Distribution Agreement - Tech Data Product Management Inc. and Sonic Systems Inc.


                            DISTRIBUTION AGREEMENT

                                    BETWEEN

                      TECH DATA PRODUCT MANAGEMENT, INC.

                                      AND

                              SONIC SYSTEMS, INC.

 
                             DISTRIBUTION AGREEMENT

          THIS AGREEMENT, dated as of this 9th day of February, 1999, is between
TECH DATA PRODUCT MANAGEMENT, INC., a Florida corporation ('Tech Data'), with
its principal corporate address at 5350 Tech Data Drive, Clearwater, Florida
33760 and SONIC SYSTEMS, INC., a California corporation ('VENDOR' or 'Vendor'),
with its principal corporate address at: 5400 Betsy Ross Drive, Suite 206, Santa
Clara, CA 95054-1101.

                                    RECITALS

          A.  Tech Data desires to purchase certain Products from VENDOR from
time to time and VENDOR desires to sell certain Products to Tech Data in
accordance with the terms and conditions set forth in this Agreement.

          B.  VENDOR desires to appoint Tech Data as its non-exclusive
distributor to market Products within the Territory (as hereinafter defined) and
Tech Data accepts such appointment on the terms set forth in this Agreement.

          NOW, THEREFORE, in consideration of the Recitals, the mutual covenants
contained in this Agreement and other good and valuable consideration, Tech Data
and VENDOR hereby agree as follows:

                                   ARTICLE I.
                                   ----------
                 DEFINITIONS, APPOINTMENT AND TERM OF AGREEMENT
                 ----------------------------------------------

1.1  Definitions.  The following definitions shall apply to this Agreement.
     -----------                                                           

     (a) 'Customers' of Tech Data shall include dealers, resellers, value added
     resellers, mail order resellers and other entities that acquire the
     Products from Tech Data.

     (b) 'DOA' shall mean Product, or any portion thereof, which fails to
     operate properly on initial 'burn in,' boot, or use, as applicable.

     (c) 'Documentation' shall mean user manuals, training materials, product
     descriptions and specifications, brochures, technical manuals, license
     agreements, supporting materials and other printed information relating to
     the Products, whether distributed in print, electronic, or video format.

     (d) 'Effective Date' shall mean the date on which this Agreement is signed
     and dated by a duly authorized representative of Tech Data.

     (e) 'End Users' shall mean the final retail purchasers or licensees who
     have acquired Products for their own use and not for resale, remarketing or
     redistribution.

     (f) 'Non-Saleable Products' shall mean any Product that has been returned
     to Tech Data by its Customers that has had the outside shrink wrapping or
     other packaging seal 

                                       2

 
     broken; any components of the original package are missing, damaged or
     modified; or is otherwise not fit for resale.

     (g) 'Products' shall mean, individually or collectively as appropriate,
     hardware, licensed software, Documentation, supplies, accessories, and
     other commodities related to any of the foregoing produced by VENDOR, as
     more particularly described in Schedule 1.1 (g) attached hereto.

     (h) 'Return Credit' shall mean a credit to Tech Data in an amount equal to
     the price paid by Tech Data for Products less any price protection credits
     but not including any early payment or prepayment discounts.

     (i) 'Services' means any warranty, maintenance, advertising, marketing or
     technical support and any other services performed or to be performed by
     VENDOR.

     (j) 'Territory' shall mean the United States of America, Canada, Mexico and
     South America.

1.2  Term of Agreement. The term of this Agreement shall commence on the
     -----------------
     Effective Date and, unless terminated by either party as set forth in this
     Agreement, shall remain in full force and effect for a term of one (1)
     year, and will be automatically renewed for successive one (1) year terms
     unless prior written notification of termination is delivered by one of the
     parties in accordance with the notice provision of this Agreement.

1.3  Appointment as Distributor. VENDOR hereby grants to Tech Data the non-
     --------------------------
     exclusive right to distribute Products within the Territory during the term
     of this Agreement. This Agreement does not grant VENDOR or Tech Data an
     exclusive right to purchase or sell Products and shall not prevent either
     party from developing or acquiring other vendors or customers or competing
     Products. Tech Data will use commercially reasonable efforts to promote
     sales of the Products. VENDOR agrees that Tech Data may obtain Products in
     accordance with this Agreement for the benefit of its parent, affiliates
     and subsidiaries of Tech Data. Said parent, affiliates and subsidiaries of
     Tech Data shall be entitled to order Products directly from VENDOR pursuant
     to this Agreement.

                         ARTICLE II. PURCHASE ORDERS
                         ---------------------------

2.1  Issuance and Acceptance of Purchase Order.
     ----------------------------------------- 

     (a) This Agreement shall not obligate Tech Data to purchase any Products or
     Services except as specifically set forth in a written purchase order.

     (b) Tech Data may issue to VENDOR one or more purchase orders identifying
     the Products Tech Data desires to purchase from VENDOR.  Notwithstanding
     any preprinted terms or conditions on Tech Data's purchase orders, the
     terms and conditions of this Agreement shall apply to and govern all
     purchase orders accepted or shipped by VENDOR hereunder, except that
     purchase orders may include other terms and conditions which are consistent
     with the terms and conditions of this Agreement, or which are 

                                       3

 
     mutually agreed to in writing by Tech Data and VENDOR. Purchase orders will
     be placed by Tech Data by fax or electronically transferred.

     (c) A purchase order shall be deemed accepted by VENDOR unless VENDOR
     notifies Tech Data in writing within five (5) days of the date of the
     purchase order that VENDOR does not accept the purchase order.

2.2  Purchase Order Alterations or Cancellations. Prior to shipment of Products,
     -------------------------------------------                       
     VENDOR shall accept alterations or cancellation to a purchase order in
     order to: (i) change a location for delivery, (ii) modify the quantity or
     type of Products to be delivered or (iii) correct typographical or clerical
     errors.

2.3  Evaluation or Demonstration Purchase Orders. VENDOR shall provide to Tech
     -------------------------------------------                          
     Data a reasonable number of demonstration or evaluation Products at no
     charge.

2.4  Product Shortages. If for any reason VENDOR's production is not on
     -----------------                                                  
     schedule, VENDOR may allocate available inventory to Tech Data and make
     shipments based upon a fair and reasonable percentage allocation among
     VENDOR's customers.

2.5  Proof of Delivery.  Vendor shall provide to Tech Data, at no charge, a hard
     -----------------                                                     
     copy Proof of Delivery ('POD') for any drop shipment requested by Tech
     Data. The POD shall be faxed to Tech Data within five (5) business days of
     the initial request. If the POD is not received within the specified time,
     the invoice will be considered disputed and no payment shall be made to
     Vendor on that invoice.

                           ARTICLE III. DELIVERY AND
                          -------------------------
                      ARTICLE IV. ACCEPTANCE OF PRODUCTS
                      ----------------------------------

3.1  Acceptance of Products.  Tech Data shall, after a reasonable time to 
     ----------------------                                              
     inspect each shipment, which will not exceed thirty (30) days, accept
     Product (the 'Acceptance Date') if the Products and all necessary
     documentation delivered to Tech Data are in accordance with the purchase
     order.  Any Products not ordered or not otherwise in accordance with the
     purchase order (e.g. mis-shipments, overshipments) may be returned to
     VENDOR at VENDOR's expense (including without limitation costs of shipment
     or storage).  VENDOR shall refund to Tech Data within ten (10) business
     days following notice thereof, all monies paid in respect to such rejected
     Products.  Tech Data shall not be required to accept partial shipment
     unless Tech Data is notified prior to shipment.

3.2  Title and Risk of Loss. FOB Origin, Santa Clara, CA. Title and risk of loss
     ----------------------                                               
     or damage to Products shall pass to Tech Data at the time the Products are
     delivered to Tech Data's designated carrier.

3.3  Transportation of Products. VENDOR shall deliver the Products clearly
     --------------------------
     marked on the Product package with serial number, Product description and
     machine readable bar code (employing UPC or other industry standard bar
     code) to Tech Data at the location shown and on the delivery date set forth
     in the applicable purchase order or as otherwise agreed upon by the
     parties. Charges for transportation of the Products shall be paid by
     VENDOR. VENDOR shall use only those common carriers preapproved by Tech
     Data 

                                       4

 
     or listed in Tech Data's published routing instructions, unless prior
     written approval of Tech Data is received.

                              ARTICLE IV RETURNS
                              ------------------

4.1  Inventory Adjustment. VENDOR agrees to accept return of overstocked
     --------------------                                                
     Products up to [*] of net quarterly purchases for the preceding quarter.
     Shipments of Product being returned shall be new, unused and in sealed
     cartons. VENDOR shall credit Tech Data's account in the amount of the
     Return Credit.

4.2  Defective Products/Dead on Arrival (DOA).  Tech Data shall have the right 
     ----------------------------------------                           
     to return to VENDOR for Return Credit any DOA Product that is returned to
     Tech Data within ninety (90) days after the initial delivery date to Tech
     Data's Customer and any Product that fails to perform in accordance with
     VENDOR's Product warranty. VENDOR shall bear all costs of shipping and risk
     of loss of DOA and in-warranty Products to VENDOR's location.

4.3  Obsolete or Outdated Product. Tech Data shall have the right to return for
     ----------------------------
     Return Credit, without limitation as to the dollar amount, all Products
     that become obsolete or VENDOR discontinues or are removed from VENDOR's
     current price list; provided Tech Data returns such Products within ninety
     (90) days after Tech Data receives written notice from VENDOR that such
     Products are obsolete, superseded by a newer version, discontinued or are
     removed from VENDOR's price list. VENDOR shall bear all costs of shipping
     and risk of loss of obsolete or outdated Products to VENDOR's location.

4.4  Miscellaneous Returns.
     --------------------- 

     (a)  Bad Box. Tech Data shall have the right to return to VENDOR for Return
          -------  
     Credit Products which have boxes that are or become damaged.

     (b)  Non-Saleable.  Tech Data shall have the right to return to VENDOR for
          ------------                                                         
     Return Credit Non-Saleable Products.

4.5  Condition Precedent to Returns.  As a condition precedent to returning
     ------------------------------                                        
     Products, Tech Data shall request and VENDOR shall issue a Return Material
     Authorization Number ('RMA') in accordance with this Agreement as provided
     in Section 8.9.

                       ARTICLE V. PAYMENT TO VENDOR
                       ----------------------------

5.1  Charges, Prices and Fees for Products.  Charges, prices, quantities and
     -------------------------------------                              
     and discounts, if any, for Products shall be determined as set forth in
     Schedule 1.1 (g), or as otherwise mutually agreed upon by the parties in
     writing, and may be confirmed at the time of order.  In no event shall
     charges exceed VENDOR's then current established charges.  Tech Data shall
     not be bound by any of VENDOR's suggested prices.

5.2  Payment.  Except as otherwise set forth in this Agreement, any undisputed
     -------                                                       
     sum due to VENDOR pursuant to this Agreement shall be payable as follows:
     [*], net forty five (45) days after the invoice receipt. VENDOR shall
     invoice Tech Data no earlier than the 

                                       5

 
     applicable shipping date for the Products covered by such invoice. Products
     which are shipped from outside the United States shall not be invoiced to
     Tech Data prior to the Products being placed on a common carrier within the
     United States for final delivery to Tech Data. The due date for payments
     directly associated with a bona fide dispute shall be extended during any
     time the parties have a bona fide dispute concerning such payment. During
     the time a bona fide dispute is being rectified all other payments shall be
     made as per the terms in this section. Notwithstanding anything herein to
     the contrary, for the initial order only, payment shall be made by Tech
     Data net ninety (90) days after receipt of invoice.

5.3  Invoices.  A 'correct' invoice shall contain (i) VENDOR's name and invoice
     --------                                                          
     date, (ii) a reference to the purchase order or other authorizing document,
     (iii) separate descriptions, unit prices and quantities of the Products
     actually delivered, (iv) credits (if applicable), (v) shipping charges (if
     applicable) (vi) name (where applicable), title, phone number and complete
     mailing address as to where payment is to be sent, and (vii) other
     substantiating documentation or information as may reasonably be required
     by Tech Data from time to time. Notwithstanding any pre-printed terms or
     conditions on VENDOR's invoices, the terms and conditions of this Agreement
     shall apply to and govern all invoices issued by VENDOR hereunder, except
     that invoices may include other terms and conditions which are consistent
     with the terms and conditions of this Agreement, or which are mutually
     agreed to in writing by Tech Data and VENDOR.

5.4  Taxes.  Tech Data shall be responsible for franchise taxes, sales or use
     -----                                                               
     taxes or shall provide VENDOR with an appropriate exemption certificate.
     VENDOR shall be responsible for all other taxes, assessments, permits and
     fees, however designated which are levied upon this Agreement or the
     Products, except for taxes based upon Tech Data's income. No taxes of any
     type shall be added to invoices without the prior written approval of Tech
     Data.

5.5  Fair Pricing and Terms.  VENDOR represents that the prices charged and the
     ----------------------                                                
     terms offered to Tech Data are and will be at least as beneficial to Tech
     Data as those charged or offered by VENDOR to any of its other distributors
     in the Territory. If VENDOR offers price discounts, payment discounts,
     promotional discounts or other special prices to its other distributors in
     the Territory, Tech Data shall also be entitled to participate and receive
     notice of the same no later than other distributors.

5.6  Price Adjustments.
     ----------------- 

     (a) Price Increases.  VENDOR shall have the right to increase prices from
         ---------------                                                      
     time to time, upon written notice to Tech Data not less than thirty (30)
     days prior to the effective date of such increase.  All orders placed prior
     to the effective date of the increase, for shipment within thirty (30) days
     after the effective date, shall be invoiced by VENDOR at the lower price.

     (b) Price Decreases.  VENDOR shall have the right to decrease prices from
         ---------------                                                      
     time to time, upon written notice to Tech Data not less than the notice
     which it provides its other distributors in the channel.  VENDOR shall
     grant to Tech Data, its parent, affiliates and 

                                       6

 
     subsidiaries and Tech Data's Customers (any Customer price protection will
     be determined on a case by case basis), a price credit for the full amount
     of any VENDOR price decrease on all Products on order, in transit and in
     their inventory on the effective date of such price decrease. Tech Data and
     its Customers shall, within forty five (45) days after receiving written
     notice of the effective date of the price decrease, provide a list of all
     Products for which they claim a credit. VENDOR shall have the right to a
     reasonable audit at VENDOR's expense.

5.7  Advertising.
     ----------- 

     (a) Cooperative Advertising.  VENDOR offers a three percent (3%) co-op
         -----------------------                                           
     program and may offer additional advertising credits, or other promotional
     programs or incentives to Tech Data as it offers to its other distributors
     or customers.  Tech Data shall have the right, at Tech Data's option, to
     participate in such programs.  Attached as Schedule 5.7 is a copy of
     VENDOR's co-op policy.

     (b) Advertising Support.  VENDOR shall provide at no charge to Tech Data
         -------------------                                                 
     and the Customers of Tech Data, marketing support, and advertising
     materials in connection with the resale of Products as are currently
     offered or that may be offered by VENDOR.  Tech Data reserves the right to
     charge VENDOR for advertising, marketing and training services.

     (c) Launch Funds.  Prior to receipt of the initial purchase order, VENDOR
         ------------                                                         
     shall pay Tech Data for all launch funds expenditures to which VENDOR and
     Tech Data have agreed.

                                  ARTICLE VI.
                                  -----------
            WARRANTIES, INDEMNITIES AND OTHER OBLIGATIONS OF VENDOR
            -------------------------------------------------------

6.1  Warranty.  VENDOR hereby represents and warrants that VENDOR has all right,
     --------                                                            
     title, ownership interest and marketing rights necessary to provide the
     Products to Tech Data. VENDOR further represents and warrants that it has
     not entered into any agreements or commitments which are inconsistent with
     or in conflict with the rights granted to Tech Data in this Agreement; the
     Products are new and shall be free and clear of all liens and encumbrances;
     Tech Data and its Customers and End Users shall be entitled to use the
     Products without disturbance; the Products have been listed with
     Underwriters' Laboratories or other nationally recognized testing
     laboratory whenever such listing is required; the Products meet all FCC
     requirements; the Products do and will conform to all codes, laws or
     regulations; the Products have the ability to accurately recognize and
     process date data related to the 20/th/ and 21/st/ centuries and leap year,
     without error or interruption (are Year 2000 compliant); and the Products
     conform in all respects to the Product warranties. VENDOR agrees that Tech
     Data shall be entitled to pass through to Customers of Tech Data and End
     Users of the Products all Product warranties granted by VENDOR. Tech Data
     shall have no authority to alter or extend any of the warranties of VENDOR
     expressly contained or referred to in this Agreement without prior approval
     of VENDOR. VENDOR has made express warranties in this Agreement and in
     Documentation, promotional and advertising materials. EXCEPT AS SET FORTH

                                       7

 
     HEREIN OR THEREIN, VENDOR DISCLAIMS ALL WARRANTIES WITH REGARD TO THE
     PRODUCTS, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
     MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THIS SECTION SHALL
     SURVIVE TERMINATION OR EXPIRATION OF THIS AGREEMENT.

6.2  Proprietary Rights Indemnification. VENDOR hereby represents and warrants
     ----------------------------------     
     that the Products and the sale and use of the Products do not infringe upon
     any copyright, patent, trademark, trade secret or other proprietary or
     intellectual property right of any third party, and that there are no suits
     or proceedings, pending or threatened, alleging any such infringement.
     VENDOR shall indemnify and hold Tech Data, Tech Data's parent, affiliates
     and subsidiaries and their respective officers, directors, employees and
     agents harmless from and against any and all actions, claims, losses,
     damages, liabilities, awards, costs and expenses, which they or any of them
     incur or become obligated to pay resulting from or arising out of any
     breach or claimed breach of the foregoing warranty. Tech Data shall inform
     VENDOR of any such suit or proceeding filed against Tech Data and shall
     have the right, but not the obligation, to participate in the defense of
     any such suit or proceeding at Tech Data's expense. VENDOR shall, at its
     option and expense, either (i) procure for Tech Data, its Customers and End
     Users the right to continue to use the Product as set forth in this
     Agreement, or (ii) replace, to the extent Products are available, or modify
     the Product to make its use non-infringing while being capable of
     performing the same function without degradation of performance. If neither
     of the foregoing alternatives (i) or (ii) is reasonably available, VENDOR
     shall accept a return of the Products from Tech Data, at VENDOR's sole cost
     and expense, and shall refund to Tech Data the full amount of the price
     paid by Tech Data for said returned Products, less any price protection
     credits, but not including any early payment or prepayment discounts.
     VENDOR shall have no liability under this Section 6.2 for any infringement
     based on the use of any Product, if the Product is used in a manner or with
     equipment for which it was not reasonably intended. VENDOR's obligations
     under this Section 6.2 shall survive termination or expiration of this
     Agreement.

6.3  Indemnification.
     --------------- 

     (a) Vendor.  VENDOR shall be solely responsible for the design,
         ------                                                     
     development, supply, production and performance of the Products.  VENDOR
     agrees to indemnify and hold Tech Data, its parent, affiliates and
     subsidiaries and their officers, directors and employees harmless from and
     against any and all claims, damages, costs, expenses (including, but not
     limited to, reasonable attorneys' fees and costs) or liabilities that may
     result, in whole or in part, from any warranty or Product liability claim,
     or any claim for infringement, or for claims for violation of any of the
     warranties contained in this Agreement.

     (b) Tech Data.  Tech Data agrees to indemnify and hold VENDOR, its
         ---------                                                     
     officers, directors and employees harmless from and against any and all
     claims, damages, costs, expenses (including, but not limited to, reasonable
     attorneys' fees and costs) or liabilities that may result, in whole or in
     part, from Tech Data's gross negligence or willful misconduct in the
     distribution of the Products pursuant to this Agreement, or for

                                       8

 
     representations or warranties made by Tech Data related to the Products in
     excess of the warranties of VENDOR.

6.4  Insurance.
     --------- 

     (a) The parties shall be responsible for providing Workers' Compensation
     insurance in the statutory amounts required by the applicable state laws.

     (b) Without in any way limiting VENDOR's indemnification obligation as set
     forth in this Agreement, VENDOR shall maintain Commercial General Liability
     or Comprehensive General Liability Insurance in such amounts as is
     reasonable and standard for the industry.  Either policy form should
     contain the following coverages: Personal and Advertising Injury, Broad
     Form Property Damage, Products and Completed Operations, Contractual
     Liability, employees as Insured and Fire Legal Liability.

     (c) VENDOR will provide evidence of the existence of insurance coverages
     referred to in this Section 6.4 by certificates of insurance, which should
     also provide for at least thirty (30) days notice of cancellation, non-
     renewal or material change of coverage to Tech Data.  The certificates of
     insurance shall name Tech Data Product Management, Inc., its parent,
     affiliates and subsidiaries as an additional insured for the limited
     purpose of claims arising pursuant to this Agreement.

6.5  Limitation of Liability.  NEITHER PARTY SHALL BE LIABLE TO THE OTHER
     -----------------------                                             
     PURSUANT TO THIS AGREEMENT FOR AMOUNTS REPRESENTING INDIRECT, SPECIAL,
     INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF THE OTHER PARTY ARISING
     FROM THE PERFORMANCE OR BREACH OF ANY TERMS OF THIS AGREEMENT.

6.6  ECCN/Export.  VENDOR agrees to provide Tech Data, upon signing this
     -----------                                                        
     Agreement and at any time thereafter that VENDOR modifies or adds Products
     distributed or to be distributed by Tech Data, with the Export Control
     Classification Number (ECCN) for each of VENDOR's Products, and information
     as to whether or not any of such Products are classified under the U.S.
     Munitions List.

6.7  Financial Statements.  VENDOR agrees that for the term of this Agreement,
     --------------------                                          
     VENDOR shall provide, within one hundred and twenty (120) days after the
     end of VENDOR's 1998 fiscal year, audited financial statements for the 1998
     fiscal year prepared by an independent certified public accountant. Such
     financial statements shall include profit and loss statement, balance
     sheets and such other accounting data as may be requested by Tech Data and
     be acknowledged by VENDOR's authorized representative in writing as true
     and correct.

6.8  Vendor Reports.  VENDOR shall, if requested, render monthly reports to
     --------------                                                        
     Tech Data setting forth the separate Products, dollars invoiced for each
     Product, and total dollars invoiced to Tech Data for the month, and such
     other information as Tech Data may reasonably request.

                                       9

 
6.9  Tech Data Reports.  Tech Data shall, if requested, render monthly sales 
     -----------------                                                
     out reports on Tech Data's BBS system. Information provided will include:
     month and year sales activity occurred, internal product number (assigned
     by Tech Data), written description, state and zip-code of Customer's
     location, unit cost (distributor's cost at quantity 1), quantity and
     extended cost (cost times quantity). A monthly inventory report will be
     provided on a paper format once a month. VENDOR agrees that any such
     information provided by Tech Data shall be received and held by VENDOR in
     strict confidence and shall be used solely for sell through or compensation
     reporting information and shall not be used for purposes related to
     VENDOR's direct sales activities.

6.10 Trademark Usage.  Tech Data is hereby authorized to use trademarks and
     ---------------                                                       
     tradenames of VENDOR and third parties licensing VENDOR, if any, used in
     connection with advertising, promoting or distributing the Products.  Tech
     Data recognizes VENDOR or other third parties may have rights or ownership
     of certain trademarks, trade names and patents associated with the
     Products.  Tech Data will act consistent with such rights, and Tech Data
     shall comply with any reasonable written guidelines when provided by VENDOR
     or third parties licensing VENDOR related to such trademark or trade name
     usage.  Tech Data will notify VENDOR of any infringement of which Tech Data
     has actual knowledge.  Tech Data shall discontinue use of VENDOR's
     trademarks or trade names upon termination of this Agreement, except as may
     be necessary to sell or liquidate any Product remaining in Tech Data's
     inventory.

                                  ARTICLE VII.
                                  ------------
                            TERMINATION; EXPIRATION
                            -----------------------

7.1  Termination.
     ----------- 

     (a) Termination With or Without Cause.  Either party may terminate this
         ---------------------------------                                  
     Agreement, without cause, upon giving the other party thirty (30) days
     prior written notice.  In the event that either party materially or
     repeatedly defaults in the performance of any of its duties or obligations
     set forth in this Agreement, and such default is not substantially cured
     within thirty (30) days after written notice is given to the defaulting
     party specifying the default, then the party not in default may, by giving
     written notice thereof to the defaulting party, terminate this Agreement or
     the applicable purchase order relating to such default as of the date
     specified in such notice of termination.

     (b) Termination for Insolvency or Bankruptcy.  Either party may immediately
         ----------------------------------------                               
     terminate this Agreement and any purchase orders by giving written notice
     to the other party in the event of (i) the liquidation or insolvency of the
     other party, (ii) the  appointment of a receiver or similar officer for the
     other party, (iii) an assignment by the other party for the benefit of all
     or substantially all of its creditors, (iv) entry by the other party into
     an agreement for the composition, extension, or readjustment of all or
     substantially all of its obligations, or (v) the filing of a petition in
     bankruptcy by or against a party under any bankruptcy or debtors' law for
     its relief or reorganization which is not dismissed within ninety (90)
     days.

7.2  Rights Upon Termination or Expiration.
     ------------------------------------- 

                                       10

 
     (a) Termination or expiration of this Agreement shall not affect VENDOR's
     right to be paid for undisputed invoices for Products already shipped and
     accepted by Tech Data or Tech Data's rights to any credits or payments owed
     or accrued to the date of termination or expiration.  Tech Data's rights to
     credits upon termination or expiration shall include credits against which
     Tech Data would, but for termination or expiration, be required under this
     Agreement to apply to future purchases.

     (b) VENDOR shall accept purchase orders from Tech Data for additional
     Products which Tech Data is contractually obligated to furnish to its
     Customers and does not have in its inventory upon the termination or
     expiration of this Agreement; provided Tech Data notifies VENDOR of any and
     all such transactions within fifteen (15) days following the termination or
     expiration date.

     (c) Upon termination or expiration of this Agreement, Tech Data shall
     discontinue holding itself out as a distributor of the Products.

7.3  Repurchase of Products Upon Termination or Expiration.  Upon the effective 
     -----------------------------------------------------           
     date of termination or expiration of this Agreement for any reason, VENDOR
     agrees to repurchase all Products in Tech Data's inventory and Products
     which are returned to Tech Data by its Customers within one hundred twenty
     (120) days following the effective date of termination or expiration.
     VENDOR will repurchase such Products at the original purchase price, less
     any deductions for price protection. The repurchase price shall not be
     reduced by any deductions or offsets for early pay or prepay discounts.
     Such returns shall not reduce or offset any co-op payments or obligations
     owed to Tech Data. Within forty five (45) days following the effective date
     of termination or expiration, Tech Data shall return to VENDOR for
     repurchase all Product held in Tech Data's inventory as of the effective
     date of termination or expiration. VENDOR will issue an RMA to Tech Data
     for all such Products; provided, however, that VENDOR shall accept returned
     Products in accordance with this Section absent an RMA if VENDOR fails to
     issue said RMA within five (5) business days of Tech Data's request. VENDOR
     shall credit any outstanding balances owed to Tech Data. If such credit
     exceeds amounts due from Tech Data, VENDOR shall remit in the form of a
     check to Tech Data the excess within ten (10) business days of receipt of
     the Product. Customized Products shall not be eligible for repurchase
     pursuant to this Section.

7.4  Survival of Terms.  Termination or expiration of this Agreement for any 
     -----------------                                                  
     reason shall not release either party from any liabilities or obligations
     set forth in this Agreement which (i) the parties have expressly agreed
     shall survive any such termination or expiration, or (ii) remain to be
     performed or by their nature would be intended to be applicable following
     any such termination or expiration. The termination or expiration of this
     Agreement shall not affect any of VENDOR's warranties, indemnification
     obligations or obligations relating to returns, co-op advertising payments,
     credits or any other matters set forth in this Agreement that should
     survive termination or expiration in order to carry out their intended
     purpose, all of which shall survive the termination or expiration of this
     Agreement.

                                       11

 
                                 ARTICLE VIII.
                                 -------------
                                 MISCELLANEOUS
                                 -------------

8.1  Binding Nature, Assignment, and Subcontracting.  This Agreement shall be 
     ----------------------------------------------                       
     binding on the parties and their respective successors and assigns. Neither
     party shall have the power to assign this Agreement without the prior
     written consent of the other party.

8.2  Counterparts.  This Agreement may be executed in several counterparts, all 
     ------------                                                          
     of which taken together shall constitute one single agreement between the
     parties.

8.3  Headings.  The Article and Section headings used in this Agreement are for 
     --------                                                              
     reference and convenience only and shall not affect the interpretation of
     this Agreement.

8.4  Relationship of Parties.  The Parties are performing pursuant to this
     -----------------------                                              
     Agreement only as independent contractors.  Nothing set forth in this
     Agreement shall be construed to create the relationship of principal and
     agent between Tech Data and VENDOR.  Neither party shall act or represent
     itself, directly or by implication, as an agent of the other party.

8.5  Confidentiality.  Each party acknowledges that in the course of 
     ---------------                                                
     performance of its obligations pursuant to this Agreement, it may obtain
     certain information specifically marked as confidential or proprietary.
     Each party hereby agrees that all such information communicated to it by
     the other party, its parent, affiliates, subsidiaries, or Customers,
     whether before or after the Effective Date, shall be and was received in
     strict confidence, shall be used only for purposes of this Agreement, and
     shall not be disclosed without the prior written consent of the other
     party, except as may be necessary by reason of legal, accounting or
     regulatory requirements beyond either party's reasonable control.  The
     provisions of this Section shall survive termination or expiration of this
     Agreement for any reason for a period of one (1) year after said
     termination or expiration.

8.6  Arbitration.  Any disputes arising under this Agreement shall be submitted 
     -----------                                                     
     to arbitration in accordance with such rules as the parties jointly agree.
     If the parties are unable to agree on arbitration procedures, arbitration
     shall be conducted in Pinellas County, Florida, in accordance with the
     Commercial Arbitration Rules of the American Arbitration Association. Any
     such award shall be final and binding upon both parties.

8.7  Notices.  Wherever one party is required or permitted to give notice to 
     -------                                                             
     the other party pursuant to this Agreement, such notice shall be deemed
     given when actually delivered by hand, by telecopier (if and when
     immediately confirmed in writing by any of the other means provided herein
     ensuring acknowledgment of receipt thereof for purposes of providing notice
     of default or termination), via overnight courier, or when mailed by
     registered or certified mail, return receipt requested, postage prepaid,
     and addressed as follows:

                                       12

 
     In the Case of Vendor:             In the Case of Tech Data:
     ---------------------              ------------------------ 
     Sonic Systems, Inc.                Tech Data Product Management, Inc.
     5400 Betsy Ross Drive              5350 Tech Data Drive
     Suite 206                          Clearwater, FL 33760
     Santa Clara, CA 95054              Attn: Stephen Giese, Vice President-
     Attn: Sreekanth Ravi, CEO          Marketing Operations
                                        cc: Contracts Administration

     Either party may from time to time change its address for notification
     purposes by giving the other party written notice of the new address and
     the date upon which it will become effective.

8.8  Force Majeure.  The term 'Force Majeure' shall be defined to include fires
     -------------                                                             
     or other casualties or accidents, acts of God, severe weather conditions,
     strikes or labor disputes, war or other violence, or any law, order,
     proclamation, regulation, ordinance, demand or requirement of any
     governmental agency.

     (a) If a Force Majeure condition prevents a party from performance, such
     performance is excused so long as the excused party provides prompt written
     notice describing the Force Majeure condition and immediately continues
     performance once the Force Majeure condition is removed.

     (b) If, due to a Force Majeure condition, the scheduled time of delivery or
     performance is or will be delayed for more than ninety (90) days after the
     scheduled date, the party not relying upon the Force Majeure condition may
     terminate, without liability to the other party, any purchase order or
     portion thereof covering the delayed Products.

8.9  Return Material Authorization Numbers.  VENDOR is required to issue a
     -------------------------------------                                
     Return Material Authorization number ('RMA') to Tech Data within five (5)
     business days of Tech Data's request; however, if the RMA is not received
     within five (5) business days, VENDOR shall accept returned Products absent
     an RMA.

8.10 Credits to Tech Data.  In the event any provision of this Agreement or any
     --------------------                                                      
     other agreement between Tech Data and VENDOR requires that VENDOR grant
     credits to Tech Data's account, and such undisputed credits are not
     received within thirty (30) days, all such undisputed credits shall become
     effective immediately upon notice to VENDOR.  In such event, Tech Data
     shall be entitled to deduct any such undisputed credits from the next
     monies owed to VENDOR.  In the event undisputed credits exceed any balances
     owed by Tech Data to VENDOR, VENDOR shall, upon request from Tech Data,
     issue a check payable to Tech Data within thirty (30) days of such notice.
     Credits owed to Tech Data shall not be reduced by early payment or
     prepayment discounts.  Tech Data shall have the right to set off against
     any amounts due to VENDOR under this Agreement or any invoices issued by
     VENDOR related to this Agreement any and all amounts due to Tech Data from
     VENDOR.

8.11 Severability.  If, but only to the extent that, any provision of this
     ------------                                                         
     Agreement is declared or found to be illegal, unenforceable or void, then
     both parties shall be relieved of all 

                                       13

 
     obligations arising under such provision, it being the intent and agreement
     of the parties that this Agreement shall be deemed amended by modifying
     such provision to the extent necessary to make it legal and enforceable
     while preserving its intent.

8.12 Waiver.  A waiver by either of the parties of any covenants, conditions or
     ------                                                                    
     agreements to be performed by the other party or any breach thereof shall
     not be construed to be a waiver of any succeeding breach thereof or of any
     other covenant, condition or agreement herein contained.

8.13 Remedies.  All remedies set forth in this Agreement shall be cumulative and
     --------                                                                   
     in addition to and not in lieu of any other remedies available to either
     party at law, in equity or otherwise, and may be enforced concurrently or
     from time to time.

8.14 Entire Agreement.  This Agreement, including any Exhibits and documents
     ----------------                                                       
     referred to in this Agreement or attached hereto, constitutes the entire
     and exclusive statement of Agreement between the parties with respect to
     its subject matter and there are no oral or written representations,
     understandings or agreements relating to this Agreement which are not fully
     expressed herein.  The parties agree that unless otherwise agreed to in
     writing by the party intended to be bound, the terms and conditions of this
     Agreement shall prevail over any contrary terms in any purchase order,
     sales acknowledgment, confirmation or any other document issued by either
     party affecting the purchase or sale of Products hereunder.

8.15 Governing Law.  This Agreement shall have Florida as its situs and shall be
     -------------                                                              
     governed by and construed in accordance with the laws of the State of
     Florida, without reference to choice of laws.  The parties agree that this
     Agreement excludes the application of the 1980 United Nations Convention on
     Contracts for the International Sale of Goods, if otherwise applicable.

8.16 Software Licenses.  Whenever the Products described in this Agreement shall
     -----------------                                                          
     include software licenses, VENDOR hereby grants to Tech Data a non-
     exclusive right to market, demonstrate and distribute the software to
     Customers of Tech Data.  Tech Data acknowledges that no title or ownership
     of the proprietary rights to any software is transferred by virtue of this
     Agreement notwithstanding the use of terms such as purchase, sale or the
     like within this Agreement.

8.17 Time of Performance.  Time is hereby expressly made of the essence with
     -------------------                                                    
     respect to each and every term and condition of this Agreement.

                                       14

 
     IN WITNESS WHEREOF, the parties have each caused this Agreement to be
     signed and delivered by its duly authorized officer or representative as of
     the Effective Date.

SONIC SYSTEMS, INC.                     TECH DATA PRODUCT MANAGEMENT, INC.

By: /s/ Sreekanth Ravi                  By: /s/ G.M. Labie
   -------------------------               ------------------------------------

Printed Name: SREEKANTH RAVI            Printed Name: G.M. LABIE

Title: President & CEO                  Title: Senior Vice President, Marketing

Date: 1/25/99                           Date: 2/9/99

                                       15

 
                                  SCHEDULE 5.7

                                CO-OP GUIDELINES

To increase the effectiveness of advertising and sales promotions Tech Data has
developed the following advertising requirements:

HOW CO-OP IS EARNED:
-  Co-op dollars will be [*]% of the purchases made by Tech Data, net of
   returns.
-  Co-op dollars will be accrued on a monthly basis.

HOW CO-OP IS SPENT:

-  Tech Data will obtain VENDOR's prior approval for all co-op expenditures.
-  Tech Data will be reimbursed for [*]% of the cost for ads or promotions that
   feature Vendor products.
-  Co-op dollars will be used within the 12 months immediately following the
   month in which they are earned.

HOW CO-OP IS CLAIMED:

-  Claims for co-op will be submitted to vendor within 60 days of the event
   date.
-  Claims for co-op will be submitted with a copy of vendor prior approval and
   proof of performance.
-  Payment must be remitted within 30 days of the claim date, or Tech Data
   reserves the right to deduct from the next invoice.
   
CO-OP REPORTING:

-  Vendor will submit a quarterly co-op statement outlining (i) co-op earned,
   (ii) co-op used and (iii) co-op claims paid.
   

Accepted:

SONIC SYSTEMS, INC.

/s/ Sreekanth Ravi 
-----------------------

Name: Sreekanth Ravi

Title: President & CEO

Date:

                                       16

 
                            Sonic Products (2/1/99)

               For more information:  Sonic Systems 888-557-6642



   UPC Codes      Network Access and Security Appliances                         Sonic Part #     ECCN    Retail Price    T.D. Cost
                  --------------------------------------------------------------                                        
                  Internet Firewall Appliance                                                                                [*] 
                  -------------------------------------------------------------- 
                                                                                                            
   0758479025504  SonicWALL/10                                                   01-SSC-2550      5E991       [*]            [*] 
   0758479025528  SonicWALL/50                                                   01-SSC-2552      5E991       [*]            [*] 
   0758479025542  SonicWALL Plus                                                 01-SSC-2554      5E991       [*]            [*] 
   0758479025566  SonicWALL Plus DMZ                                             01-SSC-2556      5E991       [*]            [*]
   0758479026501  SonicWALL PRO (AVAILABLE APPROX. 3/15/99)                      01-SSC-2650      5E991       [*]            [*]
                  --------------------------------------------------------------                                
                  Internet Firewall Appliance Upgrades                                                                     
                  --------------------------------------------------------------                                
   0758479025955  SonicWALL VPN for SonicWALL/10 & SonicWALL/50                  01-SSC-2595      5D992       [*]            [*]
   0758479025962  SonicWALL VPN for SonicWALL Plus & SonicWALL Plus DMZ          01-SSC-2596      5D992       [*]            [*]
   0758479025603  SonicWALL/10 Content Filter Subscription                       01-SSC-2560      5D991       [*]            [*]
   0758479025634  SonicWALL/50 Content Filter Subscription                       01-SSC-2563      5D991       [*]            [*]
   0758479025665  SonicWALL Plus, Plus DMZ & PRO Content Filter Subscription     01-SSC-2566      5D991       [*]            [*]
   0758479025726  SonicWALL/10 to SonicWALL/50 Upgrade (50 Nodes)                01-SSC-2572      5D991       [*]            [*]
   0758479025733  SonicWALL/10 to SonicWALL Plus Upgrade (Unlimited Nodes)       01-SSC-2573      5D991       [*]            [*]
   0758479025740  SonicWALL/50 to SonicWALL Plus Upgrade (Unlimited Nodes)       01-SSC-2574      5D991       [*]            [*]


                                       17