance  herewith.  Notice and  communications
          shall  be  effective  when  actually  received  by the  addressee.

               c) The  invalidity or  unenforceability  of any provision of this
          Agreement shall not affect the validity or enforceability of any other
          provision of this Agreement.

                                       36
<PAGE>
               d) The Company may withhold  from any amounts  payable under this
          Agreement  such  Federal,  state,  local or foreign  taxes as shall be
          required  to  be  withheld   pursuant   to  any   applicable   law  or
          regulation.

               e) The Executive's or the Company's failure to insist upon strict
          compliance  with any provision  hereof or any other  provision of this
          Agreement  or the  failure  to assert any right the  Executive  or the
          Company may have hereunder, shall not be deemed to be a waiver of such
          provision   or  right  or  any  other   provision  or  right  of  this
          Agreement.

               f) Any  entitlements to the Executive  created under Section 2(b)
          shall be contract rights to the extent not prohibited by law. However,
          the Company shall not be required to amend,  or refrain from amending,
          any of its plans,  practices,  policies and programs to so provide the
          contract  rights.

               g) The  Executive  and the  Company  agree  that  as of the  date
          hereof,   this  Agreement   supersedes  and  terminates  any  existing
          employment  agreement between the Company and the Executive.

     IN WITNESS  WHEREOF,  the Executive has hereunto set the  Executive's  hand
and, pursuant to the authorization from its Board of Directors,  the Company has
caused  these  presents to be executed in its name on its behalf,  all as of the
day and year  first  above  written.

                                        HEILIG-MEYERS COMPANY
                                        By:  / s / Robert L. Burrus, Jr.
                                             -----------------------------
                                        Robert L. Burrus,  Jr.
                                        Chairman, Compensation Committee
                                        Board of Directors

                                        / s / Donald S. Shaffer
                                        ---------------------------------
                                        Donald S. Shaffer

                                       37AGREEMENT OF SALE

           		THIS AGREEMENT OF SALE ("Agreement") dated this 31st day of December,
1999 by and between Telident, Inc., a Minnesota corporation ("Seller") with an office located at Ten
Second Street N.E., Suite 212, Minneapolis, Minnesota 55413, and Teltronics, Inc., a Delaware
corporation ("Buyer") with an office located at 2150 Whitfield Industrial Way, Sarasota, Florida
34243.

W I T N E S S E T H:

           		WHEREAS, the Seller desires to dissolve, and in conjunction therewith, to sell to the
Buyer and the Buyer desires to purchase from the Seller substantially all of its tangible and intangible
assets, subject only to certain liabilities of the Seller described in this Agreement; and

          		WHEREAS, Buyer desires to sell and Seller desires to purchase from Buyer certain
molds of Buyer's majority owned subsidiary, Interactive Solutions, Inc.

          		NOW, THEREFORE, in consideration of the mutual promises herein set forth and
subject to the terms and conditions of this Agreement, the parties agree as follows:

           		1.     	Definitions.    As used in this Agreement, terms defined in the preamble and
recitals of this Agreement shall have the meanings set forth therein and the following terms shall
have the meanings set forth below:

          		"Act" shall mean the Securities Act of 1933, as amended.

          		"Affiliate" shall mean, with respect to any person or entity, the shareholders,
subsidiaries, officers, directors and/or partners of such person or entity and any other person which
directly or indirectly controls, is controlled by or is under common control with such person or entity.

          		"Agreement" shall mean this Agreement of Sale and all Exhibits to this Agreement.

          		"Assignment Agreements" shall mean the Assignment Agreements to be delivered
by Seller to Buyer pursuant to Paragraph 4(a).

          		"Assumed Liabilities" shall mean the Liabilities of the Seller described in Exhibit A
to this Agreement.

          		"Bills of Sale" shall mean the Bill(s) of Sale to be delivered by Seller to Buyer
pursuant to Paragraph 4(a).

          		"Buyer's Disclosure Statement" shall mean the disclosure statement and attachments
thereto delivered by Buyer to Seller simultaneously with Buyer's execution of this Agreement.

          		"Buyer's SEC Documents" shall mean all forms, documents, financial statements and
schedules included therein filed by Buyer with the SEC under the Exchange Act or the Act since
June 30, 1996 and on or before the Closing Date.

          		 "Closing" shall mean the closing of the transactions contemplated by this Agreement,
which shall occur at the offices of Briggs and Morgan, P.A. at 10:00 a.m. one (1) day after approval
of the dissolution of the Seller by holders of a majority of the outstanding voting shares of the Seller
at the Special Meeting ("Closing Date").  The Closing may be postponed to a later date (in which
case all references to the Closing Date or Closing in this Agreement shall refer to the postponed date)
or time by mutual agreement of the Seller and Buyer.

          		 "Code" shall mean the Internal Revenue Code of 1986 and all regulations
promulgated thereunder, as the same have from time been amended.

          		 "ERISA" shall mean the Employee Retirement Income Security Act of 1974 (and
any section of the Code amended by it) and all regulations promulgated thereunder, as the same have
from time to time been amended.

          		"Escrow Agreement" shall mean the mutually agreeable escrow agreement to be
entered into at the Closing between Buyer, FAMCO III Limited Liability Company and Special
Situations Private Equity Fund, L.P. providing that ten percent (10%) of the Shares be held in escrow
for a period of ninety (90) days in order to secure Seller's indemnity obligations under Paragraph 14
of this Agreement.

          		"Exchange Act" shall mean the Securities and Exchange Act of 1934, as amended.

          		"Financial Statements" shall mean the financial statements of Buyer or Seller (as
applicable) included in such party's SEC Documents.

          		 "GAAP" shall mean generally accepted accounting principles.

          		"Indemnity Loss" shall mean any demand, suit, claim, action or cause of action,
assessment, loss, damage, liability, settlement, penalty, or forfeiture, and reasonable costs and
expenses (including court costs, and any other litigation related expenses incident thereto) which
individually, or when aggregated with any directly related claims, exceeds $10,000.

          		"Intellectual Property" shall mean all patents, patent applications, patent registrations,
trademarks, trademark applications, trademark registrations, copyrights, copyright applications,
copyright registrations, trade names, formulae, trade secrets, know-how, inventions and royalties,
technology, licenses relating to intellectual property, permits relating to intellectual property,
technology and "know-how" owned by Seller.

          		"ISI" shall mean Interactive Solutions, Inc., a majority owned subsidiary of Buyer.

          		"ISI Molds" shall mean certain molds of ISI described in Exhibit B to this Agreement.

          		"Lease" shall mean a Lease agreement acceptable to Buyer for the operation of
Seller's business and premises located at Ten Second Street N.E. Suite 212, Minneapolis, Minnesota
55413.

          		"Liabilities" shall mean all debts, liabilities, Taxes (including any sales or transfer
taxes on the sale of the Purchased Assets), obligations under contracts, leases, agreements and
commitments, and other obligations of every kind and character of the Seller as the same may exist
as of the Closing Date (whether accrued, absolute, contingent or otherwise, and whether due or to
become due) or which may arise in the future based upon events or a state of facts existing as of the
Closing Date.

          		"Proxy Statement" shall mean the Proxy Statement as described in Paragraph 9 of this
Agreement.

          		"Purchased Assets" shall mean all of the Seller's properties and assets, personal,
tangible and intangible, of every kind and wherever situated, which are owned by the Seller or in
which the Seller has any right, title or interest, including, without limiting the generality of the
foregoing, its goodwill, franchises and telephone numbers; its trademarks, trademark registrations,
trademark applications, trade names (including but not limited to "Status Recognition Unit System
I", "Station Translation System", "STS", "Trax OSN", "Site Alert", "On-Site Notification", "Data
Base Management Software", and "Telident"), copyrights, copyright applications, copyright
registrations, patents, patent applications, patent registrations, its Intellectual Property, permits,
licenses, processes, formulae, trade secrets, inventions and royalties (including all rights to sue for
past infringement); its supplies; its commercial paper, stocks, bonds and other investments; its
accounts receivable; its insurance policies (excluding director and officer insurance); its causes of
action, judgments, claims and demands of whatever nature; its tangible and intangible personal
property of all kinds; its deferred charges, advance payments, pre-paid items, claims for refunds,
rights of offset and credits of all kinds; all credit balances of or inuring to it under any state
unemployment compensation plan or fund; restrictive covenants and obligations of present and
former officers and employees and of individuals and corporations; its accounts, general intangibles,
returned and repossessed goods, and rights as an unpaid vendor, secured party or lienor; its credit
balances, documents, instruments and other chooses in action; its rights (but not liabilities other than
the Assumed Liabilities) under contracts, purchase orders, personal property, leases, joint venture
agreements or arrangements and other agreements; its files, papers and records relating to the
aforesaid business, properties and assets; its inventory, securities, machinery, equipment, software,
pre-paid expenses, work in process, contracts, tools, dies, office furniture and equipment, drawings,
product literature, and customer records; provided that the Purchased Assets shall not include the
Retained Assets.

          		"Registration Statement" shall mean the Registration Statement described in
Paragraph 9 of this Agreement.

          		 "Retained Assets" shall mean the assets and properties of Seller described in Exhibit
C to this Agreement.

          		"Retained Liabilities" shall mean all Liabilities of the Seller which are not Assumed
Liabilities.

          		 "SEC" shall mean the Securities and Exchange Commission.

          		"Seller's Disclosure Statement" shall mean the disclosure statement and attachments
thereto delivered by Seller to Buyer simultaneously with Seller's execution of this Agreement.

          		 "Seller's Majority Shareholder Approval" shall mean the approval of this Agreement
and the dissolution of the Seller executed simultaneously upon execution of this Agreement by the
holders of a majority of the outstanding voting shares of the Seller.

          		"Seller's SEC Documents" shall mean all forms, documents, financial statements and
schedules included therein filed by Seller with the SEC under the Exchange Act or the Act since
June 30, 1996 and on or before the Closing Date.

          		"Shares" shall mean the shares of voting common stock of Buyer, par value $.001 per
share to be issued in accordance with this Agreement.

          		"Special Meeting" shall mean the Special Meeting of the shareholders of Seller
described in Paragraph 9 of this Agreement.

          		"Subsidiaries" shall mean any entity in which a person holds, directly or indirectly,
a majority of the outstanding voting rights or equity interest in such entity.

          		"Taxes" shall mean all federal, state, local and foreign taxes, including, without
limitation, income taxes, excise taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes, employment and payroll taxes, property taxes, import duties and interest and penalties in connection
with any of the foregoing.

          		"Tax Returns" for any specified year shall mean the federal and state tax returns of
the Seller as of and for the period ending June 30 of such year prepared by the Seller and filed with
the appropriate taxing authority, true and correct copies of which were previously supplied by Seller
to Buyer.

          
2.     
(a)     	Sale of Purchased Assets.    Subject to and upon the terms and
conditions of this Agreement, at the Closing, the Seller will sell, transfer, assign, convey and deliver
to the Buyer, and the Buyer will purchase, accept and acquire from the Seller all of the Purchased
Assets.

          
        
(b)     	Sale of ISI Molds.    Subject to and upon the terms and conditions of
this Agreement, at the Closing, the Buyer will cause ISI to sell, transfer, assign, convey and deliver
to the Seller, and the Seller will purchase, accept and acquire from ISI the ISI Molds.

          
3.     
(a)     	Purchase Price for Purchased Assets.    The aggregate consideration to
be paid by the Buyer for the Purchased Assets ("Consideration") at the Closing will be the issuance
and delivery of the Shares and the assumption by the Buyer of the Assumed Liabilities.  The Buyer
and Seller shall agree that the Consideration shall be allocated as provided in an Allocation
Agreement to be entered into between Buyer and Seller prior to Closing ("Allocation") and such
Allocation shall be used by Seller and Buyer for all tax return filings and payments.

          
          
        			(i)     	Shares.    Subject to the terms of this Agreement, Buyer will
issue and deliver to the Seller at the Closing (a) Six Hundred Thirty-Seven Thousand Five Hundred
(637,500) of the Shares; and (b) any additional Shares required to be delivered to Seller under
Paragraph 25 hereof.

          
          
        			(ii)     	Assumed Liabilities.    The Buyer will assume the Assumed
Liabilities.

          
        
(b)     	Purchase Price for ISI Molds.   At the Closing, Seller shall pay One
Million One Hundred Thousand dollars ($1,100,000.00) to the Buyer in immediately available funds
to purchase the ISI Molds and shall assume no liabilities of Buyer or its Affiliates.

          
4.     	Instruments of Transfer; Payment of Purchase Price and Assumption of
Liabilities; Further Assurances.

          
        
(a)     	Seller's Deliveries at Closing.    At the Closing, the Seller shall
execute and deliver to Buyer:

          
          
        
(i)     	Bill(s) of Sale and/or Assignment Agreements for the
Purchased Assets in form(s) reasonably satisfactory to the Buyer;

          
          
        
(ii)     	Assignment of the Lease;

          
          
        
(iii)     	Assignment to Buyer of the Intellectual Property in form
reasonably satisfactory to Buyer;

          
          
        
(iv)     	Legal Opinion by Seller's counsel in form reasonably
satisfactory to Buyer and consistent with the provisions set forth in Paragraph 12(f) of this
Agreement;

          
          
        
(v)     	Evidence of the authorization of this Agreement and the
transactions contemplated or required under this Agreement by Seller's Board of Directors and
Shareholders;

          
          
        
(vi)     	Such other instrument or instruments of transfer in such form
as shall be reasonably necessary or appropriate to vest in the Buyer good and valid title to the
Purchased Assets;

          
          
        
(vii)     	The Escrow Agreement;

          
          
        
(viii)     The purchase price for the ISI Molds described in
Paragraph 3(b) of this Agreement; and

          
          
        
(ix)     	UCC, Judgment and Tax Lien searches confirming that the Purchased Assets are free and clear of any liens, encumbrances, pledges, security interests, claims
and other encumbrances not satisfactory to Buyer.

          
        
(c)     	Buyer's Deliveries at Closing.    At the Closing, the Buyer shall execute
and/or deliver to the Seller:

          
          
        
(i)     	the Shares to be delivered pursuant to Paragraph 3(a)(i) and
Paragraph 25 of this Agreement;

          
          
        
(ii)      	such instruments, documents and Bill(s) of Sale necessary to
transfer to Seller all of ISI's right, title and interest in the ISI Molds, free and clear of all liens,
pledges, security interests, claims and other encumbrances, all in a form reasonably satisfactory to
the Seller;

          
          
        
(iii)     	the Escrow Agreement;

          
          
        
(iv)     	an instrument under which Buyer will assume the Assumed
Liabilities in a form reasonably satisfactory to the Seller; and

          
          
        
(v)     	Evidence of the authorization of this Agreement and the
transactions contemplated or required under this Agreement by Buyer's Board of Directors;

          
          
        
(vi)     	Such other instrument or instruments of transfer in such form
as shall be reasonably necessary or appropriate to vest in the Seller good and valid title to the ISI
Molds; and

          
          
        
(vii)     	Legal Opinion by Buyer's counsel in form reasonably
satisfactory to Seller and consistent with the provisions set forth in Paragraph 11(g) of this
Agreement.

          
        
(d)     	Other Transfer Instruments; Inspection Rights.    Following the Closing,
at the request of the Buyer, the Seller shall (i) deliver any further instruments of transfer and take all
reasonable action as may be necessary or appropriate (A) to vest in the Buyer all of the Seller's rights
and title in and to the Purchased Assets, and (B) to transfer to the Buyer all of the Seller's rights to
licenses and permits necessary for the operation of the Purchased Assets (to the extent such licenses
and permits are transferable), and (ii) permit the Buyer or representatives of the Buyer during normal
business hours upon reasonable notice to inspect and make copies of the Seller's books of account
and other records which are Retained Assets.

          
5.     	Transfer of Name.    From and after the Closing, Buyer shall own the rights of
Seller in and to the names "Status Recognition Unit System I", "Station Translation System", "STS",
"Trax OSN", "Site Alert", "On-Site Notification", "Data Base Management Software", and
"Telident".  Notwithstanding the above, Buyer will grant to Seller a limited right to use the name
"Telident" for purposes of Seller's dissolution and winding down.

          
6.     	Representations and Warranties of the Seller.    The Seller represents and
warrants to the Buyer as follows:

          
        
(a)     	Organization; Good Standing.    The Seller is a corporation duly
organized, validly existing and in good standing under the laws of its state of incorporation.  The
Seller has all requisite corporate power and authority and legal right to own, operate and lease its real
and personal properties, to carry on its business as now being conducted, and to enter into this
Agreement and perform its obligations under this Agreement.  Except as disclosed in Section 6(a)
of Seller's Disclosure Statement, the Seller is qualified to do business in each jurisdiction where the
conduct of its business or the ownership of its property requires such qualification and where the
failure to so qualify would have an adverse effect on the business of Seller.  The Seller has no
outstanding shares of Series I or Series II Convertible Preferred Stock. The Seller is not a party to
any shareholder control agreements. The chief executive office and principal place of business and
the places where the Seller maintains all records relating to its business is Ten Second Street N.E.,
Suite 212, Minneapolis, Minnesota 55413.

          
        
(b)     	Seller's SEC Documents.    The Seller has filed with the SEC, and has made
available to Buyer through EDGAR true and complete copies of Seller's SEC Documents.  The
Financial Statements included in the Seller's SEC Documents (i) were prepared from, and were in
accordance with, the books and records of the Seller as of the dates thereof or for the periods
presented therein, (ii) were prepared in accordance with GAAP applied on a consistent basis as of
the dates thereof or for the periods presented therein (except as otherwise noted therein and except
that the quarterly financial statements were subject to year end adjustment and do not contain all
footnote disclosures required by GAAP), (iii) complied in all respects with applicable accounting
requirements and with the published rules and regulations of the SEC with respect thereto as of the
dates thereof or for the periods presented therein and (iv) fairly presented in all material respects the
financial position and the results of operations and cash flows of the Seller all as of the dates thereof
or for the periods presented therein.

          
        
(c)     	Absence of Certain Changes.    Except as disclosed in the Seller's SEC
Documents, this Agreement and Section 6(c) of Seller's Disclosure Statement, from September 30,
1999, to the execution of this Agreement: (i) the business of the Seller has been conducted in the
ordinary course of business, consistent with past practice; and (ii) there has been no material adverse
change in the financial condition, properties, business or results of operations of the Seller taken as
a whole including (i) any damage, destruction or loss having a material adverse effect on the
properties, business, financial condition or results of operations of the Seller, taken as a whole; (ii)
any declaration, setting aside of funds for or payment of any dividend or other distribution in respect
of any shares of the Seller's stock or any direct or indirect redemption, purchase or other acquisition
of any of the Seller's stock by Seller, or (iii) any general increase in the rate of payment of the
salaries, wages, bonuses or commissions of any of the Seller's employees or individual increase for
any employee whose annual rate of compensation exceeds $40,000.

          
        
(d)     	Tax Returns and Payments.    Except as disclosed in Section 6(d) of
Seller's Disclosure Statement, Seller has duly filed all state, federal, local and foreign tax returns and
reports (or extension with respect thereto) required to be filed by the date hereof and has paid all
amounts owed for any and all federal, state and local taxes.  All monies required to be withheld by
the Seller from employees for income taxes, Social Security and unemployment insurance taxes have
been collected or withheld, and either paid to the respective governmental agencies or set aside in
accounts for such purpose, or accrued, reserved against, and entered upon the books of the Seller.
The Seller has furnished to the Buyer true and complete copies of the federal income tax returns of
the Seller and any amendments thereto for each of fiscal years ended June 30, 1996, 1997, and 1998.

          
        
(e)     	Title to Purchased Assets.    Except as disclosed in Section 6(e) of
Seller's Disclosure Statement, the Seller has good and valid title to all of the Purchased Assets,
subject in each case, to no mortgage, pledge, option, escrow, hypothecation, lien, security interest,
financing statement, lease, charge, encumbrance, easement or conditional sale or other title retention
agreement.

          
        
(f)     	Completeness and Condition of Property.    The Purchased Assets
include all of the properties, software, documents, equipment, licenses, patents, patent applications,
patent registrations, technology, trademarks, trademark applications, trademark registrations,
copyrights, copyright applications, copyright registrations, Intellectual Property and rights which are
necessary to conduct the Seller's business substantially as conducted immediately prior to the
execution of this Agreement.

          
        
(g)     	Trademarks, Copyrights, Licenses, etc.    A list and brief description
of the Intellectual Property are included in Section 6(g) of Seller's Disclosure Statement.  Seller
owns or possesses the right to the Intellectual Property, described in Section 6(g) of Seller's
Disclosure Statement, necessary for the conduct of its business and Seller has not received notice
of any conflict with the rights of others, or any use by others which conflicts in any respect with the
rights of the Seller in the Intellectual Property described in Section 6(g) of Seller's Disclosure
Statement. Except as disclosed in Section 6(g) of Seller's Disclosure Statement, the Intellectual
Property is fully assignable without the consent of any third party.  Seller has not received or given
notice of any default or claimed or purported or alleged default on the part of any party in the
performance or payment of any material obligation to be performed or paid by any party under the
Intellectual Property described in Section 6(g) of Seller's Disclosure Statement.  During the past two
years the only names by which the Seller has been known or which Seller has used are "Telident",
"Telident, Inc.", "Status Recognition Unit System I", "Station Translation System", "STS", "Trax
OSN", "Site Alert", "On-Site Notification", "Data Base Management Software", "911 Solutions",
"Sitealert" and "Tel-a-lert".  Seller will deliver to Buyer true and correct copies of each agreement,
patent, copyright or trademark described in Section 6(g) of Seller's Disclosure Statement.

          
        
(h)     	Litigation; Compliance with Laws; etc.    Except as included in  Section
6(h) of Seller's Disclosure Statement, there is (i) no suit or action pending or to Seller's knowledge
threatened, against Seller or the property of Seller, or (ii) no governmental investigation or inquiry
pending or to Seller's knowledge threatened against the Seller, affecting Seller or its business
operations, of which Seller has received notice, which matter referred to in clauses (i) and (ii) above
would, severally or in the aggregate, have an adverse affect on the condition (financial or otherwise)
of the business of Seller (taken as a whole) or the Purchased Assets (taken as a whole).  Seller has
complied with and to its knowledge is not in default in any respect under any laws, ordinances or
governmental requirements, regulations or orders applicable to its business and properties where
such failure or default would have an adverse affect on the condition (financial or otherwise),
business of the Seller (taken as a whole) or the Purchased Assets (taken as a whole).  To Seller's
knowledge, no investigation is pending by any federal, state or local government, or by any agency
or instrumentality thereof, the effect of which would have an adverse affect on the business of the
Seller (taken as a whole) or the Purchased Assets (taken as a whole).

          
        
(i)     	Authority.    The execution and delivery of this Agreement and the
consummation of the transactions contemplated or required under this Agreement have been duly
authorized by all necessary corporate action on the part of the Seller subject to the approval of the
dissolution of Seller by the shareholders of the Seller. This Agreement has been duly authorized,
executed and delivered by the Seller and constitutes, subject to the approval of the dissolution of
Seller by the shareholders of the Seller, a legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms except to the extent that enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally and principles of equity.

          
        
(j)     	Compliance with Other Instruments, etc.   Except as the terms of the
leases and agreements provided on Section 6(l) of Seller's Disclosure Statement so specify, to
Seller's knowledge, neither the execution and delivery of the Agreement nor the consummation of
the transactions contemplated under this Agreement will conflict with or result in any violation of
or constitute a default under any term of the certificate of incorporation or by-laws of Seller or any
agreement, mortgage, indenture, franchise, license, permit, authorization, lease or other instrument,
judgment, decree or order involving the Seller, its assets or the Purchased Assets, or, to the
knowledge of Seller, any law or regulation, by which the Seller, its assets, or the Purchased Assets
are bound.

          
        
(k)     	Governmental and Other Consents.    Except as otherwise disclosed by
the Seller to Buyer in Section 6(k) of Seller's Disclosure Statement, no consent, approval, order or
authorization of, or registration, declaration or filing with, any federal, state, local or foreign
governmental authority is required by or with respect to the Seller in connection with the execution
and delivery of this Agreement by the Seller or the consummation by the Seller of the transactions
contemplated or required hereby, except for (i) the filing of the Proxy Statement with the SEC in
connection with Special Meeting described in Paragraph 9 of this Agreement, (ii) the filing and
effectiveness of the Registration Statement to be filed with the SEC, and (iii) filings and
effectiveness of the Registration Statement to be filed with various Blue Sky authorities.

          
        
(l)     	Agreements, etc.  
Section 6(l) of Seller's Disclosure Statement contains
a true, correct and complete list of all real property leases, personal property leases, distributor
agreements, sale, agency or marketing agreements, licensing agreements, royalty agreements,
development agreements and franchise agreements to which Seller is a party or in which the Seller
has an interest.  Except as the terms of the leases and agreements listed on Section 6(l) of Seller's
Disclosure Statement so specify, Seller is not aware of any reason why such leases and agreements
are not fully assignable without the consent of any third party.  To Seller's knowledge, there exists
no default or claimed or purported or alleged default of any party in the performance of any
obligation to be performed or paid by any party under any contracts, plans or other instruments or
arrangements referred to in or submitted as a part of Section 6(l) of Seller's Disclosure Statement.
Seller has not received or given notice of any default or claimed or purported or alleged default on
the part of any party in the performance or payment of any obligation to be performed or paid by any
party under any contracts, plans or other instruments or arrangements referred to in or submitted as
a part of Section 6(l) of Seller's Disclosure Statement.

          
        
(m)      	ERISA.  
  To the Seller's knowledge, the Seller is, has been at all times,
and will remain in compliance in all respects with all applicable provisions of ERISA and other
federal and state statutes and regulations relating to "employee benefit plans," as such term is defined
in §3(3) of ERISA, and the Seller is current with respect to all contributions required to be made to
any such plan.  No event has occurred which would constitute a reportable event within the meaning
of §4043(b) of ERISA, or which would constitute grounds for the appointment by the appropriate
United States district court of a trustee to administer any employee benefit plan maintained by the
Seller, and no notice of termination has been filed by the plan administrator pursuant to §4041 of
ERISA or issued by the Pension Benefit Guaranty Corporation pursuant to §4043 of ERISA with
respect to any pension benefit plan subject to ERISA.  The Seller does not maintain or contribute,
has not maintained or contributed, nor is it now nor has it ever been required to, maintain or
contribute to a defined benefit pension plan or multi-employer pension plan, and the Seller is not and
has not been under common control (within the meaning of Sections 414(b) or (c) of the Code) with
an entity.

          
        
(n)     	Safety Deposit Boxes, Lock Boxes, Securities.  
  A list and brief
description of all safe deposit boxes, lock boxes, stocks, bonds and other securities in the names of
or owned or controlled by the Seller and details about persons having access thereto is included in
Section 6(n) of Seller's Disclosure Statement.

          
        
(o)     	Environmental Compliance.  
  The Seller will deliver to the Buyer a
copy of each of the following items:  (i) every written communication during the past two (2) years
between the Seller and any environmental agency which alleges noncompliance with applicable
environmental laws and regulations or demands payment of penalties and fines for alleged violations
of such laws and regulations; (ii) a description of the nature and quantities of any hazardous
materials (as defined below) generated, transported or disposed of in material quantities by the Seller
during the past two (2) years, together with a description of the location at which such materials were
generated, transported or disposed; and (iii) a summary of the nature and quantities of any hazardous
materials (as defined below) that have been disposed of in material quantities by Seller or found by
Seller in material quantities at the subject site.  Seller has no direct knowledge that it is not in
compliance with all applicable federal, state and local laws and regulations relating to pollution
control and environmental contamination including, without limitation, all laws and regulations
governing the generation, use, collecting, treatment, storage, transportation, recovery, removal,
discharge or disposal of hazardous materials (as defined below) and all laws and regulations with
regard to record keeping, notification and reporting requirements respecting hazardous materials
(defined below) where the failure to be in such compliance would have an adverse effect on the
business, properties, Purchased Assets, or condition (financial or otherwise) of the Seller, taken as
a whole.  The Seller has not received any written notice of, and has not been subject to any
administrative or judicial proceeding pursuant to laws or regulations relating to pollution control and
environmental contamination at any time during the past two (2) years.  There are no facts or
circumstances which now exist of which Seller has direct knowledge that could form the basis for
the assertion of a claim against the Seller relating to past or present environmental practices of Seller
asserted under the Comprehensive Environmental Response Compensation and Liability Act of 1980
("CERCLA"), the Resource Conservation and Recovery Act ("RCRA") or any other federal, state
or local environmental statute, which claim, if adversely determined would have an adverse effect
on the business, properties or condition (financial or otherwise) of the Seller, taken as a whole.  For
purposes of this Paragraph 6(o), the term "hazardous materials" means materials defined as
"hazardous substance" or "hazardous waste" in CERCLA, RCRA and in any similar federal, state
or local environmental statute.

          
        
(p)     	Customers and Suppliers.  
  A complete list of names and addresses of
the entities that account for 5% or more of the sales or 10% or more of the purchases, respectively,
made by the Seller during the last fiscal year is included in Section 6(p) of Seller's Disclosure
Statement.  The Seller has no knowledge of any intention of any customer or supplier to terminate,
cancel, modify, or change its business relationship with the Seller which individually or in the
aggregate would be materially adverse to the business of the Seller taken as a whole.  Except as to
the agreements listed in Section 6(l) of Seller's Disclosure Statement which may not be assigned
pursuant to their terms, the Seller has no knowledge of any existing events or conditions or state of
facts or circumstances relating to the Seller's relationships with customers and suppliers that will
prevent the Buyer from conducting the business of the Seller after the consummation of the
transactions contemplated by this Agreement in essentially the same manner in which it had been
conducted by the Seller prior to the Closing Date.

          
        
(q)     	Permits and Licenses.  
  Included in Section 6(q) of Seller's Disclosure
Statement is a list and brief description of all permits, licenses, notices and similar filings that are
required in the Seller's operation of its business in each jurisdiction in which it conducts business,
the failure of which to possess would have an adverse effect on the business, properties or condition
(financial or otherwise) of the Seller, taken as a whole.  Except as set forth in Section 6(q) of Seller's
Disclosure Statement, all such permits, licenses, notices and similar filings may be freely transferred
to the Buyer.

          
        
(r)     	Accuracy of Documents.   
 All agreements, contracts, leases, titles,
patents, copyrights, licenses, permits, trademarks and other documents delivered by the Seller to the
Buyer for the Buyer's review in connection with this Agreement and the transactions contemplated
hereby, including without limitation, the certificate of incorporation, by-laws, corporate minutes and
tax returns are true, correct and complete copies of all such agreements, contracts, titles and other
documents.

          
        
(s)     	Inventory.   
 Except as set forth in Section 6(s) of Seller's Disclosure
Statement, the Seller's inventory

          
          
        
(i)     	is of merchantable quality,
useable and saleable in the ordinary
course of Seller's business, as determined in accordance with GAAP, consistently applied, ordinary
wear and tear excepted, and

          
          
        
(ii)     	is valued at the lower of Seller's actual cost or market value.

          
        
(t)     	Accounts Receivable.  
  All of Seller's accounts receivable represent
bona fide amounts due for sales of goods or provision of services; arose in the ordinary course of
business; and except as set forth in Section 6(t) of Seller's Disclosure Statement, all of the accounts
receivable are fully collectible.  Except as set forth in Section 6(t) of Seller's Disclosure Statement,
the Seller has no knowledge of any accounts receivable that are being contested or disputed by the
obligor thereon, or which the Seller has reason to believe will be contested or disputed.

          
        
(u)     	Transactions with Affiliates.  
  No transaction in excess of $5,000
between the Seller and any Affiliate, relating to Purchased Assets or Assumed Liabilities, has been
fraudulent with respect to any creditor of the Seller or any of its Affiliates.

          
        
(v)     	Product Warranties.   
 Section 6(v) of Seller's Disclosure Statement
includes a copy of the standard maintenance and warranty policy for products sold by Seller. The
Seller (i) has not made any warranties other than specified in the distribution agreements listed in
Section 6(l) of the Seller's Disclosure Statement and the standard warranties disclosed in Section
6(v) of Seller's Disclosure Statement; (ii) has not received written notice of any claim based on any
product warranty and/or based upon any alleged failure to meet Seller's specifications; and (iii) has
no knowledge or any reasonable ground to know of any claim (actual or threatened) based on any
product warranty of which it has received no written notice.

          
        
(w)     	Brokers' or Finder's Fee.  
 Except as disclosed in Section 6(w) of
Seller's Disclosure Statement, no agent, broker, investment banker, or other firm acting on behalf
of Seller, or any shareholder of Seller, or under the authority of any of them, is or will be entitled to
any broker's or finder's fee or any other commission or similar fee directly or indirectly from Seller
or any such shareholder in connection with any of the transactions contemplated by this Agreement.

          
        
(x)     	Securities Law Compliance.  
 The information supplied by
the Seller for inclusion in the Proxy Statement shall not, on the date the Proxy Statement is first
mailed to shareholders of the Seller, at the time of the Special Meeting, and at the time of Closing,
contain any statement which, at such time and in light of the circumstances under which it shall be
made, is false or misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made in the Proxy Statement not false or misleading. If
at any time prior to the Closing, any event relating to the Seller or any of its Affiliates should be
discovered by the Seller which should be set forth in a supplement to the Proxy Statement, the Seller
shall promptly inform the Buyer. Notwithstanding the foregoing, the Seller makes no representation,
warranty or covenant with respect to any information supplied by the Buyer that is contained in any
of the foregoing documents.

          
        
(y)     	Year 2000 Compliance.  
  The Year 2000 Readiness Disclosure
contained in Seller's Form 10-QSB for the quarter ended September 30, 1999 is true in all material
respects as of the date of execution of this Agreement.

          
7.     	Representations and Warranties of Buyer.    Buyer represents and warrants to
the Seller as follows:

          
        
(a)      	Organization; Good Standing.  
  The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of its state of incorporation.  The Buyer has all
requisite corporate power and authority and legal right to own, operate and lease its real and personal
properties, to carry on its business as now being conducted, and to enter into this Agreement and
perform its obligations under this Agreement.  The Buyer is qualified to do business in each
jurisdiction where the conduct of its business or the ownership of its property requires such
qualification and where the failure to so qualify would have an adverse effect on the business of
Buyer.

          
        
(b)     	Buyer's SEC Documents.  
  The Buyer has filed with the SEC, and has made
available to Seller through EDGAR true and complete copies of Buyer's SEC Documents.  The
Financial Statements included in the Buyer's SEC Documents (i) were prepared from, and are were
in accordance with, the books and records of the Seller as of the dates thereof or for the periods
presented therein, (ii) were prepared in accordance with GAAP applied on a consistent basis as of
the dates thereof or for the periods presented therein (except as otherwise noted therein and except
that the quarterly financial statements were subject to year end adjustment and do not contain all
footnote disclosures required by GAAP), (iii) complied in all respects with applicable accounting
requirements and with the published rules and regulations of the SEC with respect thereto as of the
dates thereof or for the periods presented therein and (iv) fairly presented in all material respects the
financial position and the results of operations and cash flows of the Seller all as of the dates thereof
or for the periods presented therein.

          
        
(c)     	Absence of Certain Changes.  
  Except as disclosed in the Buyer's SEC
Documents, this Agreement and Section 7(c) of Buyer's Disclosure Statement, from September 30,
1999, to the execution of this Agreement, the respective business of the Buyer has been conducted
in the ordinary course of business, consistent with past practice.  From September 30, 1999, to the
execution of this Agreement, there has been no material adverse change in the financial condition,
properties, business or results of operations of the Buyer taken as a whole including (i) any damage,
destruction or loss having a material adverse effect on the properties, business, financial condition
or results of operations of the Buyer, taken as a whole; or (ii) any declaration, setting aside of funds
for or payment of any dividend or other distribution in respect of any shares of the Buyer's stock or
any direct or indirect redemption, purchase or other acquisition of any of the Buyer's stock by Buyer.

          
        
(d)     	Tax Returns and Payments.  
  Except as disclosed in Section 7(d) of
Buyer's Disclosure Statement, Buyer has duly filed all state, federal, local and foreign tax returns
and reports (or extension with respect thereto) required to be filed by the date hereof and has paid
all amounts owed for any and all federal, state and local taxes.  All monies required to be withheld
by the Buyer from employees for income taxes, Social Security and unemployment insurance taxes
have been collected or withheld, and either paid to the respective governmental agencies or set aside
in accounts for such purpose, or accrued, reserved against, and entered upon the books of the Buyer.

          
        
(e)     	Litigation; Compliance with Laws; etc.  
  Except as included in  Section
7(e) of Buyer's Disclosure Statement or the Buyer's SEC Documents, there is (i) no suit or action
pending or to Buyer's knowledge threatened, against Buyer or the property of Buyer, or (ii) no
governmental investigation or inquiry pending or to Buyer's knowledge threatened against the Buyer,
affecting Buyer or its business operations, of which Buyer has received notice, which matter referred
to in clauses (i) and (ii) above would, severally or in the aggregate, have a material adverse affect
on the condition (financial or otherwise) of the business of Buyer (taken as a whole) or the Buyer's
ability to acquire the Purchased Assets (taken as a whole) as contemplated by this Agreement.  Buyer
has complied with and to its knowledge is not in default in any respect under any laws, ordinances
or governmental requirements, regulations or orders applicable to its business and properties where
such failure or default would have a material adverse affect on the condition (financial or otherwise),
of the business of the Buyer (taken as a whole) or the Buyer's ability to acquire the Purchased Assets
(taken as a whole) as contemplated by this Agreement.  To Buyer's knowledge, no investigation is
pending by any federal, state or local government, or by any agency or instrumentality thereof, the
effect of which could have a material adverse affect on the business of the Buyer (taken as a whole)
or the Buyer's ability to acquire the Purchased Assets (taken as a whole) as contemplated by this
Agreement.

          
        
(f)     	Authority.  
  The execution and delivery of this Agreement and the
consummation of the transactions contemplated or required hereby have been duly authorized by all
necessary corporate action on the part of the Buyer.  This Agreement has been duly executed and
delivered by the Buyer and constitutes a valid and binding obligation of the Buyer enforceable in
accordance with its terms except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of
creditors' rights generally and principles of equity.

          
        
(g)     	Compliance with Instruments, Consents, Adverse Agreements.  

Neither the execution and the delivery of this Agreement nor the consummation of the transaction
contemplated hereby will conflict with or result in any violation of or constitute a default under the
Buyer's organization documents or any agreement, mortgage, indenture, license, permit, lease or
other instrument, judgment, decree, order, or, to the knowledge of the Buyer, any law or regulation
by which the Buyer is bound.  No consent, approval or authorization of or designation, declaration
or filing with any governmental authority or persons or entities on the part of the Buyer is required
in connection with the execution or delivery of this Agreement, or the consummation of the
transaction contemplated hereby except for the Proxy Statement and Registration Statement
described in Paragraph 9 of this Agreement.  The Buyer is not a party to or subject to any agreement
or instrument, or subject to any charter or other restriction or any judgment, order, writ, injunction,
decree, law, rule or regulation which adversely affects or, so far as the Buyer can now reasonably
foresee, may in the future adversely affect the business operations, prospects, properties, assets or
condition, financial or otherwise, of the Buyer.

          
        
(h)     	Brokers' or Finder's Fee.  
 No agent, broker, investment banker, or other
firm acting on behalf of Buyer, or any shareholder of Buyer, or under the authority of any of them,
is or will be entitled to any broker's or finder's fee or any other commission or similar fee directly
or indirectly from Buyer or any such shareholder in connection with any of the transactions
contemplated by this Agreement.

          
        
(i)     	Registration Statement; Proxy Statement/Prospectus.  
The information
to be supplied by Buyer for inclusion in the Registration Statement shall not at the time the
Registration Statement is declared effective by the SEC contain any untrue statement of a material
fact or omit to state any material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the circumstances under
which they were made, not misleading. If at any time prior to the Closing, any event relating to the
Buyer or any of its Affiliates should be discovered by the Buyer which should be set forth in an
amendment to the Registration Statement, the Buyer shall promptly inform the Seller.
Notwithstanding the foregoing, the Buyer makes no representation, warranty or covenant with
respect to any information supplied by Seller that is contained in any of the foregoing documents.

          
        
(j)     	Title to ISI Molds.  
 Except for liens in favor of the CIT Group / Credit
Finance, Inc. and Finova Capital which shall be released at Closing, ISI has good and valid title to
all of the ISI Molds, subject in each case, to no mortgage, pledge, option, escrow, hypothecation,
lien, security interest, financing statement, lease, charge, encumbrance, easement or conditional sale
or other title retention agreement.

          
        
(k)     	Title to Shares.  
  All Shares to be transferred to Seller at Closing
will be fully paid and nonassessable and shall be free and clear of all liens and encumbrances.

          
        
(l)     	Preemptive Rights.   There are no preemptive rights or other rights
to subscribe for or to purchase any shares of capital stock of the Buyer pursuant to Buyer's articles
of incorporation, bylaws or any agreement or other instrument to which Buyer is a party or by which
Buyer is bound which would be triggered by the transactions contemplated or evidenced by this
Agreement.

          
8.     	Conduct of Business.

          
        
(a)     	After the execution by both parties of this Agreement and up to and
including the Closing Date, the Seller will:

          
          
        
(i)     	use commercially reasonable efforts to preserve its
business organization intact, to keep available the services of its employees and representatives and
to preserve the goodwill of its employees, customers, suppliers and others having business relations
with the Seller; and

          
          
        
(ii)     	maintain its books, accounts and records in the usual
manner on a basis consistent with prior years.

          
          
        
(iii)     	maintain in good repair, working order and condition,
reasonable wear and tear excepted, all items of tools, furniture, machinery, vehicles, equipment and
all other items of tangible personal property included in the Purchased Assets.

          
        
(b)     	After the execution by both parties of this Agreement and up to and
including the Closing Date, the Seller will not, without the prior written consent of Buyer:

          
          
        
(i)     	modify its practices with respect to employee
compensation or benefits, enter into any new oral or written compensation agreements with employees or amend any existing oral or written compensation agreements (except for annual
increases in compensation of employees in the ordinary course of business and consistent with past
practice);

          
          
        
(ii)     	issue or contract to issue any debt or guarantees of debt
other than draws under existing lines of credit;

          
          
        
(iii)     	enter into any joint venture, partnership or other similar
arrangement for the conduct of its business;

          
          
        
(iv)     	make any loans or advances to any employee, officer,
director or Affiliate of the Seller;

          
          
        
(v)     	directly or indirectly dispose or accelerate realization
of any of its assets, including inventory and receivables, except in the ordinary course of business
and consistent with past practice;

          
          
        
(vi)     	change the character of its business; or

          
          
        
(vii)     	enter into any other transaction not in the ordinary
course of business;

          
          
        
(viii)     	enter into any contract to merge or consolidate with any
other corporation; or

          
          
        
(ix)     		sell, transfer, or otherwise dispose of or encumber all or any
part of the Purchased Assets, other than in the
ordinary course of business.

          
        
(c)     		After the execution of this Agreement by both parties and up to
and including the Closing Date and the Special Meeting, the Seller will not, without the prior written
consent of Buyer, issue any voting securities the effect of which would cause Special Situations
Private Equity Fund, L.P., and/or FAMCO III, Limited Liability Company to hold voting rights less
than fifty-one percent (51%) of the aggregate voting rights of the Seller.

          
9.     	Additional Covenants.

          
        
(a)     	Access to Properties and Records.  
  Seller shall permit the Buyer
reasonable access to its properties, and shall disclose and make available to the Buyer hereto all
books, papers and records relating to the Purchased Assets, including, but not limited to, all books
of account, the general ledger, tax records, minute books of directors' and stockholders' meetings,
organizational documents, by-laws, material contracts and agreements, filings with any regulatory
authority, accountants' work papers, litigation files, employees, and any other business activities or
prospects in which the Buyer may have a reasonable interest in light of the transactions contemplated
or required under this Agreement.

          
        
(b)     	Confidentiality.  
  All information furnished by each party hereto to the
other shall be treated as the sole property of the party furnishing the information except that, after
the Closing, all information relating to the Purchased Assets shall be treated as the sole property of
the Buyer.  If this Agreement shall be terminated, the party receiving the information shall return to
the party which furnished such information all documents or other materials containing, reflecting
or referring to such information, shall keep confidential all such information, and shall not directly
or indirectly use such information for any competitive or other commercial purpose.  The obligation
to keep such information confidential shall continue for five (5) years from the date this Agreement
is terminated and shall not apply to any information which (i) the party receiving the information can
establish by convincing evidence was already in its possession prior to the disclosure thereof by the
party furnishing the information; (ii) was at the time of disclosure generally known to the public; (iii)
thereafter became known to the public through no fault of the party receiving the information; (iv)
was disclosed to the party receiving the information by a third party not bound by an obligation of
confidentiality; (v) is required to be disclosed in accordance with an order of a court of competent
jurisdiction; or (vi) is required to be disclosed upon the advice of counsel in any document which
must be publicly filed as a result of this Agreement and the transactions evidenced thereby.

          
        
(c)     		Proxy Statement/Prospectus; Registration Statement.  
  As promptly as practical
after execution of this Agreement, Buyer and Seller shall prepare and file with the SEC the
Registration Statement, in which the Proxy Statement will be included as a prospectus. The Buyer
and Seller shall use all reasonable efforts to cause the Registration Statement to become effective
as soon after such filing as practical. The Proxy Statement, and any supplement thereto, shall include
the recommendation of the Board of Directors of Seller in favor of this Agreement, provided that the
Board of Directors of the Seller may withdraw such recommendation if it believes in its good faith
reasonable judgment, based upon and consistent with advice received in consultation with outside
legal counsel, that the withdrawal of such recommendation is necessary for the Board of Directors
of Seller to comply with its fiduciary duties under applicable law.

          
        
(d)     	Approval of Stockholders; Proxy Statement.  
  The Seller shall cause
the Special Meeting to be duly called and held for the purpose of approving the dissolution of the
Seller, which approval will result in Seller causing the transactions contemplated by this Agreement
to occur. The Seller will use its best efforts to call and hold the Special Meeting as promptly as
practicable following the effective date of the Registration Statement.  The Seller shall cause the
Proxy Statement to be distributed to each shareholder of record of the Seller as of the record date for
the Special Meeting in accordance with Regulation 14A under the Exchange Act and applicable state
law.  The Seller will deliver to Buyer promptly after the conclusion of the Special Meeting a
certificate of its Secretary stating the number of shares voted for and against such proposal as well
as the number of abstentions and broker non-votes.

          
        
(e)     	Regulatory Filings.   
 The Seller and Buyer will take all such action as
may be necessary under the federal securities laws applicable to or necessary for, and will file and,
if appropriate, use their best efforts to have declared effective or approved all documents and
notifications with the SEC and other governmental or regulatory bodies which they deem necessary
or appropriate for the consummation of this Agreement and the transactions contemplated or
required hereby under the Securities Act, the Exchange Act, applicable state blue sky laws and the
rules and regulations thereunder, and each party shall give the other information reasonably
requested by such other party pertaining to it and its subsidiaries and Affiliates to enable such other
party to take such actions.

          
        
(f)     	Public Announcements.  
  At all times until the approval of Seller's
shareholders as described in Paragraph 9(d), each party shall promptly advise and cooperate with the
other before issuing, or permitting any of its subsidiaries, directors, officers, employees or agents to
issue any press release or other public announcement to the press or any third party with respect to
this Agreement or the transactions contemplated or required hereby.

          
        
(g)     		Certain Notices.   
 Each of the parties hereto shall promptly notify
the other in writing upon becoming aware of (i) any order or decree or any complaint (or threat
thereof) seeking any order or decree restraining or enjoining or seeking damages in connection with
the consummation of this Agreement or any of the transactions contemplated or required under this
Agreement, or upon receiving any notice from any person, firm or corporation or any governmental
department, court, agency or commission of his or its intention to institute an investigation into, or
institute a suit or proceeding to restrain or enjoin or to seek damages in connection with the
consummation of this Agreement, or to nullify or render ineffective this Agreement or such
transactions contemplated or required under this Agreement or (ii) the occurrence or impending or
threatened occurrence of any event which would cause or constitute a breach, or would have caused
a breach had such event occurred or been known prior to the date hereof, of any of its representations
and warranties contained in this Agreement.

          
        
(h)     	NASDAQ.  
   Buyer will use its best efforts to cause all Shares
issued to Seller to be approved for quotation on the NASDAQ SmallCap Market.

          
        
(i)     	Assignment of Lease.  
  Buyer agrees to assume all obligations of
Seller under the Lease arising on or after the date of Closing.

          
        
(j)     	Insurance.  
 If requested by Buyer, Seller shall cause Buyer to be
named as an additional insured under all of Seller's existing corporate insurance policies provided
that Buyer pays any additional costs for such coverage.

          
        
(k)     	FCC Approval.  
  Buyer shall use its best efforts to obtain the FCC
approvals referenced in Section 12(k) hereof on or before March 30, 2000.

          
10.     	Survival of Representations and Warranties.  
  The parties hereto agree that
all representations and warranties made in this Agreement or in any Exhibit attached hereto,
certificate or document delivered herewith or at the Closing shall survive the execution and delivery
thereof and the Closing hereunder for the period of ninety (90) days from the Closing Date.

          
11.     	Conditions Precedent to the Obligations of Seller.  
  All obligations of
Seller under this Agreement are subject to the fulfillment, at or prior to the Closing Date, of each of
the following conditions, any or all of which may be waived in whole or in part at or prior to the
Closing Date by Seller:

          
        
(a)     	Buyer's Representations and Warranties.  
  The representations and
warranties of Buyer herein contained shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as though made on and as of the Closing Date,
except as affected by transactions contemplated or permitted by this Agreement.

          
        
(b)     	Buyer's Covenants.  
  Buyer shall have performed all of its obligations
and agreements and complied with all its covenants contained in this Agreement to be performed and
complied with by Buyer on or prior to the Closing Date.

          
        
(c)     	No Litigation.  
  No action, suit or proceeding before any court or any
governmental or regulatory authority shall have been commenced and still be pending, no
investigation by any governmental or regulatory authority shall have been commenced and still be
pending, and no action, suit or proceeding by any governmental or regulatory authority shall have
been commenced against Buyer, seeking to restrain, prevent or change the transactions contemplated
under this Agreement or questioning the validity or legality of any of such transactions.

          
        
(d)     	Registration Statement, Proxy Statement, State Securities Laws.  
  The
conditions described in Paragraph 12(g) of this Agreement shall have been fulfilled.

          
        
(e)     	Seller's Shareholders Approval.  
  Seller shall have obtained the
approval of the shareholders of Seller for the dissolution of the Seller under Paragraph 9(d).

          
        
(f)     	Documentation.  
  All matters and proceedings taken in connection with
the sale of the Purchased Assets and the sale of the ISI Molds as herein contemplated, including
forms of instruments and matters of title, shall be reasonably satisfactory to Seller and its counsel.

          
        
(g)     	Buyer's Counsel's Opinion.  
  Counsel for Buyer, shall have delivered
to Seller an opinion, dated the Closing Date, in form and substance satisfactory to counsel for Seller,
to the following effect:

          
          
        
(i)     	Buyer (A) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, and (B) has all corporate
power and authority to own, lease and operate its properties and to carry on its business as now being
conducted.

          
          
        
(ii)     	Buyer has all requisite corporate power and authority to execute
and deliver this Agreement, and to perform its obligations hereunder and thereunder.

          
          
        
(iii)     	The execution, delivery and performance of this Agreement,
(A) have been duly authorized by all necessary action of Buyer, and (B) do not violate any provision
of the certificate of incorporation or by-laws of Buyer.

          
          
        
(iv)     	This Agreement has been duly executed and delivered by the
Buyer.  Assuming due execution and delivery by Seller, this Agreement constitutes the valid and
binding obligations of Buyer enforceable in accordance with their respective terms, subject to the
qualifications that (1) the rights and remedies of Seller hereunder and thereunder may be limited by
bankruptcy, reorganization and other laws of general application relating to or affecting the
enforcement of creditors rights, and (2) equitable remedies are subject to the discretion of the court
before which any proceedings therefore may be brought.

          
          
        
(v)     	Such counsel does not have any actual knowledge of any
action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency now pending against the Buyer in which the alleged damages exceed $25,000 except
as described in Buyer's SEC Documents.

          
          
        
(vi)     	All Shares issued to Seller have been duly authorized, validly
issued and delivered by Buyer.

          
          
        
(vii)     	There are no preemptive rights or other rights to subscribe for
or to purchase any shares of capital stock of Buyer pursuant to Buyer's articles of incorporation,
bylaws or any agreement or other instrument known to such counsel to which Buyer is a party or by
which Buyer is bound which would be triggered by the transactions evidenced or contemplated by
this Agreement.

          
          
        
(viii)     	The Registration Statement has been declared effective by
order of the SEC, and to such counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceeding for that purpose has been instituted
or is pending or threatened under the Securities Act.

          
          
        
(xi)     	All Shares to be transferred to Seller at Closing are free and
clear of all liens and encumbrances.

          
        
(h)      	Registration Statement, Proxy Statement, State Securities Laws.  
The Registration Statement described in Paragraph 9 of this Agreement shall have become effective and
no stop order suspending the effectiveness of the Registration Statement shall have been issued and
no proceeding for that purpose and no similar proceeding in respect of the Proxy Statement shall
have been initiated or threatened by the SEC. Buyer shall have received all state securities laws or
"Blue Sky" permits and other authorizations necessary to consummate this Agreement and the
transactions contemplated by this Agreement.

          
        
(i)	     Lease.  
   The Buyer shall have accepted the assignment of the
Lease.

          
        
(j)	     NASDAQ.  
  The Shares of the Buyer to be issued to the Seller shall
have been approved for quotation on the NASDAQ SmallCap Market.

          
        
(k)	     Liens on ISI Molds.  
CIT Group / Credit Finance, Inc. and Finova Capital shall have released their respective liens on the ISI Molds.

          
12.	     Conditions Precedent to the Obligations of Buyer.    All obligations   
of Buyer
under this Agreement are subject to the fulfillment, at the Closing Date, of each of the following
conditions, any or all of which may be waived in whole or in part at or prior to the Closing by Buyer:

          
        
(a)	     Seller's Representations and Warranties.  

  The representations and
warranties of Seller herein contained shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as though made on and as of the Closing Date,
except as affected by transactions contemplated or permitted by this Agreement.

          
        
(b)	     Seller's Covenants.  
  Seller shall have performed all of its obligations
and agreements and complied with all of its covenants contained in this Agreement to be performed
and complied with by Seller on or prior to the Closing Date.

          
        
(c)	     No Litigation.  
  No action, suit or proceeding before any court or any
governmental or regulatory authority shall have been commenced and still be pending, no
investigation by any governmental or regulatory authority shall have been commenced and still be
pending, and no action, suit or proceeding by any governmental or regulatory authority shall have
been commenced against Seller, seeking to restrain, prevent or change the transactions contemplated
under this Agreement or questioning the validity or legality of any of such transactions.

          
        
(d)	     Consents.  
  Buyer shall have received evidence, satisfactory to Buyer
and its counsel, that all of the consents disclosed in the Seller's Disclosure Statement have been duly
obtained, and that all permits, licenses, franchises, and other authorizations necessary to the
operation of the business of Seller have been transferred to or issued to Buyer.

          
        
(e)	     Documentation.  
  All matters and proceedings taken in connection with
the sale of the Purchased Assets by Seller to Buyer as herein contemplated, including forms of
instruments and matters of title, shall be reasonably satisfactory to Buyer and its counsel.

          
        
(f)	     Seller's Counsel's Opinion.  
  Counsel for Seller, shall have delivered
to Buyer an opinion, dated the Closing Date, in form and substance satisfactory to counsel for Buyer,
to the following effect:

          
          
        
(i)	     Seller (A) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, and (B) has all corporate
power and authority to own, lease and operate its properties and to carry on its business as now being
conducted.

          
          
        
(ii)	     Seller has all requisite corporate power and authority to execute
and deliver this Agreement, and to perform its obligations hereunder and thereunder.

          
          
        
(iii)	     The execution, delivery and performance of this Agreement,
(A) have been duly authorized by all necessary action of Seller, and (B) do not violate any provision
of the certificate of incorporation or by-laws of Seller.

          
          
        
(iv)	     This Agreement has been duly executed and delivered by the
Seller.  Assuming due execution and delivery by Buyer, this Agreement constitutes the valid and
binding obligations of Seller enforceable in accordance with their respective terms, subject to the
qualifications that (1) the rights and remedies of Buyer hereunder and thereunder may be limited by
bankruptcy, reorganization and other laws of general application relating to or affecting the
enforcement of creditors rights, and (2) equitable remedies are subject to the discretion of the court
before which any proceedings therefore may be brought.

          
          
        
(v)	     Such counsel does not have any actual knowledge of any
mortgage, lien, encumbrance, security interest or other claim upon or with respect to any of the
Purchased Assets except for those disclosed in the Seller's Disclosure Statement.

          
          
        
(vi)	     Except as described in this Agreement , such counsel does not
have any actual knowledge of any action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other agency now pending against the Seller.

          
        
(g) 	     Registration Statement, Proxy Statement, State Securities Laws.  
  The
Registration Statement described in Paragraph 9 of this Agreement shall have become effective and
no stop order suspending the effectiveness of the Registration Statement shall have been issued and
no proceeding for that purpose and no similar proceeding in respect of the Proxy Statement shall
have been initiated or threatened by the SEC. Buyer shall have received all state securities laws or
"Blue Sky" permits and other authorizations necessary to consummate this Agreement and the
transactions contemplated by this Agreement.

          
        
(h)	     Lease.  
    Seller shall have assigned the Lease to Buyer.

          
        
(i)	     Simultaneous Closing of Sale to Seller of ISI Molds.  
  On the Closing
Date, Seller shall simultaneously purchase the ISI Molds for the purchase price for the ISI Molds
described in Paragraph 3(b) of this Agreement.

          
        
(j)	     Seller's Shareholders Approval.  
  The condition described in Paragraph
11(e) of this Agreement shall be satisfied.

          
        
(k)	     Escrow Agreement.  
  The Escrow Agreement shall have been executed.

          
        
(l)	     NASDAQ Approval.    All Shares of the Buyer to be issued to the Seller
shall have been approved for quotation on the NASDAQ SmallCap Market.

          
        
(m)	     Agreements with Affiliates  
   Not less than ten (10) days prior to the
Closing, the Seller shall deliver to Buyer a list of its Affiliates, identifying all persons who are
reasonably and in good faith believed to be, at the time of the Special Meeting, Affiliates of the
Seller for purposes of Rule 145 under the Act.  The Seller shall use its best efforts to cause each
person who is identified as an Affiliate in the list referred to above to deliver to Buyer on or prior
to the effective date of the Registration Statement a written agreement, in form reasonably
satisfactory to Buyer whereby such persons acknowledge (i) the restrictions on the transfer of Shares
issued to Affiliates necessary or advisable to comply with Rule 145 under the Act, and (ii) the
appropriate legending of the certificates for the Shares to be issued pursuant to this Agreement.
Notwithstanding Paragraph 3 of this Agreement, no stockholder who at the time of the effective date
of the Registration Statement was so identified as an Affiliate of the Seller shall be entitled to receive
certificates for Buyer's Shares until such stockholder has complied with any and all provisions of
this Paragraph 12(m).

          
        
(n)	     FCC Approval.  
  Receipt by Buyer of FCC Part 15 certificate(s) and
Part 68 equipment registration(s) for the Purchased Assets (other than products not yet sold by
Seller) to which such certificate(s) and registration(s) apply.

          
13.	     Shareholder Approval.

          
        
Simultaneously upon Seller's execution of this Agreement, Special Situations
Private Equity Fund, L.P. and FAMCO III, Limited Liability Company shall have delivered their
approval of this Agreement and the dissolution of the Seller and have agreed to vote their shares of
Seller in favor of the dissolution of the Seller at the Special Meeting.

          
14.	     Indemnification.

          
        
(a)	     Indemnification by Seller.  
 Seller shall indemnify, defend, and hold
Buyer and their respective officers, directors, employees, and shareholders and their respective
successors and assigns (collectively, "Buyer's Indemnified Persons") harmless from and against an
Indemnity Loss asserted against, suffered, or incurred by any of Buyer's Indemnified Persons arising
out of or in any way related to:

          
          
        
(i)	     Any misrepresentation in or breach of the representations and
warranties of Seller or the failure of Seller to perform any of its covenants or obligations contained
in this Agreement, the Assignment Agreements, or in any exhibit, schedule, certificate or other
instrument or document furnished to or to be furnished by Seller pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement;

          
          
        
(ii)	     Except with respect to the Assumed Liabilities assumed by
Buyer under this Agreement, the operation of Seller's business or the use of the Purchased Assets
prior to the date hereof;

          
          
        
(iii)	     Any actions, claims, suits, or proceedings asserted by third
parties alleging personal injury or property damage due to, arising out of, or by reason of the design,
manufacture or use of any products of the Seller's business manufactured on or prior to the Closing
Date;

          
          
        
(iv)	     Any worker's compensation claims of any employee or former
employee of Seller relating to events occurring on or prior to the Closing Date;

          
          
        
(v)	     Any and all claims for compensation and other employee
benefits (including, but not limited to, severance pay, outplacement benefits, disability benefits,
health, retiree medical, worker's compensation, tuition assistance, death benefits, and pension and
profit sharing plans and claims relating to employment or termination of employment) accruing on
or prior to the date hereof, or on or after the date hereof with respect to the payment of severance
benefits and other welfare benefit payments, if any, with respect to (i) employees in the Seller's
business who are laid off on or prior to the date hereof and (ii) employees in the Seller's business
who, on the date hereof, are on medical leave or disability, and related costs and liabilities, regardless
of whether such claims and related costs and liabilities are made or incurred before, on or after the
Closing Date;

          
          
        
(vi)	     All claims, investigations, actions, suits, proceedings, demands,
assessments, judgments, costs and expenses, including reasonable attorneys' fees and expenses,
incident to the foregoing (other than Assumed Liabilities); or

          
          
        
(vii)	     Any liabilities, obligations or expenses of Seller not included
in the Assumed Liabilities assumed by Buyer pursuant to the provisions of the Agreement.

          
        
(b)	     Indemnification by Buyer.  
 Buyer shall indemnify, defend, and hold
Seller, and its officers, directors, employees, and shareholders and their respective successors and
assigns (collectively "Seller's Indemnified Persons"), harmless from and against any Indemnity Loss
asserted against, suffered or incurred by any of Seller's Indemnified Persons arising out of or in any
way related to:

          
          
        
(i)	     Any misrepresentation in or breach of the representations and
warranties of Buyer or the failure of Buyer to perform any of their covenants or obligations contained
in this Agreement, the Assignment Agreements, or in any exhibit, schedule, certificate or other
instrument or document furnished or to be furnished by Buyer pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement;

          
          
        
(ii)	     The use by Buyer of the Purchased Assets after the Buyer has
received good and valid title to the Purchased Assets;

          
          
        
(iii)	     The Assumed Liabilities;

          
          
        
(iv)	     All claims, investigations, actions, suits, proceedings, demands,
assessments, judgments, costs, and expenses, including reasonable attorneys' fees and expenses,
incident to the foregoing;

          
          
        
(v)	     Any actions, investigations, actions, suits, proceedings,
demands, assessments, judgments, costs, and expenses, including reasonable attorneys' fees and
expenses (incurred thereon at trial and upon appeal), incident to the foregoing;

          
        
(c)	     Notice.  
  If any party believes that it has suffered or incurred any
Indemnity Loss, that party shall so notify the indemnifying party promptly in writing describing such
loss or expense, the amount thereof, if known, and the method of computation of such Indemnity
Loss, all with reasonable particularity.  If any action at law, suit in equity or administrative action
is instituted by or against a third party with respect to which any party intends to claim any liability
or expense as an Indemnity Loss under this Paragraph 14, such party shall promptly notify the
indemnifying party of such action.

          
        
(d)	     Defense of Claims.  
  The indemnifying party shall have ten (10)
business days after receipt of either notice referred to in Paragraph 14(c) of this Agreement to notify
the indemnified party that it elects to conduct and control any legal or administrative action or suit
with respect to an indemnifiable claim.  If the indemnifying party does not give such notice, the
indemnified party shall have the right to defend, contest, settle or compromise such action or suit in
the exercise of its exclusive discretion, and the indemnifying party shall, upon request from the
Indemnified Person promptly pay the indemnified person in accordance with the other terms and
conditions of this Paragraph 14, the amount of any Indemnity Loss resulting from its liability to the
third party claimant.  If the indemnifying party gives such notice, it shall have the right to undertake,
conduct and control, through counsel of its own choosing (which counsel shall be satisfactory to the
indemnified party in the reasonable judgment of the indemnified party) and at its sole expense, the
conduct and settlement of such action or suit, and the indemnified party shall cooperate with the
indemnifying party in connection therewith; provided, however, that (i) the indemnifying party shall
not thereby permit to exist any lien, encumbrance or other adverse change securing the claims
indemnified hereunder upon any asset of the indemnified party, (ii) the indemnifying party shall not
thereby consent to the imposition of any injunction against the indemnified party without the prior
written consent of the indemnified party, (iii) the indemnifying party shall permit the indemnified
party to participate in such conduct or settlement through counsel chosen by the indemnified party,
but the fees and expenses of such counsel shall be borne by the indemnified party except as provided
in clause (iv) below, and (iv) upon a final determination of such action or suit, the indemnifying
party shall agree promptly to reimburse to the extent required under this Paragraph 14 the
indemnified party for the full amount of any Indemnity Loss resulting from such action or suit and
all reasonable and related expenses incurred by the indemnified party, except fees and expenses of
counsel for the indemnified party incurred after the assumption of the conduct and control of such
action or suit by the indemnifying party.  So long as the indemnifying party is contesting any such
action in good faith, the indemnified party shall not pay or settle any such action or suit.
Notwithstanding the foregoing, the indemnified party shall have the right to pay or settle any such
action or suit, provided that in such event the indemnified party shall waive any right to indemnity
therefor from the indemnifying party and no amount in respect therefor shall be claimed as a
Indemnity Loss under this Agreement.

          
        
(e)	     Cooperation.  
  If requested by the indemnifying party, the indemnified
person shall cooperate with the indemnifying party and its counsel in contesting any claim which the
indemnifying party elects to contest or, if appropriate, in making any counterclaim against the person
asserting the claim, or any cross-complaint against any person, and further agrees to take such other
action as reasonably may be requested by an indemnifying party to reduce or eliminate any loss or
expense for which the indemnifying party would have responsibility, but the indemnifying party will
reimburse the indemnified person for any expenses incurred by it in so cooperating or acting at the
request of the indemnifying party.

          
        
(f)	     Right to Participate.  
  The indemnified party shall afford the
indemnifying party and its counsel (at the indemnifying party's own expense) the opportunity to be
present at, and to participate in, conferences with all persons, including governmental authorities,
asserting any claim against the indemnified party or conferences with representatives of or counsel
for such persons.

          
        
(g)	     Payment of Losses.  
  The indemnifying party shall promptly pay to the
indemnified person in cash the amount of any Indemnity Loss to which the indemnified person is
entitled by reason of the provision of  this Agreement.  Any claim for which indemnification occurs
under this Agreement shall be assigned (without recourse) to the indemnifying party.

          
        
(h)	     Subrogation.  
  In the event of any payment by an indemnifying party
to an indemnified party in connection with any Indemnity Loss, the indemnifying party shall be
subrogated to and shall stand in the place of the indemnified party as to any events or circumstances
in respect of which the indemnified party may have any right to claim against any third party relating
to such event of indemnification.  The indemnified party shall cooperate with the indemnifying party
in any reasonable manner in prosecuting any subrogated claim.

          
        
(i)	     Limitation on Indemnification.  
  Neither Buyer nor Seller shall assert
a claim for an Indemnity Loss pursuant to Paragraph 14 of this Agreement unless and until the
cumulative aggregate of such Indemnity Loss incurred by Buyer or Seller exceeds $50,000, after
which point such party will be obligated to indemnify against all such Indemnity Loss, including the
first $50,000.

          
        
(j)	     Maximum Liability.  
  The total liability of either the Buyer or the Seller for any claim for an Indemnified Loss under Paragraph 14 of this Agreement, or for a breach
of this Agreement, shall not exceed the value of those Shares placed in escrow pursuant to the
Escrow Agreement.  Further, neither party shall be entitled to assert a claim for indemnification
against the other party after sixty (60) days after the date hereof.

          
        
(k)	     Knowledge of Party Seeking Indemnification.  
  Neither party shall
be entitled to seek indemnification from the other party for any matters, claims or facts of which such
party had knowledge prior to entering into this Agreement.

          
        
(l)	     The Buyer and Seller acknowledge and agree that following the
Closing, the indemnification provisions contained in this Paragraph 14 shall be the exclusive
remedies of Buyer and Seller for any claims of the type described in this Paragraph 14, including
without limitation, any breach of the representations and warranties under this Agreement.

          
15.	     Seller's Claims.  
  Buyer acknowledges that Seller intends to liquidate and
dissolve shortly after the consummation of the transactions set forth in this Agreement and to
distribute all of the shares received from Buyer pursuant to this Agreement.  Any claims Seller may
have hereunder may be brought by Seller or by a designee on behalf of the shareholders of Seller.

          
16.	     Non-Compete.  
  To induce Buyer to enter into this Agreement, Seller
covenants and agrees that commencing on the Closing Date and for a period of two years thereafter,
Seller shall not, directly or indirectly, as an owner, shareholder, partner, agent, representative or in
any other manner enter into, or in any manner take an active part in, any business which is or may
be in competition with the business of Buyer within the United States.  Seller expressly
acknowledges that in addition to all rights and remedies at law available to Buyer to enforce the
terms of this Paragraph, Buyer shall have the right to seek and obtain equitable relief, including
injunctive relief, against Seller for violating the terms of this Paragraph 16.

          
17.	     Severability.  
  If any provision of this Agreement or the application of any such
provision to any party or circumstances shall be determined by any court of competent jurisdiction
to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of
such provision to such person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision hereof shall be
enforceable to the fullest extent permitted by law.

          
18.	     Applicable Law.  
  This Agreement shall be governed and construed and
interpreted in accordance with the internal laws of the State of Florida without regard to principles
of conflicts of laws.

          
19.	     Waivers and Notices.  

  Any failure by any party to this Agreement to comply
with any of its obligations, agreement or covenants hereunder may be waived by the Seller in the
case of a default by the Buyer and by the Buyer in the case of a default by the Seller.  All waivers
under this Agreement and all notices, consents, demands, requests, approvals and other
communications which are required or may be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered or mailed certified first class mail, postage prepaid,
return receipt requested:

	 (a)
	 If to the Seller:

	 Copy to:

		 Telident, Inc.
Ten Second Street N.E., Suite 212
Minneapolis, Minnesota 55413	 Brian D. Wenger
Briggs and Morgan, P.A.
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402

	 (b)	 If to the Buyer:

	 Copy to:

		 Teltronics, Inc.
2150 Whitfield Industrial Way
Sarasota, Florida 34243-4046	 John Blair
Blair and Roach
2645 Sheridan Dr.
 Tonawanda, NY 14150

or to such other person or persons at such address or addresses as may be designated by written
notice to the other parties hereunder.

          
20.	     Access to Books and Records Post-Closing.  
  After the Closing, (i) the Seller
shall provide the Buyer full access during normal business hours (upon reasonable prior notice) to
all books and records which are part of the Retained Assets insofar as they relate to any Purchased
Assets or Assumed Liabilities or the conduct of the business after the Closing and (ii) the Buyer shall
provide the Seller full access during normal business hours (upon reasonable prior notice) to all
books and records which are part of the Purchased Assets or which relate to the Purchased Assets,
Assumed Liabilities or the conduct of the business of Seller prior to the Closing.

          
21.	     Entire Agreement.  
  This Agreement, together with the other writings delivered
in connection herewith, embodies the entire Agreement and understanding of the parties hereto and
supersedes all prior agreements or understandings between the parties, oral or written, express or
implied.  This Agreement cannot be amended orally, but only by a writing duly executed by the
parties.

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

          
23.	     Headings.  
  Headings of the Paragraphs in this Agreement are for reference
purposes only and shall not be deemed to have any substantive effect.

          

24.	     Binding Effect, Benefits.  
  This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns; provided, however, that
nothing in this Agreement shall be construed to confer any rights, remedies, obligations or liabilities
on any person other than the parties hereto or their respective successors and assigns.

           
25.	     Expenses.  
  All costs and expenses, including accountant's fees, incurred by
Seller in connection with this Agreement and the transactions contemplated or required hereby,
including, but not limited to, all costs of dissolving the Seller and all costs relating to the Proxy
Statement (the "Transaction Costs"), shall be paid by the Seller at Closing, except that Buyer shall
pay up to a maximum of fifty thousand dollars ($50,000.00) cash and twenty-five thousand (25,000)
additional Shares.  In the event Seller's aggregate Transaction Costs are less than two hundred and
ninety thousand dollars ($290,000.00), fifty percent (50%) of the difference between $290,000.00
and the aggregate of Seller's Transaction Costs will be credited to Seller up to a maximum of twelve
thousand five hundred (12,500) additional Shares.  All costs and expenses incurred by Buyer in
connection with this Agreement and the transactions contemplated or required hereby including, but
not limited to all costs relating to the typesetting, printing, edgarizing, mailing, and distribution of
the Proxy Statement and the Registration Statement (including all supplements and amendments
thereto), and all costs relating to the issuance and distribution of the Shares to the Seller and the
subsequent distribution of such shares to Seller's shareholders, shall be paid by Buyer.  In addition,
Buyer shall pay to Seller after the Closing up to an additional twenty-five thousand dollars
($25,000.00) for certain pending litigation of Seller outstanding as of the date hereof which is
outstanding after the Closing Date, including any legal fees related to such litigation.

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

	 SELLER
	 BUYER

	 Telident, Inc.
	 Teltronics, Inc.

	  By:    /s/   Bruce Senske

	  By:    /s/   Ewen R. Cameron 

	 Bruce Senske	 Ewen R. Cameron, President
and Chief Execuive Officer

----------

EXHIBIT A

ASSUMED LIABILITIES

		The Assumed Liabilities shall be limited to:

	 1.
	 All warranty obligations of Seller specified in the distribution agreements listed in
 Section 6(l) of the Seller's Disclosure Statement and all warranty obligations of Seller under the
Standard Maintenance and Warranty policy attached to Section 6(v) of the Seller's Disclosure Statement.

	 2.	 All liabilities set forth on Seller's balance sheet as of the date of Closing. Such liabilities,
 other than the liability captioned "Deferred Income ­ Maintenance" shall not exceed $400,000, except if caused by increases in trade payables and amounts drawn under
Seller's line of credit to cover Seller's operating expenses and the purchase of inventory (the "Excess") related to receivables and inventory (as reflected on Seller's financial
 statements prepared in accordance with GAAP consistently applied) created after October 31, 1999 in amounts at least equal to two hundred percent (200%) of the Excess.

	 3.	 All obligations under the leases and agreements specified in Section 6(l) of Seller's
Disclosure Statement accruing on and after the Closing Date. 

	  4.	 All deductibles for claims made after the Closing Date under those insurance
policies of Seller for which Buyer has elected, at its option, to be named as an additional insured.

----------

Exhibit B

ISI MOLDS

CPU, Upper
CPU, Lower

CPU, Door

Tablet, Top

Tablet, Bottom

Battery, Upper

Battery, Lower

UUB, Upper

UUB, Lower

UUB, Door

10.4 Display, Front

10.4 Display, Back

----------

Exhibit C

RETAINED ASSETS

		The Retained Assets consist of the following:

	1.
	Cash in two investment accounts at Wells Fargo in excess of $1,100,000.00, which shall be equal to
a minimum of $140,000.00 and which, provided the Assumed Liabilities under item 2 on Exhibit A are equal to or less
than $400,000 (or such higher amount as Buyer is to assume under item 2 on Exhibit A), may be greater than $140,000.00. 

	2.	Seller's minute book, stock record book and similar organizational documents. 

	3.	ISI Molds 

	4.	All corporate insurance policies of Seller and any remaining benefits under the term of such
policies. Seller shall retain any and all refunds or rebates of premiums under Seller's Director and Officer
Liability policy. Refunds or rebates under all other corporate insurance policies are included in the Purchased
Assets of Buyer.

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