Document:

EXHIBIT 10.6

               AGREEMENT OF LOAN ENTERED INTO AS OF JULY 30, 1999

BETWEEN: PRODUCTS POLYART INTERNATIONAL INC., a corporation,
         hereinafter referred to as the

         "LENDER"

AND:     THE GUITRON CORPORATION, having it's head office at 38 Place du
         Commerce, Suite 230, Nuns' Island, Quebec, hereinafter referred
         to as the

         "BORROWER"

NOW THEREFORE IT IS AGREED TO BETWEEN THE PARTIES THAT:

1.00  The preamble is true and correct and forms part of this Agreement.

2.00  The LENDER hereby agrees to lend to the BORROWER, present and accepting,
      the maximum sum of ONE HUNDRED FORTY FIVE THOUSAND DOLLARS ($145,000.00)
      July 30, 1999.

3.00  The loan shall be for a period of two years (2). The BORROWER shall pay
      interest to the LENDER at the rate of 6% per annum. The loan shall be
      payable in full no later than July 31, 2001.

3.01  Interest shall accrue monthly for the first year of the loan agreement and
      be payable July 31, 2001. Thereafter, interest shall be payable monthly
      commencing July 31, 2000.

4.00  The BORROWER shall sign a promissory note in favour of the LENDER
      evidencing the LOAN and the BORROWER shall be entitled to the return of
      the said note at such time as the LOAN has been completely repaid.

5.00  This Agreement shall not be assignable. This Agreement shall enure to the
      benefit of and be binding upon the parties hereto and their respective
      heirs, legal representatives, administrators and successors who agree to
      do and sign all act, deeds and documents as may necessary or desirable to
      give full force and effect to this Agreement.

                                      172
<PAGE>

6.00  The parties acknowledge that they have specifically requested and degree
      that this Agreement be drawn up in English language.

      AND THE PARTIES HAVE SIGNED.

/s/ Richard Duffy                      /s/ France Bergeron Fasano
------------------------------         ------------------------------------
Richard Duffy for                      France Bergeron Fasano for

THE GUITRON CORPORATION                PRODUCTIONS POLYART
                                       INTERNATIONAL INC.

                                      173EXHIBIT 10.7

January 31, 2000

Innovative Products Resources Ltd.
Lachine, Quebec

Attn: Dr. Paul Okulov

                                Service Contract

Whereas The Guitron  Corporation  (Guitron) wishes to engage Innovative Products
Resources Ltd. (IPR) to manage,  direct,  co-ordinate  and supervise the further
development  of the  Guitron  technology  and  the  manufacture  of the  Guitron
instrument and whereas IPR is will to undertake these tasks, be it hereby agreed
that:

This agreement will become effective  February 1, 2000 and will be for a term of
two years.  By mutual  consent this  agreement can be extended for an additional
two years.

IPR  will  be  responsible   for  all  aspects  of  research,   development  and
improvements to the existing technology.

IPR will be responsible for all aspects of the future development of the Guitron
instruments and the manufacture of instruments with the existing  technology and
the  manufacture  of future  instruments  and  products  during the term of this
agreement.

IPR will assist in the  preparation  of all necessary  patents,  trademarks  and
other pertinent filings necessary to protect the proprietary technology and know
how of The Guitron Corporation.

Guitron  will pay a monthly fee of $10,000  plus GST and QST for the term of the
contract.

IPR will work directly with the President in preparing budgets,  personnel, work
schedules and priorities.

From  time to  time,  the  Board of  Directors  of  Guitron  will  evaluate  the
contribution  made by IPR to the commercial  success of the Corporation with the
express intent of providing  compensation for such contribution in the form of a
bonus which may be paid in cash or shares of the Corporation.

                                      174
<PAGE>

Either  party shall be entitled to terminate  this  agreement in the case of the
declared  or admitted  insolvency  or  bankruptcy  of the other  party,  without
notice,  or in the case of the other  party's  failure to fulfill an  obligation
hereunder and to cure such default within 30 days of written notice.

IPR recognizes that during the course of providing its services,  it will become
privy to information  relating to the business and financial affairs of Guitron,
its customers  and  suppliers,  its costing and pricing of the products,  all of
which  constitute  confidential  and  proprietary  information  which Guitron is
entitled to protect.  IPR agrees and  undertakes  that it will not  disclose any
such  information to any third party for any reason  whatsoever  except for such
information relating to the performance of its contracted activities.

During the  course of the  agreement,  certain  proprietary  technology  will be
developed and expanded.  All such technology and know how shall remain or become
the  property of Guitron  and as such will not be  disclosed  except  where such
disclosure relates to the performance of IPR's activities under this agreement.

Upon termination of this agreement,  for any reason, IPR will deliver to Guitron
all  information  and data, in whatever  form,  which IPR has in its  possession
relating to Guitron or to the products.

IPR is an independent contractor, and is not a partner,  co-venturer or agent of
Guitron.  IPR is not  authorized  to enter into any  contractual  agreements  on
behalf of Guitron,  unless specifically  authorized and such authority shall not
be unreasonably withheld.

This agreement  constitutes the entire  agreement  between the parties as to the
subject matter hereof.

This  agreement is to IPR and may not be assigned or  transferred by IPR without
the express written consent of Guitron. Subject to the foregoing, this agreement
shall be binding upon and enure to the benefit of the respective  successors and
assigns of the parties.

The parties  acknowledge  that they have  required  that this  agreement and all
related documents be prepared in English.

GUITRON CORPORATION                    INNOVATIVE PRODUCTS RESOURCES LTD.

By: /s/ Richard Duffy                  By: /s/ Paul Okolov
    ---------------------------            -------------------------------
        Richard Duffy                          Paul Okolov

                                      175<PAGE>   1

                            ASSET PURCHASE AGREEMENT

                               Dated May 19, 2000

                                 By and Between

                                    8X8, INC.

                                    as Seller

                                       and

                                INTERLOGIX, INC.

                                    as Buyer

<PAGE>   2

                            ASSET PURCHASE AGREEMENT

            ASSET PURCHASE AGREEMENT (the "Agreement") dated May 19, 2000 by and
between 8x8, INC., a Delaware corporation ("Seller"), and INTERLOGIX, INC., a
Delaware corporation ("Buyer").

                                   Background

            In addition to its other lines of business, Seller is engaged in the
design, development, manufacture and sale of products, (the "Products") used in,
and in providing services for, the remote surveillance, security and
telemedicine industries (the "Business"). Seller desires to sell and transfer to
Buyer and Buyer desires to purchase from Seller certain of the assets of Seller
comprising, used in or associated with the Business, upon the terms and subject
to the conditions set forth in this Agreement.

            In consideration of the mutual covenants contained herein and
INTENDING TO BE LEGALLY BOUND hereby, the parties hereto agree as follows:

                                    ARTICLE I

                                 THE TRANSACTION

            1.1. Sale and Purchase of Assets. Seller hereby sells and transfers
to Buyer, and Buyer hereby purchases from Seller, for the purchase price
specified in Section 1.2, effective as of the date hereof and subject to the
terms and conditions hereof, all of the property and assets of Seller
exclusively used or held for use in the Business that are set forth as follows,
as the same exist on the date hereof (collectively, the "Purchased Assets"),
free and clear of any mortgage, attachment, lien, pledge, option, title
retention, conditional sale or other security interest, restriction, claim,
charge or other encumbrance of any kind (each, a "Lien"), except Permitted
Encumbrances (as defined in Section 2.11):

                (a) Accounts Receivable. All of Seller's trade accounts and
other documents and notes receivable in respect of products shipped or services
rendered (the "Accounts Receivable").

                (b) Inventories. Seller's finished goods inventory, work in
process, raw materials, components and supplies (the "Inventories"), as set
forth in Schedule 1.1(b) as of the close of business on May 9, 2000; provided,
however, that Buyer may decline to purchase any or all raw materials or
components contained in the Inventories, to the extent that such raw materials
or components (i) are not usable in the manufacture of the "RSM" line of current
Products or (ii) exceed Buyer's projected requirements therefor for the period
ending on the first anniversary of the Closing Date, as shall be determined by
Buyer in its reasonable discretion within 30 days following the Closing Date and
after consulting with EFA Corporation (the "Contract Manufacturer").
Concurrently with such determination, the Contract Manufacturer shall determine
the fair market value as of the Closing Date of any raw materials or components
contained in Inventories to be purchased hereunder and the valuation of such raw
materials or

<PAGE>   3

components for the purpose of determining the Purchase Price shall be 90% of
such fair market value.

                (c) Technical Information. All of Seller's drawings, plans,
designs, specifications, instructions, models, blueprints, records, data,
diagrams, schematics, circuit drawings, bills of materials, manufacturing books,
manufacturing flows, test data and instructions, software ROMs, development
tools, documents relating to training and to regulatory testing and approvals
and other information (the "Technical Information".)

                (d) Machinery and Equipment. All of Seller's machinery, tooling
and equipment used in the manufacture, production, assembly, handling, testing,
distribution and sales of products, listed on Schedule 1.1(d), together with the
spare parts inventories and maintenance supplies pertaining thereto.

                (e) Contract Rights and Miscellaneous Intangibles. All rights,
title and interest of Seller in, under and to the agreements and contracts of
Seller set forth on Schedule 1.1(e) (the "Assumed Contracts"), and all
copyrights, customer lists, suppliers lists, computer tapes, existing
governmental permits and licenses (to the extent transfer is permitted by law),
and sales order backlog and commitments to Seller pertaining to the Purchased
Assets and the Business and operation and use thereof, and all other intangibles
related thereto.

                (f) Records. All books, records, files, documents (including
originally executed copies of all Contracts), correspondence, memoranda, forms,
lists, plats, new product development materials, creative materials, catalogues,
brochures, advertising and promotional materials, studies, reports, whether in
hard copy or magnetic format, in each instant, to the extent material to the
conduct of, the Business.

                (g) Miscellaneous Supplies and Prepaid Items. All printed
materials, packaging materials, cartons and shipping containers, graphics, sales
and advertising materials and all prepaid items associated with the Business.

            1.2. Purchase Price.

                (a) Determination and Payment. The purchase price to be paid to
Seller by Buyer for the Purchased Assets (the "Purchase Price") shall be (i)
$4,750,000 (the "Closing Amount"), payable in cash at the Closing as provided in
Section 1.5 hereof and (ii) an additional amount, if payable to Seller,
determined as provided in Section 1.6(c) (the "Adjustment Amount"), plus the
assumption of those specific liabilities of Seller as hereinafter provided.

                (b) Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets as set forth on Schedule 1.2(b). Seller and
Buyer each will report the federal, state and local income and other tax
consequences of the purchase and sale contemplated hereby in a manner consistent
with such allocation and will not take any position inconsistent therewith upon
examination of any tax return, in any refund claim, in any litigation, or
otherwise.

                                      -2-
<PAGE>   4

            1.3. Assumption of Liabilities. At the time of Closing, Buyer will
assume and agree to pay and discharge (i) the trade accounts payable of Seller
related to the Business as set forth in the Closing Net Asset Statement (such
trade accounts payable as of the close of business on May 9, 2000 being set
forth on Schedule 1.3), (ii) obligations of Seller under the unfilled purchase
orders listed on Schedule 2.8(a), and (iii) all liabilities and obligations in
connection with the operation of the Business to the extent arising on or after
the Closing Date, including, without limitation, all such liabilities and
obligations of Seller as a party to the Assumed Contracts and all liabilities
relating to any Products manufactured after the Closing Date (other than any
such liabilities arising out of or in connection with the Seller's obligations
or actions pursuant to or in connection with the License Agreement or the Supply
Agreement) (such trade payables and liabilities and obligations, the "Assumed
Liabilities"). Buyer shall assume no other liabilities of Seller, whether or not
relating to the Purchased Assets (all such other liabilities, the "Excluded
Obligations"). Without limiting the foregoing, in no event shall the Assumed
Liabilities include (i) any liability for Taxes of the Seller or any other
person related to the operation of the Business or ownership of the Purchased
Assets prior to the Closing; (ii) any liabilities relating to any Products
manufactured prior to the Closing Date; (iii) any other liability arising out of
or relating to the Business or its operations prior to the Closing Date, other
than the trade account payables set forth on Schedule 1.3; or (iv) any liability
arising under contracts other than the Assumed Contracts.

            1.4. Consent of Third Parties. On the Closing Date, Seller shall
assign to Buyer, and Buyer shall assume, the Assumed Contracts and the Permits
which are to be transferred to Buyer as provided in this Agreement by means of
an Assignment and Assumption Agreement. To the extent that the assignment of all
or any portion of any Assumed Contract or Permit shall require the consent of
the other party thereto or any other third party, this Agreement shall not
constitute an agreement to assign any such Assumed Contract or Permit included
in the Purchased Assets if an attempted assignment without any such consent
would constitute a breach or violation thereof. In order, however, to provide
Buyer the full realization and value of every Assumed Contract and Permit of the
character described in the immediately preceding sentence, Seller agrees that on
and after the Closing, it will, at the request and under the direction of Buyer,
in the name of Seller or otherwise as Buyer shall specify, take all reasonable
actions (including without limitation the appointment of Buyer as
attorney-in-fact for Seller to proceed at Buyer's sole cost and expense) and do
or cause to be done all such things as shall in the reasonable opinion of Buyer
or its counsel be necessary or proper (a) to assure that the rights of Seller
under such Assumed Contracts and Permits shall be preserved for the benefit of
Buyer and (b) to facilitate receipt of the consideration to be received by
Seller in and under every such Assumed Contract, which consideration shall be
held for the benefit of, and shall be delivered to, Buyer. Nothing in this
Section 1.4 shall in any way diminish Seller's obligations hereunder to obtain
all consents and approvals and to take all such other actions as are necessary
to enable Seller to convey or assign good and marketable title free and clear of
Liens (other than Permitted Exceptions) to all the Purchased Assets to Buyer.

            1.5. Closing. The closing of the sale and purchase of the Purchased
Assets (the "Closing") shall take place by telefax or mail on the date hereof
(the "Closing Date").

                                      -3-
<PAGE>   5

            1.6. Closing Net Asset Statement.

                (a) Preparation and Review of Closing Net Asset Statement.
Promptly following the Closing Date, Buyer shall cause to be prepared a net
asset statement of the Business as at the opening of business on the Closing
Date (the "Closing Net Asset Statement"), which shall be prepared on a basis
consistent with those accounting principles and procedures employed in the
preparation of the Financial Statements as set forth on Schedule 1.6(a) (the
"Applicable Principles"), except that raw materials and components included in
Inventories shall be valued at 90% of the fair market value thereof as of the
Closing Date, as determined pursuant to Section 1.1(b), and including only those
assets purchased and liabilities assumed hereunder. Seller will cooperate with
Buyer in Buyer's preparation of the Closing Net Asset Statement and provide full
access to those books and records of Seller (if any) not in the possession of
Buyer. Buyer will deliver copies of the Closing Net Asset Statement to Seller
promptly following the preparation thereof, but in any event within 30 days
after the Closing Date. Within 15 days of receipt of the Closing Net Asset
Statement, Seller shall propose to Buyer such adjustments (if any) therein as
shall in its judgment be required to cause the Closing Net Asset Statement to
reflect fairly those items required to be included therein, in accordance with
the Applicable Principles. Buyer will cooperate with Seller in Seller's review
of the Closing Net Asset Statement and provide full access to those books and
records relating to the Business not in Seller's possession.

                (b) Dispute Resolution. Any dispute (and only those items in
dispute) concerning the Closing Net Asset Statement which cannot be resolved by
the parties and their respective independent accountants within 15 days of
Buyer's receipt of Seller's proposed adjustments to the Closing Net Asset
Statement will be submitted no later than 30 days after such receipt for
determination to a mutually acceptable independent accounting firm (the
"Arbiter"), whose decision shall be final and binding on the parties. Prior to
referring the matter to the Arbiter, the parties shall agree on the procedures
to be followed by the Arbiter (including procedures with regard to the
presentation of evidence). If the parties are unable to agree upon procedures
within the time prescribed for referral of the dispute to the Arbiter, the
Arbiter shall establish such procedures, giving due regard to the intention of
the parties to resolve disputes as quickly, efficiently and inexpensively as
possible, which procedures may be, but need not be, those proposed by either
party. The determination by the Arbiter shall be based solely on presentations
by Seller and Buyer and shall not involve independent review. In resolving any
disputed item, the Arbiter shall not assign a value thereto in excess of the
greater value or less than the lesser value for such item respectively claimed
by the parties. The fees and expenses of the Arbiter will be borne pro rata by
the respective parties based upon the percentage that the sum of the amounts by
which a party's claims are reduced by the Arbiter bears to the aggregate amount
by which the claims of both parties are so reduced.

                (c) Calculation of Adjustment Amount. The Adjustment Amount
shall be equal to $750,000, minus the amount (the "Deduction Amount"), if any,
by which the sum of (i) the amount of the Inventories (less any raw materials or
components which Buyer elects not to purchase pursuant to Section 1.1(b)), (ii)
the amount of any unused royalties prepaid to Formula Consultants Incorporated
("Consultants") and (iii) the amount of the accounts receivable minus the amount
of any stated reserve and of the accounts payable, each as shown upon the Final
Statement, is less than $1,500,000. If such sum equals or exceeds $1,500,000,
the

                                      -4-
<PAGE>   6

Adjustment Amount shall be equal to $750,000 plus the amount by which such sum
exceeds $1,500,000. If the Adjustment Amount is greater than zero, then the
Adjustment Amount shall be paid to Seller by Buyer. If however, the Adjustment
Amount is negative, Seller shall pay to Buyer the amount by which the Deduction
Amount exceeds $750,000.

                (d) Payment of Adjustment Amount. As promptly as is commercially
reasonable, but in no event later than 10 days after the parties' agreement upon
the Closing Net Asset Statement or the Arbiter's final determination thereof, as
the case may be (such statement in either case, the "Final Statement"), the
Adjustment Amount shall be paid to the party by wire transfer pursuant to
instructions delivered to the party paying the Adjustment Amount at least three
days prior to the date payment of the Adjustment Amount is required.

            1.7. Deliveries and Proceedings at Closing. Contemporaneously with
the execution of this Agreement, at the Closing:

                (a) Deliveries to Buyer. Seller will deliver or cause to be
delivered to Buyer:

                    (i) a bill of sale and instrument of assignment to the
Purchased Assets, duly executed by Seller;

                    (ii) assignments of all transferable or assignable Assumed
Contracts, Permits, and warranties relating to the Purchased Assets, each duly
executed and, where necessary or desirable, in recordable form;

                    (iii) the transition services agreement (the "Transition
Services Agreement") duly executed by Seller;

                    (iv) the technology license agreement (the "License
Agreement") duly executed by Seller;

                    (v) the development agreement (the "Development Agreement")
duly executed by Seller;

                    (vi) the supply agreement (the "Supply Agreement") duly
executed by Seller;

                    (vii) certified resolutions evidencing the authority of
Seller as set forth in Section 2.2 hereof;

                    (viii) all agreements, records and other documents required
by this Agreement;

                    (ix) a receipt for the payment of the Closing Amount duly
executed by Seller;

                    (x) the letter between Buyer and Seller with respect to
Advanced Technology Video, Inc.; and

                                      -5-
<PAGE>   7

                    (xi) all such other instruments of conveyance as shall, in
the reasonable opinion of Buyer and its counsel, be necessary to vest in Buyer
good, valid and marketable title to the Purchased Assets in accordance with
Section 1.1 hereof, including without limitation, time-stamped instruments and
releases, in form and substance satisfactory to Buyer, evidencing release and
removal of all Liens on the Purchased Assets other than Permitted Encumbrances.

                (b) Deliveries By Buyer to Seller. Buyer will deliver to Seller:

                    (i) wire transfer of immediately available funds in an
amount equal to the Closing Amount;

                    (ii) an assumption of liabilities, duly executed by Buyer;

                    (iii) the Transitional Services Agreement, duly executed by
Buyer;

                    (iv) the License Agreement, duly executed by Buyer;

                    (v) the Development Agreement, duly executed by Buyer; and

                    (vi) the Supply Agreement, duly executed by Buyer.

                                   ARTICLE II

                    REPRESENTATIONS AND WARRANTIES OF SELLER

            Seller hereby represents and warrants to Buyer as follows:

            2.1. Organization and Good Standing. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own or lease its properties and assets (including all of the
Purchased Assets) as now owned or leased and to carry on its business as and
where now being conducted and to enter into this Agreement and each of the other
agreements to be entered into in connection with this Agreement (this Agreement
and each such other agreement, the "Transaction Documents"), including the
Transitional Services Agreement, the Development Agreement, the Supply
Agreement, and the License Agreement, and to perform its obligations under each
of the Transaction Documents.

            2.2. Authorization and Enforceability. The execution, delivery and
performance of each of the Transaction Documents by Seller have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement has been duly executed and delivered by Seller and constitutes the
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms. When delivered at the Closing, each of the other
Transaction Documents will be the legal, valid and binding obligation of Seller,
enforceable in accordance with its terms.

                                      -6-
<PAGE>   8

            2.3. No Violation of Laws or Agreements. The execution and delivery
of the Agreement does not, and the execution and delivery of each of the other
Transaction Documents will not, and the consummation of the transactions
contemplated hereby and thereby and the compliance with the terms, conditions
and provisions of each of the Transaction Documents by Seller will not, (a)
contravene any provision of the certificate of incorporation or bylaws of
Seller; (b) violate any provision of any law, rule or regulation or any order,
judgment or decree applicable to Seller, (c) with or without the giving of
notice or the lapse of time, or both, constitute a breach of or default under
any of the terms, conditions or provisions of any indenture, mortgage, loan or
credit agreement or any other agreement or instrument to which Seller is a party
or by which any of its assets may be bound or affected; (d) result in the
creation or imposition of any Lien upon any of the Purchased Assets or give to
others any interests or rights therein; (e) result in the maturation or
acceleration of any Assumed Liability of Seller (or give others the right to
cause such a maturation or acceleration); or (f) result in the termination of or
loss of any right (or give others the right to cause such a termination or loss)
under any Assumed Contract.

            2.4. Financial Statements. The books of account and related records
of Seller fairly and accurately reflect in reasonable detail its assets,
liabilities and transactions relating to the Business. Attached hereto as
Schedule 2.4 are the following financial statements of the Business
(collectively, the "Financial Statements"): (a) a net asset statement at March
30, 2000; (b) quarterly statements of income for the four quarters ended March
30, 2000 and (c) quarterly statements of revenue for the seven quarters ended
March 30, 2000. The Financial Statements (i) have been prepared in accordance
with the books and records of Seller, (ii) fairly present the financial
condition of the Business, to the extent of the assets acquired and liabilities
assumed hereunder, as at their respective dates and its results of operations
for the periods covered thereby, and (iii) have been prepared in accordance with
the Applicable Principles. All references in this Agreement to the "Net Asset
Statement" shall mean the net asset statement of the Business as of March 30,
2000 and to the "Net Asset Statement Date" shall mean March 30, 2000.

            2.5. Undisclosed Liabilities. To the knowledge of Seller's officers,
who shall be deemed to include Jonathan Foster, Seller does not have any
liability or obligation with respect to the Business of a type or amount which
would be required to be disclosed on a balance sheet prepared in accordance with
generally accepted accounting principles (whether due or to become due), except
liabilities or obligations (a) reflected in the Net Asset Statement; (b)
incurred in the ordinary course of business not in excess of $10,000 since the
Net Asset Statement Date and reflected in its books and records or (c) disclosed
on Schedule 2.5.

            2.6. No Changes. Since the Net Asset Statement Date, Seller has
conducted the Business only in the ordinary course of business consistent with
past practice. Without limiting the generality of the foregoing sentence, since
the Net Asset Statement Date, with respect to the Business, there has not been
any change in the financial condition, assets, liabilities, prospects, net
worth, earning power or business of the Business, except changes in the ordinary
course of business, none of which, individually or in the aggregate, has had or
will have a material adverse effect on the results of operations or the
financial condition of the Business, taken as a whole (a "Material Adverse
Effect");

                                      -7-
<PAGE>   9

            2.7. No Pending Litigation or Proceedings. There are no (nor during
the past five years have there been any) actions, suits, investigations or
proceedings arising out of or in connection with the Business, pending or, to
the knowledge of Seller's officers, who shall be deemed to include Jonathan
Foster, threatened, at law or in equity, by or before any court or governmental
department, agency or instrumentality or by any third party, (i) against or
affecting Seller, the Business or the Purchased Assets, (ii) which seek to
enjoin or obtain damages in respect of the transactions contemplated hereby,
(iii) with respect to which there is a reasonable likelihood of a determination
which would prevent Seller from consummating the transactions contemplated
hereby; or (iv) which seek to impose any liability arising out of or in
connection with the Business on the Seller or any of its officers or directors,
the Business or the Purchased Assets under any environmental laws or theories of
liability or with respect to the on-site or off-site disposal, release or
emission of any hazardous, toxic or polluting material, substance or waste
("Hazardous Material") (collectively, "Proceedings"). None of the foregoing
Proceedings, if adversely determined against Seller, its directors or officers
as such, or any other person, could reasonably be expected to result in a loss
to Seller, individually or in the aggregate, in excess of $25,000. To the
knowledge of Seller's officers, who shall be deemed to include Jonathan Foster,
there is no basis for any Proceeding which, if adversely determined against
Seller, its directors or officers as such, or any other person, could reasonably
be expected to cost or result in a loss to Seller, individually or in the
aggregate, in excess of $25,000. There are currently no outstanding judgments,
decrees or orders of any court or any governmental or administrative agency
against or affecting Seller which relate to or arise out of the conduct of the
Business or the ownership, condition or operation of the Business or Purchased
Assets.

            2.8. Contracts; Compliance.

                (a) Schedule 2.8(a) sets forth each contract or agreement
outstanding as of May 5, 2000 relating exclusively to the Business to which
Seller is a party.

                (b) Except as set forth in Schedule 2.8(b):

                    (i) Each Assumed Contract was entered into in a bona fide
transaction in the ordinary course of business and is legal, valid, binding and
enforceable and in full force and effect. Seller has heretofore delivered to
Buyer complete and correct copies of the Assumed Contracts. There is not under
any Assumed Contract: (A) any existing default by Seller or, to the knowledge of
Seller's officers, who shall be deemed to include Jonathan Foster, by any other
party thereto, or (B) any event which, after notice or lapse of time or both,
would constitute a default by Seller or, to the knowledge of Seller's officers,
who shall be deemed to include Jonathan Foster, by any other party, or result in
a right to accelerate or terminate or result in a loss of rights of Seller,
which default or event could, individually or in the aggregate, reasonably be
expected to result in a liability or cost to Seller in excess of $5,000.

                    (ii) There are no outstanding sales contracts or commitments
of Seller which upon completion or performance thereof could reasonably be
expected to result in levels of gross margin which are 75% or less of the levels
achieved on comparable products since the Net Asset Statement Date; and

                                      -8-
<PAGE>   10

                    (iii) Seller is not under any liability or obligation (other
than those relating to product warranties) with respect to the return of
inventory or merchandise in the possession of customers or other persons
(including without limitation liabilities or obligations with respect to
consignment sales), except liabilities under any individual contract or
agreement that do not exceed $5,000 and that in the aggregate do not exceed
$50,000.

            2.9. Compliance with Laws. Schedule 2.9 sets forth a list of all
material permits, certificates, licenses, orders, registrations, franchises,
authorizations and other approvals from all federal, state, local and foreign
governmental and regulatory bodies held by Seller required under all laws, rules
and regulations in connection with the Business (collectively, the "Permits").
All Permits are in full force and effect and Seller is in compliance with the
terms and conditions thereof except where non-compliance would not have a
Material Adverse Effect. To the knowledge of Seller's officers, who shall be
deemed to include Jonathan Foster, Seller has complied with all applicable
statutes, rules, regulations and orders (including without limitation those
relating to environmental protection, occupational safety and health, equal
employment practices and fair trade practices) relating to the Business. No
notice, citation, summons or order has been issued, no complaint has been filed,
no penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged (a)
violation by Seller of any law, ordinance, rule, regulation or order of any
governmental entity relating to the Business or (b) failure by Seller to have
any permit, certificate, license, approval, registration or authorization
required in connection with the Business.

            2.10. Consents. No consent, approval or authorization of, or
registration or filing with, any person, including any governmental authority or
other regulatory agency, is required in connection with the execution and
delivery of any Transaction Document or the consummation of the transactions
contemplated thereby by Seller except such as have been previously made or
obtained.

            2.11. Title. Seller has good and marketable title (fee or leasehold)
to all of the Purchased Assets; and none of the Purchased Assets is subject to
any Lien, except (a) minor imperfections of title, none of which, individually
or in the aggregate, materially detracts from the value of or impairs the use of
the affected properties or impairs any operations of Seller or (b) Liens for
current taxes not yet due and payable (collectively, "Permitted Encumbrances").

            2.12. Condition of Fixed Assets. The machinery, equipment, tools and
other tangible assets included among the Purchased Assets are in good operating
condition and repair, reasonable wear and tear excepted, and are suitable for
the purposes for which they are used in the Business.

            2.13. Products Liability. There are no claims pending or, to the
knowledge of Seller's officers, who shall be deemed to include Jonathan Foster,
threatened against Seller with respect to any product liability or any similar
claim that relates to any product manufactured or sold by Seller in the conduct
of the Business or any liabilities of Seller with respect to any claim for the
breach of any express or implied product warranty or any other similar claim
with respect to any product manufactured or sold by Seller in the conduct of the
Business, other than any claim based on standard warranty obligations (to
repair, replace or refund) made by Seller in the

                                      -9-
<PAGE>   11

ordinary course of business. Schedule 2.13 sets forth Seller's standard warranty
and return policies.

            2.14. Environmental Matters. In addition to the representation in
Section 2.9 (as it relates to environmental matters), Seller has no known
liability or responsibility under any environmental law, rule or regulation or
any common law claim regarding any environmental matter, the management,
disposal or release of Hazardous Materials, or pollution relating to the
Business, and Seller has received no notice of or threat regarding any such
potential responsibility or liability, whether relating to on-site or off-site
liability or responsibility.

            2.15. Brokerage. Neither Seller nor any shareholder thereof has made
any agreement or taken any other action which might cause Buyer to be obligated
to pay any broker's fee or commission as a result of the transactions
contemplated hereunder.

            2.16. Payments. Neither Seller nor any director, officer, agent,
employee or other person acting on behalf of Seller, has, directly or
indirectly, paid any fees, commissions or other sums of money or delivered any
items of property, however characterized, to any finders, agents, customers,
government officials or other parties, in the United States or in any other
country, which in any manner are related to the Business, and which have
violated any federal, state or local laws of the United States or any other
country or territory having jurisdiction over Seller. Neither Seller nor any
director, officer, agent, employee or other person acting on behalf of Seller,
have accepted or received any unlawful contributions, payments, gifts or
expenditures in connection with the Business. Seller has not participated,
directly or indirectly, in any boycotts or similar practices in connection with
the Business.

            2.17. Transactions with Related Parties. Except in amounts less than
$5,000, no Related Party:

                (a) has any contractual or other claim relating to the Business,
express or implied, of any kind whatsoever against Seller;

                (b) had, since April 15, 2000, any interest in any property or
assets used by Seller in the Business; or

                (c) has been engaged, since March 1, 1998, in any other
transaction with Seller relating to the Business.

As used herein, a "Related Party" means Seller, any of its officers or directors
or any person or entity under the control of, controlled by, or under common
control with, Seller or any of such officers or directors, or any relative of
any such person by blood, marriage or adoption not more remote than first
cousin, or any business or entity in which, to the knowledge of Seller's
officers, who shall be deemed to include Jonathan Foster, any such person has
any direct or material indirect interest.

            2.18. Inventory. All finished goods contained in the Inventories are
valued at the lower of cost or market, the cost thereof being determined on a
first-in, first-out basis and consist of items of a quality and quantity usable
and saleable in the ordinary course of business,

                                      -10-
<PAGE>   12

except to the extent of any reserves for slow moving or obsolete inventory set
forth in the Closing Net Asset Statement.

            2.19. Accounts Receivable. To the knowledge of Seller's officers,
who shall be deemed to include Jonathan Foster, all of the Accounts Receivable
represent amounts receivable for merchandise actually delivered or services
actually provided (or, in the case of non-trade accounts or notes represent
amounts receivable in respect of other bona fide business transactions), have
arisen in the ordinary course of business. Schedule 2.19 lists for the fiscal
year ending March 30, 2000, the amounts of accounts receivable written off and
the amount of Seller's provisions for doubtful accounts.

            2.20. Relationships with Customers and Suppliers.

                (a) Seller is not currently, nor has it been since the Net Asset
Statement Date, involved in any dispute involving $10,000 or more with any
customers of the Business and has not received any notice since the Net Asset
Statement Date from such customer to the effect that such customer intends to
materially reduce or cease doing business with Seller; and

                (b) Seller is not currently, nor has it been since the Net Asset
Statement Date, involved in any dispute with respect to the Business involving
$10,000 or more with its suppliers, and Seller has not received any notice since
the Net Asset Statement Date from any of the top ten largest suppliers to the
Business to the effect that the supplier intends to materially reduce or cease
doing business with Seller.

            2.21. Principal Customers. Schedule 2.21 sets forth a true and
complete list of all customers of the Business who in the aggregate accounted
for more than 65% of the revenues of the Business, and a list of all customers
of the Business who individually accounted for more than 5% of the Business, for
the fiscal year ended March 30, 2000.

            2.22. Warranties. Schedule 2.22 sets forth, with respect to the
Business, the terms of Seller's standard warranties which are the warranties
given to each such customer of Seller.

            2.23. Return of Shipments. Since the Net Asset Statement Date, there
have been no cancellations of purchase orders or contracts by customers of the
Business, or shipments of the products of the Business which have been returned
by such customers, or which have been authorized to be so returned, or the
acceptance of which has been rejected by such customers for any reason
whatsoever except for such returns, cancellations and rejections of items
occurring in the ordinary course of business.

            2.24. Customer Information. Seller has sole and exclusive ownership,
free and clear of any Liens, of all customer lists, customer contact
information, customer correspondence and customer licensing and purchasing
histories relating to current and former customers of the Business (the
"Customer Information"). No person other than Seller possesses any claims or
rights with respect to use of the Customer Information.

                                      -11-
<PAGE>   13

            2.25. RSM-PC Agreement. Exhibit C attached hereto is a true and
complete copy of the agreement (the "RSM-PC Agreement") dated June 28, 1999, as
amended, by and between Seller and Consultants. The RSM-PC Agreement is the only
agreement between Consultants and Seller and is assignable to Buyer pursuant to
Section 1.1(e) of this Agreement. Seller has paid to Consultants the minimum
royalties, including the Prepaid Sublicense Fee, as defined therein, required to
be paid to Consultants over the full term (including any permitted renewal
term(s)) of the RSM-PC Agreement.

                                   ARTICLE III

                     REPRESENTATIONS AND WARRANTIES OF BUYER

            Buyer hereby represents and warrants to Seller as follows:

            3.1. Organization and Good Standing. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.

            3.2. Corporate Power and Authority. Buyer has all requisite
corporate power and authority to own or lease its properties and assets as now
owned or leased, to carry on its business as and where now being conducted and
to make, execute, deliver and perform each of the Transaction Documents.

            3.3. Due Authorization. The execution, delivery and performance of
each of the Transaction Documents by Buyer have been duly authorized by all
necessary corporate action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
When delivered at the Closing, each of the other Transaction Documents will be
the legal, valid and binding obligation of Buyer, enforceable in accordance with
its terms.

            3.4. No Violation of Laws or Agreements. The execution and delivery
of this Agreement does not, the execution and delivery of each of the other
Transaction Documents will not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms, conditions and
provisions of the Transaction Documents by Buyer will not, (a) contravene any
provision of the certificate of incorporation or bylaws of Buyer; (b) violate
any provision of law, rule or regulation or any order, judgment or decree
applicable to Buyer; or (c) with or without the giving notice or the lapse of
time, or both, constitute a breach of or default under any of the terms,
conditions or provisions of any agreement or instrument to which Buyer is a
party or by which any of its assets may be bound or affected.

            3.5. No Pending Litigation or Proceedings. There are no actions,
suits, investigations or proceedings pending or, to Buyer's knowledge,
threatened, at law or in equity, by or before any court or governmental
department, agency or instrumentality, (i) which seek to enjoin or obtain
damages in respect of the transactions contemplated hereby, or (ii) with respect
to which there is a reasonable likelihood of a determination which would prevent
Buyer from consummating the transactions contemplated hereby.

                                      -12-
<PAGE>   14

            3.6. Consents. No consent, approval or authorization of, or
registration or filing with, any governmental authority or other regulatory
agency is required in connection with the execution and delivery of the
Transaction Documents or the consummation of the transactions contemplated
thereby by Buyer, except such as have been made or obtained.

            3.7. Brokerage. Neither Buyer nor any direct or indirect shareholder
of Buyer has made any agreement or taken any other action which might cause
anyone to become entitled to a broker's fee or commission as a result of the
transactions contemplated hereunder, other than certain payments to be made to
Sandra Jones by Buyer.

                                   ARTICLE IV

                          SURVIVAL AND INDEMNIFICATION

            4.1. Survival of Representations and Warranties. The
representations, warranties, covenants and agreements of Seller and Buyer
contained in this Agreement, and all statements contained in any exhibit or
schedule hereto or any certificate, or other document delivered pursuant to this
Agreement, shall be deemed to constitute representations, warranties, covenants
and agreements of the respective party delivering the same. Subject to Section
4.5, all such representations, warranties, covenants and agreements shall
survive the consummation of the transactions contemplated hereby.

            4.2. Indemnification.

                (a) By Seller. Seller will indemnify and hold harmless Buyer
against any (i) losses, liabilities, damages, actions, fines, penalties, demands
or claims (hereinafter referred to collectively as "Losses" and individually as
a "Loss"), insofar as such Losses arise out of the breach of any representation
or warranty of Seller contained herein or in any certificate to be furnished by
Seller pursuant hereto; (ii) Losses with respect to any and all Excluded
Obligations; and (iii) any actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses incurred in investigating,
preparing or defending any litigation or proceeding, commenced or threatened)
incident to any of the foregoing or the enforcement of this Section.

                (b) By Buyer. Buyer will indemnify and hold harmless Seller
against any (i) Losses, insofar as such Losses arise out of the breach of any
representation or warranty of Buyer contained herein or in any certificate to be
furnished by Buyer pursuant hereto; (ii) Losses with respect to any and all
Assumed Liabilities; and (iii) actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses incurred in investigating,
preparing or defending any litigation or proceeding, commenced or threatened)
incident to any of the foregoing or the enforcement of this Section.

            4.3. Indemnification Procedure. Promptly after receipt by a party
hereto (the "Indemnified Party") of notice of any claim by a third party which
might give rise to indemnification hereunder, the Indemnified Party shall notify
the other party or parties hereto (the "Indemnifying Party") in writing
specifying, in reasonable detail, the nature and amount of the claim and shall
include supporting documentation to the extent available. The Indemnifying

                                      -13-
<PAGE>   15

Party shall be entitled to assume and have the sole control of the defense and
settlement of such action or claim; provided, however, that:

                (a) the Indemnified Party shall be entitled to participate in
the defense of such claim and, in connection therewith, to employ counsel at its
own expense;

                (b) without the prior written consent of the Indemnified Party,
which shall not be unreasonably withheld, the Indemnifying Party shall not
consent to the entry of any judgment or enter into any settlement;

                (c) in the event the Indemnifying Party elects to assume control
of the defense of any such action in accordance with the foregoing provisions,
(i) the Indemnifying Party shall not be liable to the Indemnified Party for any
legal fees, costs and expenses incurred by the Indemnified Party in connection
with the defense thereof and (ii) the Indemnified Party shall fully cooperate
with the Indemnifying Party in such defense. If the Indemnifying Party does not
assume control of the defense of such claim in accordance with the foregoing
provisions, the Indemnified Party shall have the right to defend such claim, in
which case the Indemnifying Party shall pay all reasonable costs and expenses of
such defense. The Indemnified Party shall conduct such defense in good faith and
shall have the right to settle the matter with the prior written consent of the
Indemnifying Party which shall not be reasonably withheld; and

                (d) notwithstanding an election by the Indemnifying Party to
assume the defense of such action, the Indemnified Party shall have the right to
employ separate counsel and to participate in the defense of such action, and
the Indemnifying Party shall bear the reasonable fees, costs and expenses of
such separate counsel, if (a) the use of counsel chosen by the Indemnifying
Party to represent the Indemnified Party would present such counsel with a
conflict of interest; (b) both an Indemnified Party and the Indemnifying Party
are the defendants in , or targets of, such action and the Indemnified Party has
reasonably concluded that representation by the same counsel of such Indemnified
Party and the Indemnifying Party would be inappropriate according to the
applicable standards of professional conduct (in which case the Indemnifying
Party shall not have the right to direct the defense of such action on behalf of
the Indemnified Party); or (c) injunctive relief or specific performance is
sought against the Business or against the Indemnified Party in connection with
the Business.

            4.4. Limitations on Certain Indemnification Claims.

                (a) Threshold Amounts. Notwithstanding any provision contained
herein to the contrary, an Indemnified Party will have no obligation to
indemnify an Indemnified Party pursuant to Section 4.2(a) for any Losses until
the aggregate amount of such Losses exceeds on a one time basis, $50,000 (the
"Threshold Amount").

                (b) Time Limitations. No action or claim for Losses resulting
from breaches of the representations and warranties of Seller or Buyer shall be
brought or made after the first anniversary of the Closing Date, except that
such time limitation shall not apply to claims which have been the subject of a
written notice from Buyer to Seller prior to said first anniversary, which
notice specifies in reasonable detail the nature of the claim.

                                      -14-
<PAGE>   16

                (c) Notwithstanding anything to the contrary in this Article IV,
Seller shall not be required to indemnify Buyer for any Losses or other amounts
to the extent that such Losses or other amounts (excluding Losses set forth in
Section 4.2(a)(ii)) exceed $1,000,000, in the aggregate.

                (d) Notwithstanding anything to the contrary in this Article IV,
Buyer shall not be required to indemnify Seller for any Losses or other amounts
pursuant to Section 4.2(b) to the extent such Losses or other amounts (excluding
Losses set forth in Section 4.2(b)(ii)) exceed $1,000,000 in the aggregate.

            4.5. Characterization of Indemnity Payments. Any indemnification
payments made pursuant to this Agreement shall be treated by the parties for Tax
purposes as an adjustment to the Purchase Price, unless otherwise required by
applicable law.

            4.6. Exclusive Remedy. The indemnification set forth in this Article
IV shall be the exclusive remedy of either party for the breach of a
representation or warranty of the other party set forth in this Agreement except
for claims relating to fraud.

                                    ARTICLE V

                          CERTAIN ADDITIONAL COVENANTS

            5.1. Costs, Expenses and Taxes. Seller will pay all of its expenses
and Buyer will pay all of its expenses incurred in connection with this
Agreement and the transactions contemplated hereby, including (a) all costs and
expenses stated herein to be borne by a party, and (b) all accounting and legal
fees and settlement charges. Buyer will pay all sales, transfer, stamp,
documentary and similar taxes payable in connection with the transfer and
delivery of the Purchased Assets to be made to Buyer hereunder.

            5.2. Termination of Related Party Agreements. Promptly following the
time of Closing, to the extent not already effected, Seller shall cause all
agreements with any Related Party to be terminated with no further liability to
the Business.

            5.3. Confidentiality

                (a) (i) Seller acknowledges that through its prior operation of
the Business and the performance of its obligations under the Transaction
Documents, Seller has acquired and will continue to acquire Confidential
Information relating to the Business. Seller agrees that commencing on the date
hereof and continuing for a period of five years after the date on which Seller
has no further obligations to Buyer under any Transaction Document (other than
obligations relating to confidentiality or indemnification), Seller shall keep
and cause each of its employees, directors, officers, and representatives and
affiliates to keep confidential and not disclose to any other person or use for
its own benefit or the benefit of any other person or entity (except as may be
required for Seller to perform its obligations under any Transaction Document),
any Confidential Information in its or their possession and control regarding
the Buyer or the Business, as the Business may be operated from time to time.
For purposes of this Agreement, "Confidential Information" means all trade
secrets, information, data, know-how, systems and procedures of a technical or
confidential nature in any form relating to the Business

                                      -15-
<PAGE>   17

or any customers of the Business, including, without limitation, all business
and marketing plans, marketing and financial information, pricing, profit
margin, cost and sales information, operations information, forms, contracts,
bids, agreements, legal matters, unpublished written materials, names and
addresses of customers, suppliers and other companies with which Buyer has or
shall have a commercial relationship, plans, methods, concepts, technical
information, computer programs, source code listings and object code. In the
event that any of the covenants contained in this Section 5.3 shall be
determined by a court of competent jurisdiction to be unenforceable by reason of
its extending for too long a period of time or over too large a geographic area
or by reason of its being too extensive in any other respect, it shall be
interpreted to extend over only the longest period of time for which it may be
enforceable and/or over the largest geographic area over which it may be
enforceable and/or to the maximum extent in all other respects as to which it
may been enforceable, all as determined by such court in such action. Seller
acknowledges that the restrictions contained herein are considered by Seller to
be reasonable, given the nature of the Business, and are necessary to the
protection of the Business.

                    (ii) Nothing in this Section 5.3(a) shall restrict the
ability of Seller to enter into any merger, sale of stock of assets or change of
control transaction with one or more third parties or to engage in any due
diligence activities in respect thereof, provided, however, that Seller shall
require any such third party to agree in writing to comply with the provisions
of this Section 5.3(a). In addition, nothing in this Section 5.3(a) shall
prevent Seller from (x) disclosing to a third party any information which may be
considered Confidential Information if such information is the subject of a
non-exclusive license from Seller to Buyer under the License Agreement or (y)
using any Technical Information in a manner consistent with the License
Agreement, provided, however, that the confidentiality of all Confidential
Information shall be maintained by all licensees or sublicensees of Seller.

                (b) The restrictive covenants contained in this Section 5.3 are
each covenants independent of any other provision of this Agreement, and the
existence of any claim which Seller may allege against Buyer shall not prevent
the enforcement of these covenants. Seller acknowledges that the covenants in
this Section 5.3 are essential to the protection of Buyer's investment in the
Business and that Buyer would not purchase the Business but for these covenants.
Buyer agrees that any breach by Buyer of this Section 5.3 shall cause
irreparable harm to Buyer and that Buyer's remedies at law for any breach or
threat of breach of the provisions of this Section 5.3 shall be inadequate, and
that Buyer shall be entitled to an injunction or injunctions to prevent breaches
of this Section 5.3 and to enforce specifically the terms and provisions hereof,
in addition to any other remedy which Buyer may have at law or in equity. The
provisions contained in this Section 5.3 are in addition to and shall not be
construed to limit or preempt, nor shall such provisions be limited or preempted
by, any provision of or any remedy provided by any other Transaction Document.

            5.4. Technical Information. Notwithstanding anything herein to the
contrary, the Technical Information shall be deemed Documentation, as defined,
in the License Agreement, and shall be subject to the terms and conditions
thereof.

                                      -16-
<PAGE>   18

            5.5. Accounts Receivable and ADI Adjustments.

                (a) Promptly after each of the dates 60 and 120 days after the
Closing, Buyer shall deliver to Seller a statement setting forth the amount of
any Accounts Receivable which Buyer has determined in good faith during the
sixty day period preceding the date in question to be uncollectible, using
substantially the same accounts receivable collection practices (the "Collection
Procedures") as were used by Buyer in its course of business prior to the
Closing Date, including such practices with respect to delinquent accounts. Such
statement shall include copies of the documentation supporting Buyer's
determination. Within 10 days of receipt of such notice, Seller shall remit to
Buyer the amount of such uncollected Accounts Receivable, provided, however,
that Seller shall not be required to make any such payments until and to the
extent that the aggregate amount of such uncollected Accounts Receivable exceeds
the reserve therefor set forth in the Final Statement.

                (b) As promptly as practicable after the date (the "Receivables
Date") 180 days after the Closing Date, Buyer shall deliver to Seller a
statement (the "Adjustment Statement") setting forth the amount of (i) the
Accounts Receivable, less the stated reserve, set forth on the Final Statement
(the "Closing Receivables") which Buyer has been able to collect in the ordinary
course of business or has otherwise received from Seller or any other person
through the Receivables Date using the Collection Procedures (the "Collected
Receivables"), and (ii) the "ADI Adjustment Amount". For purposes of this
Section 5.5, the "ADI Adjustment Amount" shall equal 50% of the aggregate amount
of the original purchase price paid for Products delivered to Ademco
Distribution, Inc. ("ADI") prior to the Closing Date and returned by ADI after
the Closing Date and prior to the Receivables Date (accounting for ADI's
inventory on a first in, first out basis for purposes of determining the amount
of any such returns.) Buyer shall also deliver to Seller the work papers upon
which Buyer's calculation of the Collected Receivables and the ADI Adjustment
Amount was based.

                (c) If the amount of the Collected Receivables is greater than
the amount of the Closing Receivables, Buyer shall pay to Seller an amount equal
to such excess. If the amount of the Collected Receivables is less than the
amount of the Closing Receivables, Seller shall pay to Buyer an amount equal to
the difference between the Closing Receivables and the Collected Receivables, as
set forth on such statement. Seller shall pay to Buyer the ADI Adjustment
Amount. The amounts payable by Buyer and Seller pursuant to this Section 5.4
shall be netted against each other and any amounts then payable by Buyer shall
be delivered with the Adjustment Statement. Any amounts then payable by Seller
shall be payable within ten days of the receipt of such statement. All amounts
shall be payable by wire transfer of immediately available funds.

                (d) Notwithstanding anything in subsections (a) and (c) above,
if Seller disagrees with the amounts set forth on any statement delivered by
Buyer pursuant to such subsections, Seller shall not be required to pay the
amount in dispute and shall notify Buyer in writing within such 10 day period,
specifying the basis for Seller's disagreement, and shall follow the procedures
set forth in Section 5.7 below. Upon receipt of the full amount of any amounts
owing to Buyer pursuant to this Section 5.5 (or such lesser amount as may be
determined pursuant to Section 5.7), Buyer shall execute such documents as
Seller shall

                                      -17-
<PAGE>   19

reasonably request to transfer all right, title and interest to any uncollected
Accounts Receivable for which Seller has compensated Buyer to Seller.

            5.6. Post-Closing Warranty Claims. In the event that after the
Closing any customer of the Business shall make a warranty claim with respect to
any Product (a "Pre-Closing Product") which was delivered prior to the Closing
Date and for which the warranty period has not expired, Buyer shall perform any
required repairs or make any replacement of any defective Product which may be
required, for the account of Seller. Buyer shall use its commercially reasonable
efforts to follow the same standards for repair or replacement that Seller used
prior to the Closing. Each month Buyer shall send Seller a written statement
detailing (i) the warranty claims for Pre-Closing Products which Buyer received
in the previous month, (ii) the repairs and or replacements of Pre-Closing
Products which Buyer performed in the preceding month, and (iii) the actual
costs incurred by Buyer in connection therewith for parts, labor and the
replacement of Products, including any shipping and insurance costs. With such
statement Buyer shall also deliver to Seller any Pre-Closing Products which have
been replaced by Buyer during the month in question pursuant to a warranty
claim. Within 10 days of the receipt of such statement, Seller shall remit to
Buyer the amount of such costs. If, however, Seller disagrees with the amounts
set forth on such statement, Seller shall not be required to make such payment
and shall so notify Buyer in writing within such 10 day period, specifying the
basis for Seller's disagreement, and shall follow the procedures set forth in
Section 5.7 below.

            5.7. Audit. If either party hereto (the "Requesting Party") shall
notify the other party hereto (the "Audit Party") that the Requesting Party
disagrees with any statement previously delivered to the Requesting Party
pursuant to Section 5.5 or 5.6 above or the Transition Services Agreement, upon
the written request of the Requesting Party, the Audit Party shall permit the
Requesting Party and/or an independent public accountant selected by the
Requesting Party to have access during normal business hours to such records of
the Audit Party as may be reasonably necessary to verify the accuracy of the
statement in question. All such audits shall be conducted at the Requesting
Party's expense and, with respect to any audit concerning warranty claims, not
more than twice (2) in each calendar year. In the event such audit concludes
that the amounts set forth in the disputed statement were in excess of the
actual amounts owed by the Requesting Party or less than the actual amount owed
by the Audit Party, any excess amount previously paid by the Requesting Party or
any additional amounts owing by the Audit Party shall be paid by the Audit Party
to the Requesting Party within ten (10) days (the "Payment Period") of the date
the Requesting Party delivers to the Audit Party its or its representative's
written report so concluding, unless the Audit Party shall have a good faith
dispute as to the conclusions set forth in such written report, in which case
the Audit Party shall provide written notice to the Requesting Party within the
Payment Period of the nature of its disagreement with such written report and
may withhold payment of the amount in dispute, pending resolution of the
dispute. The parties hereto shall thereafter, for a period of thirty (30) days,
attempt in good faith to resolve such dispute. If the parties cannot within such
period in good faith resolve such dispute, the matters in question shall be
resolved in accordance with the third party dispute resolution procedures of
Section 1.6(b). If such report concludes that the Requesting Party owes an
additional amount to the Audit Party, the Requesting Party shall deliver such
amount to the Audit Party within ten days of the Requesting Party's receipt of
such report, together with a copy of such report. The fees associated with any
such audit shall be paid

                                      -18-
<PAGE>   20

by Requesting Party unless the audit discloses that the amounts required to be
paid by Requesting Party for the audited period were overstated by five percent
(5%) or more, or the amounts required to be paid by the Audit Party were
understated by five percent or more, in which case the Audit Party shall pay the
reasonable fees and expenses associated with any such audit.

                                   ARTICLE VI

                                  MISCELLANEOUS

            6.1. Further Assurances; Cooperation. After the date hereof, each
party hereto will execute and deliver such further instruments and documents and
perform such acts as may be reasonably necessary or appropriate to cause the
satisfactory completion and consummation of the transactions contemplated by
this Agreement.

            6.2. Post-Closing Access; Preservation of Books and Records. Buyer
shall give to Seller and authorized representatives such reasonable access,
during normal business hours and upon prior notice, to books and records of the
Business delivered by Seller to Buyer as Seller may reasonably request in
connection with (a) the preparation and filing of tax returns and (b) the
verification of any claim of Buyer for indemnification under this Agreement and
shall permit Seller to make extracts and copies of such books and records at the
expense of Seller. Buyer shall preserve all such books and records for a period
of seven years after the Closing; provided, however, that Buyer shall have the
right at any time to return any of such books and records to Seller. Seller
shall afford Buyer similar rights of access to and copying of any books and
records retained by it.

            6.3. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered, when transmitted by facsimile transmission
and appropriate answerback received or, if mailed, three business days after
mailing by United States first-class, certified or registered mail, postage
prepaid, to the other party at the following address (or at such other address
as shall be given in writing by any party to the other in accordance with these
provisions):

                (a) If to Seller, to:

                    8X8, Inc.
                    2445 Mission College Boulevard
                    Santa Clara, CA 95054

                    Fax No:  408-980-0432

                    Attention:  General Counsel

                                      -19-
<PAGE>   21

                    With a required copy to:

                    Latham & Watkins
                    135 Commonwealth Drive
                    Menlo Park, CA 94025

                    Fax No: 650-463-2600

                    Attention: Robert Koenig

                (b) If to Buyer, to:

                    Interlogix, Inc.
                    12345 S.W. Leveton Dr.
                    Tualatin, OR 97062

                    Fax No: 503-691-7562

                    Attention: Kenneth L. Boyda

                    With a required copy to:

                    Berwind Corporation
                    3000 Centre Square West
                    1500 Market Street
                    Philadelphia, PA 19102

                    Fax No: 215-563-4489

                    Attention: Pamela I. Lehrer
                    And to:

                    Dechert Price & Rhoads
                    4000 Bell Atlantic Tower
                    1717 Arch Street
                    Philadelphia, PA 19103-2793

                    Fax No: 215-994-2222

                    Attention: Herbert F. Goodrich, Jr.

            6.4. Assignability; Successors and Assigns. Except as hereinafter
contemplated, this Agreement and the rights of the parties hereunder may not be
assigned by any party without the prior written consent of the other parties.
Notwithstanding the foregoing, nothing herein contained shall prohibit the
assignment by Buyer of certain or all of its rights hereunder to one or more
affiliates of Buyer, including, without limitation, by operation of law

                                      -20-
<PAGE>   22

pursuant to a merger, provided, however, that no such assignment shall relieve
Buyer of any liability hereunder. Subject to the foregoing, this Agreement and
all rights and powers granted and obligations created hereby will bind and inure
to the benefit of the parties hereto and their respective successors and
assigns.

            6.5. Governing Law; Consent to Service. This Agreement shall be
governed by and construed in accordance with the laws of the State of Oregon
without regard to any principles of conflicts of laws. Each of Buyer and Seller
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth in Section 6.3
shall be effective service of process for any action, suit or proceeding with
respect to any matters to which it has submitted to jurisdiction as set forth in
the immediately preceding sentence.

            6.6. Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.

            6.7. Amendment and Waiver. The parties may by mutual agreement amend
this Agreement in any respect, and any party, as to such party, may (a) extend
the time for the performance of any of the obligations of any other party, and
(b) waive (i) any inaccuracies in representations by any other party, (ii)
compliance by any other party with any of the agreements contained herein and
performance of any obligations by such other party, and (iii) the fulfillment of
any condition that is precedent to the performance by such party of any of its
obligations under this Agreement. To be effective, any such amendment or waiver
must be in writing and be signed by the party against whom enforcement of the
same is sought.

            6.8. Entire Agreement. This Agreement and the Exhibits and Schedules
hereto, each of which is hereby incorporated herein, set forth all of the
promises, covenants, agreements, conditions and undertakings between the parties
hereto with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written.

            6.9. Publicity. Press releases and other announcements with respect
to this Agreement and the transactions contemplated hereunder shall be subject
to mutual agreement of the parties hereto, except to the extent that any party,
in the opinion of its counsel, is obligated to make public disclosure pursuant
to securities laws.

            6.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute one instrument.

            6.11. No Third Party Beneficiary Rights. This Agreement is not
intended to and shall not be construed to give any person or entity other than
the parties signatory hereto (and successors and assigns permitted under Section
7.4) any interest or rights (including, without limitation, any third party
beneficiary rights) with respect to or in connection with any agreement or
provision contained herein or contemplated hereby.

                                      -21-
<PAGE>   23

               IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.

                               8X8, INC.

                               By: /s/  Keith Barraclough
                                   ---------------------------------------------
                                   Name:  Keith Barraclough
                                   Title:  President and Chief Operating Officer

                               INTERLOGIX, INC.

                               By: /s/  John R. Logan
                                   ---------------------------------------------
                                   Name:  John R. Logan
                                   Title:  Chief Financial Officer

                                      -22-

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