Authorized Distributor Agreement - Dragon Systems Inc. and Multimicro Inc.


                        AUTHORIZED DISTRIBUTOR AGREEMENT



                   THIS AGREEMENT is made Multimicro inc, 1998



                                    between:

                          DRAGON SYSTEMS, INCORPORATED
                                320 NEVADA STREET
                           NEWTON, MASSACHUSETTS 02160
                                       USA

                             (hereinafter 'DRAGON')

                                       AND

                                MULITMICRO, INC.
                            9393 LOUIS H. LAFONTAINE
                                  VILLE D'ANJOU
                                     QUEBEC
                                     CANADA
                                     H1J 1Y8

                                FAX: 514-354-2299

                           (hereinafter 'DISTRIBUTOR')

                                                Authorized Distributor Agreement
                                                                Revision 3/12/98


                               LIST OF APPENDICES



Appendix A:       Products
Appendix B:       Territories
Appendix C:       Quotas/Prices
appendix D:       Trademark Guidelines
Appendix E:       List of Distributors in Territories
Appendix F:       License Agreement



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                                                Authorized Distributor Agreement
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1.       DECLARATIONS.

Whereas DRAGON develops, manufactures and/or distributes certain products shown
in Appendix A and which may be changed from time to time, ('PRODUCTS'); and

WHEREAS DISTRIBUTOR, distributes, markets, and sells items used in the computer
and software field, and

WHEREAS RESELLER, markets and sells items used in the computer and software
field to end users, and includes

WHEREAS the PARTIES intend to enter into an agreement pursuant to which
DISTRIBUTOR will solicit orders from RESELLERS for the purchase of the PRODUCTS
in the areas ('TERRITORIES') specified in Appendix B;

NOW, THEREFORE the PARTIES hereto agree as follows:

2.       APPOINTMENT AND DUTIES.

2.1      APPOINTMENT OF DISTRIBUTOR

DRAGON hereby appoints and grants to DISTRIBUTOR the non-exclusive right to sell
the PRODUCTS provided by DRAGON within TERRITORIES.

(a)      If the DISTRIBUTOR does not meet an assigned quarterly quota as defined
         in Appendix C this AGREEMENT is terminated immediately, unless DRAGON
         extends AGREEMENT in writing.

(b)      DRAGON retains the right to negotiate and transact directly with all
         customers within the territory.

2.2      DUTIES OF DISTRIBUTOR

DISTRIBUTOR agrees that it shall use reasonable efforts to promote the sale and
distribution of the PRODUCTS, including, but not limited to:

(a)      Ensuring that its staff is appropriately trained by DRAGON or its
         designee as needed;

(b)      Following-up any and all leads of prospective buyers furnished to
         DISTRIBUTOR by DRAGON in a timely and efficient manner

(c)      Participating in promotions and selling programs sponsored by DRAGON;

(d)      Complying with all reasonable standards of DRAGON for displaying,
         advertising, demonstrating, and explaining the operation and use of the
         PRODUCTS to RESELLERS and prospective RESELLERS;






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(e)      Using its best efforts to resolve any customer satisfaction issues that
         may arise from the use of DRAGON's PRODUCTS;

(f)      Submitting to DRAGON financial data on a yearly basis. Public companies
         should also include annual report with such financial data.

(g)      Advising DRAGON immediately of any legal notices served on DISTRIBUTOR
         or filed by DISTRIBUTOR which might affect DRAGON or the market
         prospects of the PRODUCTS;

(h)      Supplying DRAGON with monthly sell through data including reseller
         name, address, street, zip, country and telephone number along with
         number of units of Dragon Products sold by SKU and version. This is a
         condition precedent to DRAGON giving any Marketing Development Funds to
         DISTRIBUTOR.

(i)      Ensuring that RESELLERS of the Dragon NaturallySpeaking Deluxe and
         other high-end DRAGON Products receive a Certification Number from
         Dragon before selling such Product.

(j)      Making available to RESELLERS designated new products as they become
         available from DRAGON

DISTRIBUTOR understands that failure to satisfactorily perform the above duties
will provide grounds for termination of this Agreement.

2.3      DUTIES OF DRAGON.

DRAGON shall provide to DISTRIBUTOR:

(a)      training of DISTRIBUTOR's salespeople and technical support people in
         the important characteristics, benefits, markets, competition, and
         operation of PRODUCTS; the frequency, duration, location, subject
         matter, and cost of training shall be provided as appropriate in the
         judgment of DRAGON. DRAGON will not pay a fee associated with training
         of DISTRIBUTOR staff.

(b)      when available, reasonable quantities, at a reasonable cost, and in a
         timely manner, of information, descriptive materials, demonstration
         programs, and manuals on the sale, and support of PRODUCTS;

(c)      (3) three copies of PRODUCT at no charge for internal use only by
         DISTRIBUTOR;

(d)      reasonable access to DRAGON's pre-sale and post-sale technical
         assistance information sources as needed by DISTRIBUTOR with regard to
         the application and uses of the PRODUCTS;

(e)      according to DRAGON's then-current DISTRIBUTOR lead distribution
         policy, timely sales leads of prospective buyers who have responded to
         DRAGON's advertising or public relations efforts;

(f)      inclusion of DISTRIBUTOR's name and contact information in DRAGON's
         home page information on the World Wide Web.

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                                                Authorized Distributor Agreement
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(g)      whenever possible thirty (30) days advanced notice of expected changes
         in DRAGON policy, products or DISTRIBUTOR promotions including new
         versions, new pricing, special DISTRIBUTOR promotions, etc.

(h)      notification of any new Distributors in the Territories in addition to
         those listed on Appendix E

Notwithstanding anything to the contrary contained herein, DRAGON shall have no
obligation to provide servicing, repairs, counseling or other assistance to any
customers of DISTRIBUTOR unless DRAGON has made agreements with any such
customer directly.

3.       PRICING & TERMS.

PRICE FROM DRAGON TO DISTRIBUTOR. For each item or type of PRODUCTS ordered by
DISTRIBUTOR from DRAGON during the term of this Agreement, DISTRIBUTOR shall pay
to DRAGON the Distribution price listed on Appendix C.

DISCOUNT. DRAGON will give DISTRIBUTOR a discount on the Product price in the
event the quarterly sales goals on Appendix C are met.

PRICE CHANGES. DRAGON retains the right to change the product and pricing
schedules, set forth in Appendices A and C. Whenever possible DRAGON will give
DISTRIBUTOR 30 days prior notice.

TERMS AND CONDITIONS OF SALES. Costs of duties, customs, and taxes shall be the
exclusive responsibility of the DISTRIBUTOR. Cost of ground freight will be the
responsibility of DRAGON.

PAYMENT TERMS
DRAGON grants DISTRIBUTOR the option of the following payment terms: Net 60
days, with a [**] at the time of shipping or [**] of receipt of Product and
invoice. For purposes of determining discount, payment is deemed made on the day
received by DRAGON.

4. SALES REQUIREMENTS.

SALES WITHIN TERRITORIES. This Agreement only provides authorization for
DISTRIBUTOR to resell DRAGON's products through its own sales and marketing
efforts within the TERRITORIES, and/or through its facilities located within the
TERRITORIES as specified in Appendix B. Sales of DRAGON's product through other
facilities or through selling/marketing programs outside of the TERRITORIES,
without express written permission from DRAGON, is grounds for termination of
this Agreement by DRAGON.



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                                                Authorized Distributor Agreement
                                                                Revision 3/12/98

5.       APPOINTMENT OF RESELLERS BY DISTRIBUTOR

DISTRIBUTOR is authorized to appoint third parties ('RESELLERS') to assist in
the sales of DRAGON's products, and fulfillment of DISTRIBUTOR's duties as
defined above, provided that:

(a)      DISTRIBUTOR uses its good faith efforts to appoint RESELLERS whose
         ethics, business practices, and professionalism are consistent with
         DRAGON's.

(b)      Such DEALERS are located solely within the TERRITORIES specified in
         Appendix B and will be bound by the same restrictions as above.

(c)      DISTRIBUTOR is only authorized to sell to RESELLERS. DISTRIBUTOR is NOT
         authorized to sell any of DRAGON's products directly to end-users.

d)       All orders for PRODUCTS supplied to RESELLERS must be placed to DRAGON
         through DISTRIBUTOR and DISTRIBUTOR shall retain any and all financial
         responsibilities for such purchases.

(e)      DISTRIBUTOR will remain responsible for meeting its duties as defined
         above with respect to any users of RESELLERS

6.       ADVERTISING AND MARKET DEVELOPMENT PROGRAM

DRAGON grants DISTRIBUTOR a cooperative advertising allowance of [**] of Product
invoice amount for such advertising featuring Product and/or DRAGON. DISTRIBUTOR
shall submit advertising to DRAGON for review and approval prior to any initial
release. Upon receipt of evidence of Authorized Distributor Agreement such
advertising expenditures, DRAGON agrees to credit the amount thereof against
future DISTRIBUTOR purchases.

DRAGON will provide an [**] for Marketing Development Funds which will be used
for marketing activities specific to DRAGON products. DISTRIBUTOR and DRAGON
will reach prior agreement on how these funds are to be used. These funds are
subject to completion of reports required of DISTRIBUTOR pursuant to section
2.2(h) herein.

Whether or not DISTRIBUTOR uses or qualifies for DRAGON's Market Development
Funds, DISTRIBUTOR agrees to use a DRAGON-approved logo or mark on any of
DISTRIBUTOR's advertising or marketing communications that feature DRAGON's
products, but only according to the provisions in paragraph 7 below, and
according to DRAGON's guidelines, which are attached hereto as Appendix D.

It is understood that the co-op allowance, the marketing development funds and
the discount for meeting the quarterly sales targets are net of all price
protections, rebates, and returns.



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                                                Authorized Distributor Agreement
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7.       REPRESENTATIONS BY DISTRIBUTOR.

Under this Agreement, DISTRIBUTOR may represent that it is an authorized
DISTRIBUTOR of DRAGON's products in the TERRITORIES.

DISTRIBUTOR agrees not to in any way misrepresent, or in any way cause to be
ambiguous (especially with respect to prospective customers, journalists, or
market analysts, etc.) about DISTRIBUTOR's relationship with DRAGON,
DISTRIBUTOR's duties as specified in this Agreement, the features of DRAGON's
products including any technical specifications, expected benefits of use, and
the origin of DRAGON's products. In particular, DISTRIBUTOR shall not represent
itself as an exclusive agent or exclusive distributor of DRAGON's products. The
DISTRIBUTOR shall not represent itself as the developer or manufacturer of
DRAGON's products, or as DRAGON itself.

8.       STOCK ROTATION AND RETURNS

DISTRIBUTOR shall be allowed to return Product for [**] after purchase of
Product. The Product being returned as overstock will have return ground
shipping paid for by DISTRIBUTOR. Defective Products will be destroyed on a
monthly basis except for unused headsets upon DRAGON's approval, which will be
shipped to Dragon freight collect. DISTRIBUTOR will provide proof of on-site
destruction prior to issuance of credit by DRAGON.

DRAGON shall give DISTRIBUTOR [**] of product discontinuation. DISTRIBUTOR may
return all such products to DRAGON [**] incurred by DISTRIBUTOR in returning the
product, within [**]. [**].

In the event that DISTRIBUTOR wishes a return of Product, it will request an RMA
(Return Merchandise Authorization Number) DISTRIBUTOR shall issue an RMA within
5 business days. DRAGON will accept product returns only when clearly labeled
with the RMA.

9.       WARRANTY.

DRAGON warrants that its PRODUCTS shipped to DISTRIBUTOR shall be free from
material defect and shall be reasonably suitable for resale. Unless otherwise
specified, the warranty period for DRAGON's products shall be ninety (90) days
from date of DRAGON's shipment. In the event that DISTRIBUTOR finds such defects
in DRAGON's products DISTRIBUTOR's sole remedy shall be the repair, replacement
or refund of the amounts paid to DRAGON for any defective product, at the sole
discretion of DRAGON.

IN NO EVENT SHALL DRAGON BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL OR SPECIAL
DAMAGES, OR FOR INSTALLATION, ADJUSTMENTS, OR OTHER EXPENSES WHICH MAY ARISE
FROM THE PURCHASE OR RESALE OF PRODUCTS. NO WARRANTIES OTHER THAN THOSE
EXPRESSLY SET FORTH ABOVE SHALL APPLY, AND DRAGON MAKES NO EXPRESS OR IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO ITS
PRODUCTS.




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DISTRIBUTOR UNDERSTANDS THAT DRAGON'S SPEECH RECOGNITION PRODUCTS ARE BASED UPON
A STATISTICAL PROCESS IN WHICH ERRORS ARE AN INHERENT PART OF THEIR OPERATION.
DISTRIBUTOR ACCEPTS THE RESPONSIBILITY OF ENSURING THAT ITS RESELLERS AND THEIR
CUSTOMERS UNDERSTAND THAT SUCH ERRORS ARE INEVITABLE AND THAT ITS CUSTOMERS AND
ITS RESELLERS AND RESELLERS CUSTOMERS ARE RESPONSIBLE FOR CORRECTING SUCH
ERRORS. DRAGON SHALL IN NO EVENT BE LIABLE FOR ANY DIRECT OR INDIRECT DAMAGES,
INCLUDING PERSONAL INJURY OR DEATH, RESULTING FROM ERRORS THAT OCCUR IN THE USE
OF PRODUCTS.

Some states or countries do not allow the exclusion or limitation of implied
warranties or liability for incidental or consequential damages, so the above
limitation or exclusion may not apply.

10.      USE OF PATENTS, TRADEMARKS AND OTHER PROPRIETARY RIGHTS.

DRAGON shall retain all rights, title and interest (including all intellectual
property rights) in the PRODUCTS. DISTRIBUTOR shall, at DISTRIBUTOR's expense,
deliver to DRAGON whenever requested by DRAGON a sample of all labels, packages,
advertisements and other materials related to the PRODUCTS so that DRAGON may
review the same. DISTRIBUTOR shall not at any time adopt, or use, or attempt to
register with any governmental authority, without first obtaining DRAGON's
written approval, any word or mark that is similar, or bears any resemblance, to
a trademark or service mark owned or used by DRAGON.

11.      PROTECTION OF KNOW HOW.

ACKNOWLEDGMENT OF PROPRIETARY INFORMATION. DISTRIBUTOR acknowledges (i) that the
KNOW-HOW (as hereafter defined) obtained from DRAGON hereunder is commercially
valuable proprietary information of DRAGON or others, the design and development
of which has involved the expenditure of substantial amounts of money and the
use of skilled development experts over a long period of time and which affords
DRAGON a commercial advantage over its competitors: (ii) that such KNOW-HOW
constitutes trade secrets and confidential business information that is
disclosed to DISTRIBUTOR for use on the basis of the confidential relationship
between DRAGON and DISTRIBUTOR under this Agreement and is to be used only as
may be expressly permitted by the terms and conditions of this Agreement; (iii)
that the loss of this competitive advantage due to unauthorized disclosure of
such proprietary information would cause great injury and harm. As used in the
Agreement, the term 'KNOW-HOW' means any and all information of any kind
whatsoever now possessed by or known to, or hereafter developed or acquired by,
DRAGON relating to (1) the manufacturing data, and technical specifications for
the PRODUCTS, and/or marketing information of potential competitive value (e.g.
customer information, promotional plans, market data, etc.) (2) the techniques
and methods for installing and servicing the product, (3) specific techniques,
algorithms and methods used within the PRODUCTS and (4) any techniques and
methods for locating defects in the PRODUCTS.

CONFIDENTIALITY COVENANT. DISTRIBUTOR covenants that it will not divulge, or
publish to others, other than as herein provided, any KNOW-HOW obtained from
DRAGON hereunder, or any information about the DRAGON's commercial practices,
policies, or plans, and that it shall divulge the same only to employees of
DISTRIBUTOR or DEALER who require it for the purpose of DISTRIBUTOR's or
RESELLER's distribution of PRODUCTS hereunder and only if such employees are



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subject to restrictions on use and disclosure at least as restrictive as those
assumed by DISTRIBUTOR hereunder.

CONFIDENTIALITY OF WORKERS. DISTRIBUTOR shall take reasonable action, by
instruction, agreement or otherwise, with respect to independent contractors
employed by DISTRIBUTOR or to DISTRIBUTOR's employees or other persons who have
not entered into the aforesaid restrictive engagements in order to prevent the
unauthorized disclosure or use of such KNOW-HOW.

EXCEPTIONS. This section shall not apply to (i) any KNOW-HOW or information that
shall become generally known in the trade through no fault of DISTRIBUTOR, (ii)
any KNOW-HOW or information that shall be disclosed to DISTRIBUTOR by a party
having legitimate possession thereof and the unrestricted right to make such
disclosure, (iii) any KNOW-HOW or information that DISTRIBUTOR can demonstrate
was within its possession prior to the disclosure by DRAGON, and was provided by
a party having legitimate possession thereof and the unrestricted right to make
such disclosure, or (iv) any confidential business information after four (4)
years from the termination of the Agreement.

REVERSE ENGINEERING. Except to the extent DRAGON is required by the law in the
Territory to allow Distributor to do so, Distributor shall not decompile,
disassemble or otherwise reverse engineer the PRODUCTS.

12.      INFRINGEMENT OF PROPRIETARY RIGHTS.

If any action, claim or suit is threatened, filed or made against DISTRIBUTOR,
based upon infringement of a copyright, patent, trademark, or other proprietary
right in connection with the PRODUCTS, DISTRIBUTOR shall promptly notify DRAGON
in writing of such action, claim or suit. DRAGON shall at its own expense, take
charge of the defense of any such action through attorneys of DRAGON's
selection. DISTRIBUTOR shall make available to DRAGON any relevant records,
papers or information and shall cooperate in such defense as reasonably
requested by DRAGON. DRAGON shall indemnify and hold harmless DISTRIBUTOR from
and against all damages and claims arising out of such infringement action
provided that DISTRIBUTOR has otherwise complied with all the provisions of the
Agreement and with applicable state, province, federal, and international law.
DISTRIBUTOR shall notify DRAGON promptly whenever it shall obtain information
that any of the trademarks, patents, or copyrights of DRAGON are being infringed
by any other person.

13.      TERMINATION.

This Agreement shall continue in effect for a period of one year from the date
of execution hereof or to the end of the current calendar year whichever period
is longer. Thereafter, the Agreement will continue from year to year subject to
mutual agreement on the quarterly sales goals for the subsequent renewal term.

This Agreement may be terminated as follows:

(a)      termination for cause: by either PARTY by written notice to the other
         PARTY given no less than thirty (30) days after prior written notice of
         breach, if such breach is not cured.





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(b)      termination for no cause: by either PARTY at any time upon the giving
         of sixty (60) days' notice to the other party prior to any subsequent
         renewal term.

14.      EFFECT OF TERMINATION.

TERMINATION OF RIGHTS. Upon the termination of this Agreement, all rights
granted by DRAGON to DISTRIBUTOR, or through DISTRIBUTOR to its RESELLERS herein
shall terminate and revert immediately to DRAGON or its successors or assigns.

RETURN OF MATERIALS. Upon the termination of this Agreement, DISTRIBUTOR shall
promptly return all KNOW-HOW in written form, together with any copies thereof
made by DISTRIBUTOR, obtained from DRAGON hereunder. This will include any
PRODUCT demonstration product, evaluation product, product literature and other
like materials unless paid for.

15. ASSIGNMENTS.

This Agreement may not be assigned, in whole or in part, by DISTRIBUTOR without
prior written consent of the DRAGON.

16. COMPLIANCE WITH LAWS AND REGULATIONS.

This Agreement is made subject to, and both PARTIES in the performance hereof
expressly agree to comply with and abide by, all applicable laws, ordinances,
codes and regulations in TERRITORIES insofar as the same may be applicable to
the terms and conditions of the Agreement, and both PARTIES hereby agree to
indemnify and hold harmless the other from and against all claims, suits, causes
of action, demands, penalties, losses or damages (including court costs and
attorney fees) which may arise or accrue because of the failure or neglect of
the indemnifying PARTY in this respect.

17. MISCELLANEOUS.

GOVERNING LAW. This Agreement and all amendments, modifications, alterations, or
supplements hereto, and the rights of the PARTIES hereunder shall be construed
under, and be governed by, the laws of the Commonwealth of Massachusetts in the
United States of America. Any lawsuit relating to any matter arising under this
Agreement, initiated by or on behalf of DISTRIBUTOR shall be initiated in a
State or Federal Court in the Commonwealth of Massachusetts, United States of
America. Any lawsuit relating to any matter arising under this Agreement
initiated by DRAGON may be initiated in a State or Federal Court located in the
Commonwealth of Massachusetts, or in any court in the country in which the
DISTRIBUTOR is located having jurisdiction over the matter. Accordingly,
DISTRIBUTOR irrevocably consents to the jurisdiction and to the service of
process, pleadings, and notices in connection with any and all actions and
processes initiated in a State or Federal court located in the Commonwealth of
Massachusetts, United States of America or any such court in the country in
which DISTRIBUTOR is located.

ULTIMATE DESTINATION OF SHIPMENTS. The DISTRIBUTOR hereby agrees not to
knowingly export or re-export, directly, or indirectly, any product or technical
data, acquired under this Agreement, except in complete compliance with the
export laws and regulations of the United States of America.



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END USER LICENSE AGREEMENT. Use of DRAGON's PRODUCTS are subject to the terms
and conditions of the End User License Agreement provided by DRAGON in Appendix
F, or as it may be amended from time to time by DRAGON and each end user shall
agree to such terms before it uses the PRODUCTS.

NOTICES. All notices, offers, requests, instructions, acceptances, consents,
approvals and other communications required or authorized to be given by either
party to the other under this Agreement shall be in writing, shall be addressed
as indicated below, and shall be deemed to have been given upon the receipt of
the addressee.

DRAGON:                                     DISTRIBUTOR:

Steven Semenzato
Director of North American Sales            President
Dragon Systems, Inc.                        MultiMicro
320 Nevada Street                           9393 Louis H. LaFontaine
Newton, MA 02160 USA                        Ville d'Anjou
                                            Quebec
With a copy to:                             CANADA
                                            HIJ IY8
Janet Baker, President
Dragon Systems, Inc.
320 Nevada Street
Newton, MA 02160 USA

NONWAIVER OF DEFAULT. Any failure by either party, at any time or from time to
time, to enforce and require the strict keeping and performance of any of the
terms and conditions of this Agreement shall not constitute a waiver of any such
terms and conditions at any future time and shall not prevent such party from
insisting on the strict keeping and performance of such terms and conditions at
any later time.

AMENDMENT OR RESCISSION. This Agreement shall not be modified or rescinded
except by written instrument signed by authorized representatives of both
parties hereto.

SEVERABILITY. In the event that any term or provision of this Agreement shall be
deemed by a court of competent jurisdiction to be overly broad in scope,
duration or area of applicability, such court shall have the power, and is
hereby directed, to limit such scope, duration or area of applicability, or all
of them, so that such term or provision is not overly broad, and to enforce the
same as so limited. Subject to the foregoing sentence, in the event any
provision of this Agreement shall be held invalid or unenforceable for any
reason, such invalidity or unenforceability shall attach only to such provision
and shall not affect or render invalid any other provision of this Agreement.

ENTIRETY OF AGREEMENT. This is the entire agreement between the parties hereto
with respect to the subject matter hereof and there are no agreements,
understanding, covenants, conditions or undertakings, oral or written, express
or implied, concerning such subject matter that are not merged herein or
superseded hereby.


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CAPTIONS. The captions or headings of the Sections or other subdivisions hereof
are inserted only as a matter of convenience or for reference and shall have no
effect on the meaning of the provisions hereof.

COUNTERPARTS. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.

18.      SIGNATURES.

IN WITNESS WHEREOF, the PARTIES hereto have caused this Agreement to be executed
in their respective corporate names, as of the date first herein above by their
respective representatives hereunder duly authorized.

'DISTRIBUTOR'                                         'DRAGON'

By: \s\ S. Rosen                                      By: \s\ Janet M. Baker
    ----------------                                      -------------------
(Signature)                                           (Signature)

3/18/98                                               3/16/98
--------------------                                  -----------------------
Date                                                  Date




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                                   APPENDIX A
                                   'PRODUCTS'



Product Name                                                                                     Version
--------------------------------------------------------------------------------------------------------
                                                                                             
Dragon NaturallySpeaking, Personal Edition, American English                                       2.x
Dragon NaturallySpeaking, Preferred Edition, American English                                      2.x
Dragon NaturallySpeaking, Deluxe Edition, American English                                         2.x
Dragon Dictate Classic Edition, American English                                                   3.x
Dragon Dictate Power Edition, American English                                                     3.x
Dragon Power Secretary Power Edition, American English                                             2.0.7
Dragon Power Secretary Medical Edition, American English                                           2.0.7
Dragon Power Secretary Personal Edition for Microsoft Word, American English                       2.07
Dragon Power Secretary Personal Edition for Corel WordPerfect, American English                    2.07
Dragon Power Secretary Personal Edition for File Maker Pro, American English                       2.07
Dragon Power Secretary Personal Edition for Claris Works, American English                         2.07
Dragon NaturallySpeaking French Personal Edition                                                   2.02
Dragon NaturallySpeaking Spanish Personal Edition                                                  2.02





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                                   APPENDIX B
                                  'TERRITORIES'



The TERRITORIES for DISTRIBUTOR shall include the following:
North America



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                                                Authorized Distributor Agreement
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                                   APPENDIX C
                                     'QUOTA'



Quarter I. 1998            Quarter II, 1998    Quarter III, 1998      Quarter IV, 1998
---------------            ----------------    -----------------      ----------------

                                                             
[**]                       [**]                [**]                   [**]




If DISTRIBUTOR meets the above targets, DISTRIBUTOR will be entitled to a [**]
on the price of the Product.

                                    'PRICES'



Product                                                          Version      Vendor #       Distributor
--------------------------------------------------------------------------------------------------------
Price US$
---------

                                                                                     
Dragon NaturallySpeaking, Personal Edition                            2X        010420101      [**]
Dragon NaturallySpeaking, Preferred Edition                           2X        010340101      [**]
Dragon NaturallySpeaking, Preferred Edition (CANADA*)                 2X        010340101      [**]
Dragon NaturallySpeaking, Deluxe Edition                              2X        010450101      [**]
Dragon Dictate Classic Edition                                        3X        010202401      [**]
Dragon Dictate Power Edition                                          3X        010222401      [**]
Dragon Power Secretary Power Edition                                  2.0.7     CDO500OPS      [**]
Dragon Power Secretary Medical Edition                                2.0.7     CD08000MD      [**]
Dragon Power Secretary Personal Edition for Microsoft Word            2.07      CDO4002MW      [**]
Dragon Power Secretary Personal Edition for Corel WordPerfect         2.07      CDO400OWP      [**]
Dragon Power Secretary Personal Edition for File Maker Pro            2.07      CDO4003FM      [**]
Dragon Power Secretary Personal Edition for Claris Works              2.07      CDO4001CW      [**]
Dragon NaturallySpeaking French Personal Edition                      2.02     0103401061      [**]
Dragon NaturallySpeaking Spanish Personal Edition                     2.02     0103401041      [**]




Dragon NaturallySpeaking, Preferred Edition (CANADA*) product price is ONLY
applicable for product sold into Canadian Retail Outlets

                  Prices as of 2/25/98




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                                   APPENDIX D
                              TRADEMARK GUIDELINES
                             See the attached sheets



                               USE OF DRAGON LOGO
                  The use of this trademark must be accompanied
                    By a red Dragon Logo in PMS 185 Red. The
                    Dragon must be no smaller than the Dragon
                    on the accompanying trademark guideline.




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DRAGON NATURALLYSPEAKING(TM)
Identity Mark
The following guidelines specify usage of the Dragon NaturallySpeaking(TM)
identity mark. Any individuals (whether Dragon Systems employees, consultants,
outside vendors or third parties) involved in developing communications,
documentation, or packaging related to Dragon Systems products must understand
and comply with the following guidelines. Please contact Becky Squier at Dragon
Systems, 1-617-965-5200, with any questions or issues.

DRAGON NATURALLYSPEAKING(TM)

IDENTITY MARK USAGE
Size:    The NaturallySpeaking identity mark must be
         reproduced with a minimum horizontal
         dimension of 2 inches.

Color:   Whenever possible, the mark should be
         reproduced in color as follows:  the word
         'Dragon' prints 100% PMS 185 Red (or
         process match - 91 magenta, 76 yellow).  The
         word 'NaturallySpeaking(TM)' prints in 100%
         black.

ACKNOWLEDGMENT
Use of the Dragon NaturallySpeaking(TM) identity mark should be accompanied by
an acknowledgement line (when required), as follows: 'An authorized reseller of
Dragon Systems' speech products and services.'

Trademarks
Dragon Systems and the Dragon image are registered
trademarks of Dragon Systems, Inc. Dragon
NaturallySpeaking(TM) is a trademark of Dragon Systems,
Inc.



            USE OF DRAGON LOGO
            ------------------

    The use of this trademark must be
    accompanied by a red Dragon Logo
    in PMS 185 Red.  The Dragon must
    be no smaller than the Dragon on
    the accompanying trademark
    guideline.



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                                                Authorized Distributor Agreement
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                                   APPENDIX E

                  CURRENT LIST OF DISTRIBUTORS IN NORTH AMERICA

Ingram
TechData
Merisel
Beamscope



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                                                Authorized Distributor Agreement
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                                   APPENDIX F

                    'DRAGON SYSTEMS, INC. LICENSE AGREEMENT'

End User License Agreement. 
--------------------------- 
Before using this Software, you should carefully read the following terms and
conditions. Operating this software indicates your acceptance of these terms and
conditions.

Dragon Systems, Inc. (Dragon Systems) provides this Software and licenses its
use to you, the Customer.

Dragon Systems retains ownership of all rights in the Software and of all
proprietary technology embodied therein. You acknowledge that the unauthorized
distribution or use of the Software or documentation received from Dragon
Systems will cause Material Damage to Dragon Systems. 

You assume responsibility for the selection of the programs to achieve intended
results, and for the installation, use and results obtained from the Software.

IT IS UNDERSTOOD BY BOTH PARTIES TO THIS AGREEMENT THAT SPEECH RECOGNITION IS A
STATISTICAL PROCESS, THAT RECOGNITION ERRORS ARE INHERENT IN THE PROCESS OF
SPEECH RECOGNITION, AND THAT SPEECH RECOGNITION APPLICATIONS MUST BE DESIGNED TO
ALLOW FOR SUCH ERRORS IN THE RECOGNITION PROCESS. YOU MUST UNDERSTAND THAT SUCH
ERRORS ARE INEVITABLE AND THAT IT IS YOUR RESPONSIBILITY TO CORRECT RECOGNITION
ERRORS BEFORE USING THE RESULTS OF THE RECOGNITION. THE SOFTWARE AND ANY
DOCUMENTATION ARE PROVIDED ON AN 'AS IS' BASIS. DRAGON SYSTEMS DISCLAIMS ALL
WARRANTIES, WHETHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
SOFTWARE AND ANY DOCUMENTATION, INCLUDING ALL WARRANTIES OF TITLE AND IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. DRAGON
SYSTEMS' LIABILITY FOR DAMAGES TO THE LICENSEE FOR ANY CAUSE WHATSOEVER,
REGARDLESS OF THE FORM OF ANY CLAIM OR ACTION, SHALL NOT EXCEED THE TOTAL
LICENSE FEE PAID BY THE LICENSEE FOR THE LICENSE TO USE THE SOFTWARE UNDER THIS
AGREEMENT. DRAGON SYSTEMS SHALL IN NO EVENT BE LIABLE FOR ANY DAMAGES RESULTING
FROM LOSS OF DATA, PROFITS OR USE OF EQUIPMENT, OR FOR ANY SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE USE OR
PERFORMANCE OF THE SOFTWARE.

LICENSE
This license granted under this Agreement permits the Licensee and its employees
who agree to be bound by the terms and conditions of this Agreement to:

I.       use the software on a single machine, (The Software is considered used
         when loaded into temporary memory or installed into permanent memory),

II.      install a copy of the Software on a network server so that the Software
         can be used by other computers. The number of users of the Software
         shall not exceed the number of applicable licenses you have purchased
         from Dragon Systems,

Ill.     copy the Software in machine-readable form for backup purposes only.

You may transfer this Software to another party only with the prior written
consent of Dragon Systems. If you transfer possession of any copy, modification
or merged portion of the Software or documentation to another party, your
license is automatically terminated.

The user of the Software or any end-user application incorporating any part of
the Software must agree (1) not to disassemble or reverse engineer the Software
or any portion thereof and (2) to comply



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                                                                Revision 3/12/98


with all U.S. export laws. Any attempt to disassemble the object code of this
Software is unauthorized and will result in immediate termination of this
Agreement.

You must reproduce and include the copyright notice on any copy, modification or
portion of the Software merged into another program. You may not use, copy,
modify, or transfer the Software, or any copy, modification or merged portion,
in whole or in part, except as expressly provided for in this Agreement. You may
not commit any act which would directly or indirectly violate any U.S. law,
regulation, treaty, or other agreement, relating to the export or re-export of
the Software, to which the U.S. adheres or with which the U.S. complies.

TERM
The license is effective until terminated. You may terminate the license at any
time by destroying the programs along with any copies, modifications and merged
portions in any form. It will also terminate upon conditions set forth elsewhere
in this Agreement or if you fail to comply with any term or condition of this
Agreement. You agree upon such termination to destroy the programs together with
all copies, modifications and merged portions in any form.

RESTRICTED RIGHTS LEGEND
Use, duplication, or disclosure by the Government is subject to restrictions as
set forth in subparagraph (c)(I)(ii) of the Rights in Technical Data and
Computer Software clause at DFARS 252.227-7013.




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