Master Outsourcing Agreement - Motorola Inc. and Linuxcare Inc.


                         MASTER OUTSOURCING AGREEMENT

                            (MAINTENANCE SERVICES)

     This Master Outsourcing Agreement (Maintenance Services) (the "Agreement")
is made as of the 13th day of December, 1999 by and between Motorola, Inc., a
Delaware corporation, through its Motorola Computer Group, with its principal
office located at 2900 South Diablo Way, Tempe, AZ 85282 ("MCG"), and LinuxCare,
Inc, with its principal office located at 650 Townsend St. San Francisco, CA
94103 (VENDOR).

                                   RECITALS

A.   MCG manufactures, sells, distributes and licenses certain computer hardware
and software products and other third party products in connection with such
computer products.

B.   MCG provides installation, maintenance and other services for such computer
products and such third party products.

C.   VENDOR is in the business of providing engineering support, training,
development, and consulting services for Linux products.

D.   MCG desires to establish a contractual relationship with VENDOR whereby
VENDOR will provide a significant portion of MCG's support and other support
related services directly to MCG pursuant to the terms and conditions of this
Agreement.

                                   AGREEMENT

     NOW, THEREFORE, MCG and VENDOR agree as follows:

1.   DEFINITIONS

     As used in this Agreement, the following terms shall have the following
meanings (such definitions to be equally applicable to both the singular and the
plural forms of the terms defined). Unless otherwise indicated, references to
Schedules and Exhibits shall mean Schedules and Exhibits to this Agreement, as
such Schedules and Exhibits may be amended, supplemented or modified from time
to time.

     (a)  "Base Term" shall have the meaning set forth in Section 3(a) of this
     Agreement.

     (b)  "Customer Data" shall mean the customer contract files and other
     information pertaining to the customers, as communicated and provided to
     VENDOR by MCG in its sole discretion, whose service maintenance will be
     provided by VENDOR on behalf of MCG hereunder.

     (c)  "Effective Date" shall mean December 13, 1999.

                                      -1-


 
     (d)  "Eligible Products" shall mean all Linux operating system software
     currently or in the future supported by MCG or any of its affiliates
     subject to any third party contractual terms between MCG and the third
     party.

     (e)  "Loaned Equipment" shall mean equipment identified by MCG for the
     support or servicing of Eligible Products which is to be loaned to VENDOR
     as provided in Section 5 (c) herein.

     (f)  "Major Facilities" shall mean the Major Parts Facilities and VENDOR's
     facilities in 650 Townsend St. San Francisco, CA 94103.

     (g)  "Service Area" shall mean the geographic location identified in
     Schedule 1(h).

     (h)  "Services" shall mean the obligations, duties and services described
     in an attached Statement of Work.

     (i)  "Statement of Work" shall mean all of the obligations, duties and
     services of VENDOR in respect of the support and servicing of Eligible
     Products including, without limitation, remote customer service, call
     management, and customer tracking, as set forth in detail in the Statement
     of Work attached hereto as an exhibit.
                                   -------

     (j)  "Technical Documentation" shall mean diagnostic software and tools
     (including without limitation, operations and maintenance manuals, training
     materials, logic diagrams, service aids and know-how related to the
     Eligible Products that are necessary or appropriate, as communicated and
     provided to VENDOR by MCG in its sole discretion and to the extent MCG is
     permitted under third party licenses to communicate and provide such items
     to VENDOR, for VENDOR's engineers to support the Eligible Products
     properly.

     (k)  "Transition Completion Date" shall mean the date when the transition
     is completed in full and VENDOR is capable of performing the in accordance
     with the standards and requirements specified in the Transition Plan, as
     such date may be modified from time to time in connection with revisions to
     such Transition Plan.

     (l)  "Transition Coordinator" shall mean an individual identified by VENDOR
     who shall be acceptable to MCG and who shall serve as the Transition
     Coordinator for purposes of Section 4(c) hereof.

     (m)  "Transition Plan" shall mean the plan created through joint effort of
     VENDOR and MCG as set forth in Section 4(a), below.

     (n)  "Transition Phase" shall mean the period commencing on the Effective
     Date and ending on the Transition Completion Date.

     (o)  "VENDOR Onsite Project Manager" shall have the meaning set forth in
     Section 4(c).

                                      -2-


 
2.   APPOINTMENT AS SERVICE CONTRACTOR

     (a)  Appointment. Upon and subject to the terms and conditions of this
          -----------    
Agreement, MCG hereby appoints VENDOR, as its contractor, to perform the Support
for or with respect to the Eligible Products within the Service Area. VENDOR may
subcontract its obligations under this Agreement to third parties provided that
(i) such third parties agree to the terms and provisions of this Agreement
applicable to the services provided by such third parties, which provisions
shall at minimum require full compliance with Section 9 - Confidential
Information; (ii) VENDOR provides MCG prior notice of the full identity (i.e.,
name, telephone number and address) of such third party and a description of the
services being so provided, and (iii) VENDOR obtains MCG's prior written consent
of such third party for the particular subcontract, which consent shall not be
unreasonably withheld. VENDOR shall indemnify MCG for any and all claims made
against MCG resulting out of any acts or omissions of such third parties in
accordance with the provisions of Section 10(a), below.

     (b)  Acceptance of Appointment. VENDOR hereby accepts such appointment and
          -------------------------
agrees to perform the Services on or with respect to the Eligible Products
within the Service Area. VENDOR agrees to perform the Services promptly, in a
skillful, competent and workmanlike manner, and in accordance with the standards
of skill and care exercised by equipment maintenance and service providers with
respect to similar equipment.

     (c)  Non-exclusivity. MCG and VENDOR hereby acknowledge and agree that the
          ---------------
appointment of VENDOR hereunder is not exclusive. At any time, and at its sole
discretion, MCG, Motorola, Inc., and any of their respective divisions,
subsidiaries or affiliates may perform and/or may engage any third party to
perform any or all of the Services (or any other services) within or outside of
the Service Area. Nothing in this Agreement is intended to limit or restrict
VENDOR's right to provide maintenance services (including services comparable to
the Services) on behalf of other equipment vendors; provided, that any such
                                                    --------
services performed by VENDOR on behalf of any other vendor shall not interfere
with or limit VENDOR's ability to fully and timely perform the Services.

3.   TERM OF AGREEMENT

     (a)  Base Term. Subject to Section 3(b) hereof, the term of this Agreement
          ---------
will commence on the Effective Date and will, unless sooner terminated in
accordance with the provisions hereof, and subject to the requirements of
Section 12, end on the third (3rd) anniversary thereof.

     (b)  Automatic Annual Extension. The term of this Agreement shall
          --------------------------
automatically be extended for successive periods of one year each; provided,
                                                                   --------
that the term of this Agreement shall not be extended under this Section 3(b) if
either party shall have delivered, not later than twelve (12) months prior to
the then scheduled expiration date, written notice to the other party of its
election not to have the term of Services to be provided under this Agreement
automatically extended pursuant to this Section 3(b).

                                      -3-


 
4.   TRANSITION PHASE

     (a)  Transition Management. VENDOR will be responsible for all transition
          ---------------------
management and transition planning. To the extent MCG has any suggested
additions or modifications, the parties shall immediately confer and in good
faith attempt to resolve any disagreements that may arise. Both MCG and VENDOR
will diligently and timely perform their respective duties and tasks under a
mutually agreed-upon Transition Plan in accordance with the provisions of this
Agreement, the Statement of Work and the Transition Plan so that the Transition
Phase will be completed successfully within the schedule established in the
Transition Plan.

     (b)  Failure to Meet Transition Completion Date. In addition to MCG's right
          ------------------------------------------
to recover actual damages, in the event that VENDOR fails to perform its
obligations hereunder with respect to the Transition Phase in accordance with
the Statement of Work and the Transition Plan such that the Transition
Completion Date does not occur on or before the date set by mutual agreement of
the parties:

          (i)  VENDOR shall make available to MCG all personnel, equipment and
     other resources in addition to such personnel, equipment and other
     resources then dedicated to the MCG Transition Phase that are necessary
     under the circumstances to maintain MCG's service and maintenance
     operations fully operational at the same service level at which it was
     operating on the Effective Date. VENDOR shall be reimbursed for use of the
     technical people at the telephone only support rates. On site services
     performed by VENDOR during this period will be reimbursed by the Flat Rate
     Per Incident On-site Labor Rate as set forth in the Statement of Work.

          (ii) If the Transition Completion Date has not occurred by the
     mutually agreed date, VENDOR shall as soon as possible submit to MCG a
     written plan to complete the Transition. MCG shall have a mutually agreed
     to time period in which, by written notice to VENDOR, to (A) accept the
     written plan, (B) terminate this Agreement as of a date specified in the
     termination notice, without any further financial obligations to VENDOR or
     (C) elect to stay at current implementation level of the Transition Plan.
     If MCG does not provide a written response, it shall be deemed to have
     elected to stay at the current implementation level. Nothing in this
     Section 4 shall be intended to restrict or limit MCG's right to initiate
     discussions and/or negotiations with any other maintenance service provider
     during or after the Transition Phase.

5.   GENERAL COVENANTS RELATING TO THE SERVICES

     (a)  Personnel. VENDOR agrees to maintain sufficient staffing levels to
          ---------
          cause all Services to be performed in accordance with, and within the
time frames specified in, the Statement of Work. VENDOR shall assign to
maintenance services only trained and experienced personnel. Such personnel must
be technically qualified by MCG to the appropriate level required, and as
determined by MCG, for the Eligible Products to be maintained by VENDOR pursuant
to this Agreement.

                                      -4-


 
     (b)  Loaned Equipment. MCG shall deliver to VENDOR and VENDOR shall accept
          ----------------
          the delivery of the Loaned Equipment set forth in Schedule 5(c),
          attached hereto, as prescribed in the Transition Plan and such other
          Loaned Equipment as MCG shall determine is required from time to time.
          Such Loaned Equipment shall be used by VENDOR solely in the
          performance of the Services. Unless otherwise agreed to by MCG in
          writing, such Loaned Equipment shall remain the property of MCG. Upon
          delivery to VENDOR, VENDOR assumes the cost of labor for safekeeping,
          maintaining and repairing the Loaned Equipment and shall keep such
          Loaned Equipment in good working order and repair, subject to
          reasonable wear and tear that does not adversely affect the utility or
          efficiency of such Loaned Equipment. MCG shall provide the parts to
          the Loaned Equipment as requested by VENDOR in connection with the
          safekeeping, maintenance and repair of the Loaned Equipment. VENDOR
          shall maintain complete and accurate records of the location and
          condition of the Loaned Equipment and shall execute precautionary UCC-
          1 financing statements and any other documents that are reasonably
          necessary to protect MCG's ownership interest in such Loaned
          Equipment. VENDOR shall keep all such Loaned Equipment prominently
          marked with clear and readable labels, signs, or notices indicating
          "MOTOROLA, INC. PROPERTY." Upon delivery of Loaned Equipment to
          VENDOR, VENDOR assumes all risk of loss, theft, damage or casualty to
          such Loaned Equipment including, without limitation, any such loss,
          theft, damage or casualty occurring during any subsequent transfer of
          such Loaned Equipment to other VENDOR facilities or to customer
          locations and shall indemnify and hold MCG harmless from and against
          any such loss, theft, damage or casualty.

     (c)  Customer Data. MCG shall provide Customer Data to VENDOR as described
          -------------
          in the Statement of Work.

     (e)  Technical Documentation. MCG shall provide to VENDOR reasonably
          -----------------------
          sufficient copies of the Technical Documentation at no charge to
          VENDOR. All such Technical Documentation shall, to the extent owned by
          MCG, remain the property of MCG including, without limitation, all
          modifications, enhancements, improvements and translations
          ("Improvements to Technical Documentation") made to it by any party.
          However, MCG hereby grants to VENDOR a non-exclusive, royalty free,
          right and license, limited as further described herein, to use the 
          MCG-owned Technical Documentation solely for the purpose of providing
          services for customers pursuant to contracts such customers have with
          MCG only. To the extent Technical Documentation is licensed to MCG
          from a third party, MCG shall to the extent permitted by such third
          party license provide VENDOR rights under the terms of such third
          party license. VENDOR shall abide by all restrictions, limitations and
          conditions imposed on or in connection with such Technical
          Documentation as mutually agreed by the parties. Upon termination,
          expiration or cancellation of this Agreement, VENDOR shall return all
          Technical Documentation, including all copies thereof, to MCG. VENDOR
          shall have no right or license to copy or modify the Technical
          Documentation, unless otherwise agreed to in writing by MCG. VENDOR
          agrees to preserve and not remove or obscure any proprietary
          information notices or other use restrictions, including without
          limitation, any copyright notices, trademarks and

                                      -5-


 
          restricted government rights legends. The Technical Documentation are
          provided hereunder "As Is" with no representation or warranty
          whatsoever. Specifically, MCG does not represent or warrant that the
          Technical Documentation does not infringe any third party intellectual
          property rights.

     (f)  Reports. VENDOR shall prepare such reports, summaries, analyses and
          -------
          shall supply such data and other material as specified in the
          Statement of Work, and as otherwise reasonably requested by MCG.

     (g)  Inspections. After notification by MCG, VENDOR shall attempt to
          -----------
          accommodate immediately but shall in no case later than 2 days allow
          MCG to visit and inspect during VENDOR's normal business hours without
          interference to VENDOR's business at any facility of VENDOR where
          Services are performed or Loaned Equipment, Customer Data or Technical
          Documents are used or stored and to inspect all records of VENDOR kept
          or maintained in connection with the Services. Such representatives
          from MCG may be required to be escorted by VENDOR for security
          purposes. Such inspections shall include the opportunity to monitor
          VENDOR's compliance with every aspect of the Statement of Work. VENDOR
          will at all times requested by MCG cooperate with and assist such
          persons in locating and gaining access to such facilities and records.

     (h)  Financial Information. VENDOR shall provide immediately notice to MCG
          ---------------------
          of any event or condition that in VENDOR's reasonable judgment results
          in or is reasonably likely to result in a material adverse change to
          the solvency, financial condition or business operations of VENDOR.

     (i)  Quality Metric Measurements and Reporting of VENDOR's Performance. MCG
          -----------------------------------------------------------------
          and VENDOR will, on a regularly scheduled basis, meet to define and
          mutually agree upon the Quality Metric goals for the Quality Metrics
          defined in Exhibit D. VENDOR agrees to present, at MCG's monthly
          quality meeting in Tempe, Arizona, the performance data for the goals
          set above and provide root cause analysis and corrective action plans
          for all quality metric goals missed. If the quality goals missed are
          not resolved to MCG's satisfaction for a period of 3 consecutive
          months, MCG shall provide written notice to VENDOR stating the
          specific deficiencies and missed goals and requesting that an
          appropriate member of VENDOR's senior staff at the Vice President or
          Senior Vice President level attend the next MCG monthly quality
          meeting and to be present at such time. Such senior staff person shall
          attend the noticed MCG monthly quality meeting and shall present an
          executive action plan which will define how VENDOR plans to resolve
          the deficiencies and missed goals. Unless otherwise agreed to by the
          parties, all such deficiencies and missed goals must be successfully
          rectified within 90 days thereafter.

6.   FEES

     In consideration of VENDOR performing its obligations hereunder, MCG shall
pay VENDOR the fees and charges as specified in the Statement of Work. All
billable service

                                      -6-


 
performed in each month shall be invoiced the following month. All payments
required to be made by MCG hereunder shall be due and payable within thirty (30)
days from receipt of an accurate invoice. VENDOR will be permitted to increase
its prices for services as set forth in the Statement of Work no greater than 5%
for each year, after expiration of the Base Term. Notwithstanding anything to
the contrary, MCG shall be entitled to the most favorable prices for services
for equivalent type and volume of services. MCG shall provide VENDOR evidence of
tax exemption for each applicable state as required, otherwise, applicable tax
will be included with invoices.

7.   TITLE

     MCG shall retain all rights (including, without limitation, all
intellectual property rights), title, and interest in and to all Technical
Documentation, Customer Data, Loaned Equipment and Parts delivered to and/or
retrieved by VENDOR hereunder. VENDOR shall not make any contrary
representations to any third party. VENDOR shall not use, sell or encumber the
Technical Documentation, Customer Data, and Loaned Equipment for its own
account. VENDOR agrees to take all additional actions reasonably requested by
MCG to preserve MCG's rights in all Technical Documentation, Customer Data, and
Loaned Equipment, including, without limitation, keeping all Technical
Documentation, Customer Data, Loaned Equipment secure and separate from any
other inventory or materials which do not belong to MCG, placing and maintaining
signs on VENDOR's premises or tags on the property announcing MCG's ownership
and executing any documents reasonably necessary to preserve MCG's ownership
interest. VENDOR shall at all times keep all Technical Documentation, Customer
Data, and Loaned Equipment free and clear of any claims, liens, charges and
legal processes of VENDOR's creditors and shall defend, at is own cost and
expense, MCG's title to or rights in all such Technical Documentation, Customer
Data, and Loaned Equipment against all claims, liens, charges and legal
processes of creditors of VENDOR and shall indemnify, defend and hold MCG
harmless from and against any such claims, liens, charges and processes.

8.   REPRESENTATIONS AND WARRANTIES

Each party ("Representing Party") represents and warrants to and for the benefit
of the other party that on the Effective Date:

     (a)  Representing Party is validly existing and in good standing under the
laws of the state in which its principle office is located and is duly licensed
or qualified and is in good standing wherever necessary to carry on its present
business and operations and to own or lease its properties and has the power and
authority and all necessary licenses and permits to carry on its present
business and operations (including carrying on its business as presently
conducted), to own or lease its properties and to enter into and perform its
obligations under this Agreement.

     (b)  This Agreement has been duly authorized, executed and delivered by
Representing Party and constitutes legal, valid and binding obligations of
Representing Party enforceable against Representing Party in accordance with its
respective terms, subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium, or similar laws affecting creditors' rights generally
and subject to general principles of equity.

                                      -7-


 
     (c)  The execution and delivery of this Agreement and compliance by
Representing Party with all of the provisions hereof do not require any partner
(or any partner or shareholder of any partner) approval and do not and will not
contravene any law, rule, regulation, judgment or decree applicable to or
binding on Representing Party or require any consent of a third party or
contravene the provisions of, or constitute a default under, or result in the
creation of any lien on the property of Representing Party under, a general
partnership agreement or any indenture, mortgage, contract or other agreement or
instrument to which Representing Party is a party or by which it or any of its
property may be bound or affected.

     (d)  Representing Party is not in default, and no event or condition exists
which after the giving of notice or lapse of time or both would constitute an
event of default, under any mortgage, indenture, contract, agreement, judgment
or other undertaking to which Representing Party is a party or upon any of the
assets of Representing Party, except for any such default, event or condition
which, individually or in the aggregate, would not materially adversely affect
Representing Party financial condition, business or operations or adversely
affect Representing Party's ability to perform its obligations under this
Agreement.

     (e)  There are no proceedings pending or, to the knowledge of Representing
Party, threatened, and to the knowledge of Representing Party there is no
existing basis for any such proceedings, against or affecting Representing Party
or any subsidiary thereof by or before any court, arbitrator, administrative
agency or other governmental authority which, if adversely determined,
individually or in the aggregate might be reasonably expected to materially
adversely affect the properties, business, prospects, profits or condition of
Representing Party or adversely affect Representing Party's ability to perform
its obligations under this Agreement. Neither Representing Party nor any of its
subsidiaries is in default with respect to any order of any court, arbitrator,
administrative agency or other governmental authority, the violation of which
individually or in the aggregate might be reasonably expected to materially
adversely affect the properties, business, prospects, profits or condition of
Representing Party or adversely affect Representing Party's ability to perform
its obligations under this Agreement.

     (f)  Neither the execution and delivery by Representing Party of this
Agreement, nor the performance by Representing Party of its obligations
hereunder require the consent, approval or authorization of, the giving of
notice to, or the filing, registration, qualification or taking of any other
action with, any Federal, state, or foreign government authority or agency.

     (h)  This Agreement, Representing Party's written response to the other
party's due diligence requests, and the documents referenced or delivered to the
other party, individually or in the aggregate, in connection with this Agreement
do not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements and facts contained in such
documents or writings not false or misleading.

     (g)  VENDOR chief executive office (as such term is used in Article 9 of
the Uniform Commercial Code) is located at 650 Townsend St. San Francisco, CA
94103 and VENDOR hereby agrees to notify MCG in writing of any change in such
location within 30 days of such change.

                                      -8-


 
     (i)  In connection with Representing Party's business, there are no
collective bargaining agreements or other labor agreements to which Representing
Party is a party or by which it is bound. There is and has been no unfair labor
practice complaint against Representing Party in connection with its business
which materially or adversely affects the business of Representing Party. There
are and have been no labor strike or other material labor trouble affecting its
business and no pending representation question respecting the employees of
Representing Party in connection with its business.

     (j)  Representing Party and its affiliates have filed or caused to be filed
all Federal, state, local and foreign tax returns required to be filed and have
paid or caused to be paid all taxes shown to be due and payable on such returns
or any assessment received by Representing Party or any of its subsidiaries, to
the extent such taxes are due and payable (except to the extent (i) such taxes
are being contested in good faith, or (ii) such failure to file tax returns or
pay taxes would not have any material adverse effect on the properties,
business, prospects, profits, or condition of Representing Party).

9.   CONFIDENTIAL INFORMATION

     (a)  Except as provided hereinafter, for a period of five (5) years after
termination or expiration of this Agreement, each party shall not disclose,
publish or disseminate information received from the other party which may be
required to carry out this Agreement and which the disclosing party deems
proprietary and confidential, and which has been reduced to a tangible medium
and marked confidential (hereinafter "Confidential Information"). In order for
oral information to be considered Confidential Information, it must be confirmed
in writing within thirty (30) days of disclosure.

     (b)  The receiving party agrees to employ the same care (which shall be at
least reasonable) and discretion with respect to Confidential Information of the
disclosing party that it employs with similar information of its own which it
does not desire to disclose, publish or disseminate.

     (c)  The receiving party shall limit use and access of such Confidential
Information to only VENDOR employees and others whose use or access is necessary
to effect the purposes of this Agreement and who have executed confidentiality
agreements substantially equivalent to the terms in this Section 9.

     (d)  At the termination or expiration of this Agreement, the receiving
party shall promptly return all Confidential Information which are in written
form or on other media, including copies thereof, back to the disclosing party.

     (e)  VENDOR agrees that the following constitutes Confidential Information
of MCG without further markings or written notice:

               (i)   the identity of Customers as compiled in a database;

               (ii)  the identity of equipment used by a Customer, and

               (iii) the service history of such Customers.

                                      -9-


 
     (f)  VENDOR further agrees to take all actions necessary to prevent any
Confidential Information from being used or accessed by the product marketing or
sales departments of any other Company.

     (g)  The obligations specified in this Section 9 will not apply to any
information:

               (i)   that is already in the possession of the receiving party
                     without obligation of confidence;

               (ii)  that is independently developed at any time by the
                     receiving party;

               (iii) that is or becomes publicly available without breach of
                     this Agreement;

               (iv)  that is rightfully received by the receiving party from a
                     third party without restriction on disclosure;

               (v)   that is disclosed in response to a valid order of a court
                     or other governmental body of the United States of America
                     or any political subdivision thereof; provided, however,
                     that the disclosing party shall first have made a good
                     faith effort to obtain a protective order requiring that
                     the information and/or documents so disclosed be used only
                     for the purpose for which the order was issued;

               (vi)  where its disclosure is otherwise required by law; or

               (vii) where its disclosure is necessary to establish the
                     disclosing party's rights under this Agreement.

10.  INDEMNIFICATION

     (a)  VENDOR assumes liability for, and shall defend, indemnify and keep
harmless from MCG, and its respective officers, directors, employees, successors
and assigns (each, an "Indemnified Party") from and against any and all
liabilities, obligations, losses, damages, penalties, claims, demands, actions,
suits, costs and expenses (including, without limitation, reasonable legal fees
and expenses), arising from claims of third parties, of whatsoever kind or
nature, imposed on, incurred by or asserted against any Indemnified Party,
resulting from, arising out of, or incurred with respect to (i) the breach of
any covenant or warranty made by VENDOR under Section 8 or a material breach of
this Agreement, or (ii) the performance of the Services by VENDOR but not to the
extent such claim arises from or relates to VENDOR acting at MCG's direction or
instruction or VENDOR's use of the Technical Documentation or other MCG-supplied
materials; provided, however, that VENDOR shall not be required under this
           --------
Section 10(a) to defend, indemnify or keep harmless any Indemnified Party for
loss or liability resulting from any negligence, willful misconduct or gross
negligence of such Indemnified Party.

     The foregoing states VENDOR's sole liability for its breach of warranties
in Section 8. MCG shall (i) promptly notify VENDOR of any such claim, (ii) allow
VENDOR full control over

                                      -10-


 
the defense and settlement of such claim, and (iii) provide VENDOR full
cooperation in the defense and settlement of such claim.

     (b)  MCG assumes liability for, and shall defend, indemnify and keep
harmless VENDOR, and its respective officers, directors, employees, successors
and assigns (each, an "Indemnified Party") from and against any and all
liabilities, obligations, losses, damages, penalties, claims, demands, actions,
suits, costs and expenses (including, without limitation, reasonable legal fees
and expenses), arising from claims of third parties, of whatsoever kind or
nature, imposed on, incurred by or asserted against any Indemnified Party,
resulting from, arising out of, or incurred with respect to the breach of any
covenant or warranty made by MCG under Section 8 or a material breach of this
Agreement; provided, however, that MCG shall not be required under this Section
           --------
10(b) to defend, indemnify or keep harmless any Indemnified Party for loss or
liability resulting from any negligence, willful misconduct or gross negligence
of such Indemnified Party.

     The foregoing states MCG's sole liability for its breach of warranties in
Section 8. VENDOR shall (i) promptly notify MCG of any such claim, (ii) allow
MCG full control over the defense and settlement of such claim, and (iii)
provide MCG full cooperation in the defense and settlement of such claim.

11.  TERMINATION

     (a)  Termination by Either Party. This Agreement may be terminated at any
          ---------------------------
time by either party (the terminating party is referred to as the "Acting
Party"), effective upon the giving of written notice of such termination to the
other party (the other party is referred to herein as the "Affected Party") with
such notice stating the basis upon which such termination was made, upon the
occurrence of any of the following events of default:

          (i)   the Affected Party shall fail to perform or observe any material
     covenant, condition or agreement to be performed or observed on the part of
     such Affected Party with respect to this Agreement and such failure shall
     continue unremedied for thirty (30) days after the earlier of (A)the date
     upon which a responsible officer of such Affected Party obtains knowledge
     of such failure, or (B)the date on which written notice of such default and
     demand that the same be remedied shall be given by the Acting Party to such
     Affected Party; provided, however, that if the nature of such failure is
     such that more than thirty (30) days are reasonably required for its cure,
     then the Affected Party shall be entitled to an additional thirty (30) days
     to cure if the Affected Party had diligently attempted to cure during the
     initial thirty (30) day cure period.

          (ii)  any representation or warranty made by the Affected Party herein
     or in any document, report, certificate or financial or other statement now
     or hereafter furnished by such party to the Acting Party in connection with
     this Agreement shall prove at any time to have been untrue or misleading in
     any material respect as of the time when made;

          (iii) the Affected Party shall (A)be generally not paying its debts
     as they become due, (B)file, or consent by answer or otherwise to the
     filing against it of a petition for relief or reorganization or liquidation
     or to take advantage of any bankruptcy or

                                      -11-


 
     insolvency law of any jurisdiction, (C)make an assignment for the benefit
     of its creditors, (D)consent to the appointment of a custodian, receiver,
     trustee or other officer with similar powers of itself or any substantial
     part of its property, or (E)take corporate action for the purpose of any of
     the foregoing; or

          (iv) as to the Affected Party, a court or governmental authority of
     competent jurisdiction shall enter an order appointing, without the consent
     of the such Affected Party, a custodian, receiver, trustee or other officer
     with similar powers with respect to it or with respect to any substantial
     part of its property, or constituting an order for relief or approving a
     petition for relief or reorganization or any other petition in bankruptcy
     or for liquidation or to take advantage of any bankruptcy or insolvency law
     of any jurisdiction, or ordering the dissolution, winding-up or liquidation
     of such Affected Party and any such order or petition is not dismissed or
     stayed within 60days after the earlier of the entering of any such order or
     the approval of any such petition.

     (b)  Termination by MCG. MCG with twelve months prior written notice may
          ------------------
terminate this Agreement in the event of the occurrence or notice of (i) the
sale, lease or conveyance of substantially all of VENDOR's property, assets or
business; or (ii) a conflict of interest in its role as a major provider of the
services under this Agreement or shall create an image problem which is
deleterious to MCG. 

     (c)  Termination for Convenience. Either party may terminate this Agreement
          ---------------------------
for convenience upon providing the other party twelve months written notice
after the Base Term.

     (d)  Survival of Rights. Neither the expiration nor the early termination
          ------------------
of this Agreement shall release either party from the obligation to pay any sum
which may then be owing to the other party or from the obligation to perform any
other duty or discharge any other liability incurred prior to the effective date
of such expiration or termination.

12.  TERMINATION ASSISTANCE

     (a)  Transfer Obligations. Immediately upon written notice of termination,
          --------------------
expiration or cancellation of this Agreement for any reason, VENDOR shall use
its commercially reasonable efforts to transfer the Services and otherwise
cooperate fully with MCG to transfer such Services, from VENDOR's facilities to
MCG or to any third party maintenance or servicing provider designated by MCG in
a manner that (i) minimizes the time to complete such transfer, (ii) maintains
the highest quality of Services provided, and (iii) minimizes any disruption to
customer requirements. Such cooperation shall include, without limitation, the
following:

          (i)  At MCG's election, MCG may require VENDOR to continue to perform
     all or any portion of the Services for a period not to exceed twelve (12)
     months (the "Transfer Period") as part of the transfer of MCG's service and
     maintenance operations out of VENDOR's facilities; provided, that in the
                                                        --------
     event that the automatic renewal of the term of this Agreement does not
     occur as provided in Section 3(b), VENDOR shall provide the termination
     assistance under this Section 12 during the remaining term of this
     Agreement.

                                      -12-


 
          (ii)  VENDOR shall make available, at the request of MCG, all
     appropriate employees as consultants during the Transfer Period to assist
     MCG in transferring the Services from VENDOR to MCG or such third party.
     VENDOR shall make available the highest skilled support personnel who have
     performed the Services to train personnel of MCG or such third party.

          (iii) VENDOR shall immediately make available to MCG a machine-
     readable copy of all Customer Data which is in a machine-readable form and
     which is then in VENDOR's possession or being stored by or on behalf of
     VENDOR, together with all other copies of any Customer Data that may exist
     in any form.

          (iv)  VENDOR shall immediately upon MCG's request begin delivering to
     MCG or such third party all Technical Documentation, and Loaned Equipment
     then in VENDOR's possession or being stored by or on behalf of VENDOR, such
     transfer to be made at such time, and with respect to Parts at such times
     and in such quantities, to permit the orderly transfer of Services to MCG
     or such third party while providing VENDOR with all such items for the time
     and to the extent necessary for VENDOR to continue to perform the Services
     to the extent that MCG has required VENDOR to so perform as provided in
     Section 12(a)(i). Preparation and movement of the above mentioned property
     to VENDOR's shipping docks shall be at VENDOR's expense; however, expenses
     related to picking up said property from VENDOR's shipping docks and
     charges related to shipment of the property to MCG-designated destinations
     outside of VENDOR's facilities shall be borne by MCG.

          Upon delivery of said property to VENDOR's shipping docks or MCG-
     designated destinations outside of VENDOR's facilities, MCG assumes all
     risk of loss, theft, damage or casualty to said property including, without
     limitation, any such loss, theft, damage or casualty occurring during any
     subsequent transfer of such Loaned Equipment to other locations and shall
     indemnify and hold VENDOR harmless from and against any such loss, theft,
     damage or casualty.

          (v)   VENDOR shall exercise its commercially reasonable efforts to
     cooperate and assist MCG in obtaining the use of any non-proprietary,
     commercially available software that VENDOR itself used in connection with
     the Technical Documentation while it was performing under this Agreement.

     (b)  Compensation and Reimbursement. VENDOR shall be reimbursed for its
          ------------------------------
Transfer Obligations under its normal schedule of fees, except that the
provision of all consultants as set forth in above Section 12(a)(ii) shall be
reimbursed at VENDOR's "direct cost" if the termination is due to the exercise
by MCG of its termination rights based upon Section 11(a), above. Such "direct
cost" shall consist of VENDOR's direct cost for each employee's salary, the
employee's standard personnel benefits program, and the employee's standard
incentive package; said incentive package, if any, not to exceed 20% of gross
salary.

     (c)  VENDOR and MCG agree that being able to provide and maintain the
service and support as set forth in this Agreement is critical to MCG's goodwill
with its customers. The parties acknowledge that unless VENDOR performs its
obligations under Section 12, MCG will

                                      -13-


 
suffer irreparable injury and VENDOR therefore agrees that MCG should be
entitled to specific performance from VENDOR as to such obligations as defined
in a Statement of Work if so determined.

     (d)  The Transfer Obligations. If the termination of this Agreement is due
          ------------------------
to the exercise by VENDOR of its termination rights based upon (1) the
nonpayment by MCG of invoices for services when due or (2) MCG's refusal to pay
VENDOR for VENDOR's performance of its obligations as required under this
Agreement, and MCG is not in material breach of this Agreement such that the
breach would render VENDOR incapable of performing its obligations, then VENDOR
may as a precondition to performing such Transfer Obligations require MCG to pay
the amounts allegedly owed to VENDOR into an interest-bearing escrow account
pending resolution of the dispute. Upon resolution, such amounts which are
placed in escrow shall be distributed in accordance with the terms of settlement
between the parties or court decision.

13.  USE OF MOTOROLA NAME AND MOTOROLA TRADEMARK

     (a)  VENDOR acknowledges that (1) Motorola, Inc. owns all right, title and
interest in the Motorola name and logotype, (2) that Motorola is the owner of
certain trademarks and trade names used in connection with certain product lines
and software, and (3) that VENDOR will acquire no interest in any such
trademarks or trade names by virtue of this Agreement, its activities under it
or its affiliation with Motorola. During the term of this Agreement VENDOR may
indicate to the trade and to the public that it is an authorized maintenance
provider for the Eligible Products, but it will not adopt or use such
trademarks, trade names or Motorola's company name nor (to the extent it may
have any power to prevent such use) allow such marks or names to be used by
others for any other purpose. At the expiration or termination of this
Agreement, VENDOR shall immediately discontinue any and all use of the Motorola
name and any other name (or combination of words, designs, trademarks or trade
names) that would indicate that VENDOR was or is in any way an agent or
contractor of Motorola.

     (b)  MCG acknowledges that (1) VENDOR owns all right, title and interest in
the VENDOR name and logotype, (2) that VENDOR is the owner of certain trademarks
and trade names used in connection with certain product lines and software, and
(3) that MCG will acquire no interest in any such trademarks or trade names by
virtue of this Agreement, its activities under it or its affiliation with
VENDOR. During the term of this Agreement MCG may indicate to the trade and to
the public that VENDOR is an authorized maintenance provider for the Eligible
Products. But it will not adopt or use such trademarks, trade names or VENDOR's
company name nor (to the extent it may have any power to prevent such use) allow
such marks or names to be used by others. At the expiration or termination of
this Agreement, MCG shall immediately discontinue any and all use of the VENDOR
name and any other name (or combination of words, designs, trademarks or trade
names) that would indicate that MCG is providing services to customers through
VENDOR.

14.  COMPLIANCE WITH EXPORT CONTROLS

     VENDOR agrees that it will not in any form export, reexport, resell, ship
or divert or cause to be exported, reexported, resold, shipped or diverted
directly or indirectly any product,

                                      -14-


 
parts, software, documentation, technical data or a direct product thereof to
any country for which the U.S. Government, any agency thereof, or any other
sovereign government, requires an export license or other governmental approval
without first obtaining such license or approval.

15.  PROHIBITION AGAINST GIFTS OR PAYMENTS

     No official, employee or agent of any government, governmental agency or
political party shall be given any benefit, share in this Agreement, or receive
any item of value --- directly or indirectly --- related to this Agreement. MCG
and VENDOR warrant that:

     (a)  they have not and will not pay, donate, give, offer or promise
anything of value to any such person or entity on behalf of VENDOR or MCG in
connection with this Agreement;

     (b)  they are familiar with the terms of the United States Foreign Corrupt
Practices Act (15 United States Code Section 78dd-1 and -2) and with all laws
and regulations of the United States including (without limitation) those
regarding corrupt payments; and

     (c)  they are familiar with the general principles and spirit of the
Motorola Code of Conduct Policy attached hereto as Exhibit B.

16.  EQUAL EMPLOYMENT OPPORTUNITY AND AFFIRMATIVE ACTION

     VENDOR agrees to comply with the EEO provisions set forth in Schedule 16,
attached hereto.

17.  GOVERNMENT SUBCONTRACT

     IF ANY CUSTOMER CONTRACT COVERED BY THIS AGREEMENT INDICATES THAT IT IS
SUBJECT TO A PRIME CONTRACT WITH FEDERAL, STATE AND LOCAL GOVERNMENT AGENCY, OR
A HIGHER TIER SUBCONTRACT WITH A U.S. GOVERNMENT PRIME CONTRACTOR OR
SUBCONTRACTOR, THEN VENDOR AGREES TO COMPLY WITH ALL TERMS AND CONDITIONS OF THE
GOVERNMENT CONTRACT WHICH APPEAR ON EXHIBIT C ATTACHED HERETO AND MADE A PART
HEREOF, AND ANY OTHER PERTINENT LAWS, DIRECTIVES AND EXECUTIVE ORDERS TO THE
EXTENT THAT THEY APPLY TO THE SUBJECT MATTER OF THE ORDER.

18.  DISASTER RECOVERY

     VENDOR shall provide certain backup procedures as set forth in the
Statement of Work to continued operation in the event of certain catastrophic
events. VENDOR shall use its commercially reasonable efforts at its own cost to
regenerate MCG's Customer Data and to bring back on-line in the event of such a
disaster. In the event that part of VENDOR's facilities are operable, VENDOR
should provide for MCG's service and maintenance operations in no less favorable
position than that given to VENDOR's other customers.

                                      -15-


 
19.  INSURANCE.

     VENDOR shall at its sole cost and expense maintain at all times during the
term of this Agreement policies of at least the following insurance coverage and
amounts:

     (a)  Worker's Compensation and Employers Liability Insurance for its
employees who perform services for MCG. Worker's Compensation shall be as
required by statute and Employer's Liability shall be no less than $1,000,000.
VENDOR agrees to waive its right of subrogation against Motorola in connection
said Worker's Compensation and Employers Liability Insurance. Motorola agrees to
waive its right of subrogation against VENDOR in connection with its own
Worker's Compensation and Employer's Liability Insurance.

     (b)  Comprehensive General Liability insurance, including broad form
     contractual liability and products and completed operations coverage. The
     limits shall be no less than $5,000,000 each for bodily injury and/or
     property damage and $10,000,000 for the aggregate. Motorola shall be named
     as additional insured under such coverage.

     (c)  Automobile Liability insurance covering bodily injury and property
     damage liability arising out of the use by or on behalf of VENDOR and its
     employees. The limits shall be no less than $5,000,000 and Motorola shall
     be named as additional insured.

     (d)  Errors and Omissions insurance covering the VENDOR for loss or damage
     arising out of negligent acts or errors or omissions which arise from
     providing Designated Services under this Agreement with limits of no less
     than $5,000,000 per occurrence.

     (e)  Umbrella or excess coverage, including professional liability, in the
     amount of $5,000,000 with MCG named as additional insured.

     (f)  Fidelity insurance which covers VENDOR's employees. The limits shall
     be at least $1,000,000.

     (g)  Fire insurance in an amount to cover the repair or replacement of
     MCG's property provided to VENDOR's care. Business Interruption Insurance
     sufficient to continue operations for six (6) months. Motorola shall be
     named as loss payee under these policies.

     (h)  Special Provisions.

          (i)  VENDOR shall deliver to MCG a certificate(s) of insurance stating
     that the foregoing insurance policies are in full force and effect and
     shall name MCG, MCG, their directors and officers, representatives and
     employees as additional insured and/or loss payee, with the exception of
     workers compensation coverage with the foregoing insurance above, as their
     interests may appear.

          (ii) Policies shall be placed with a company rated not less than A/VII
          in the A.M. Best Company Rating Guide. VENDOR shall require each
          insurer to give MCG thirty (30) days written notice before the policy
          or policies are canceled or materially altered.

                                      -16-


 
          (iii)  Insurance shall include cross liability, severability of
          interests endorsement.

          (iv)   Insurance shall stipulate that the VENDOR's insurance is
          primary insurance.

          (v)    In the event that MCG agrees to a "claims-made" policy pursuant
          to the provision of the required insurance listed above, such claims-
          made policy must be maintained by VENDOR for at least five (5) years
          after completion of work unless this obligation is waived in writing
          in whole or in part by MCG.

          (vi)   The foregoing requirements as to the types and limits of
          insurance coverage to be maintained by VENDOR, and any approval or
          waiver of said insurance by MCG is not intended to and shall not in
          any manner limit or qualify the liabilities and obligations otherwise
          assumed by VENDOR pursuant to this Agreement, including but not
          limited to the provisions concerning the indemnification provision.

          (vii)  At MCG's sole option, some insurance requirements contained in
          this Section 19 may be fulfilled by a self-insurance program of
          VENDOR. In the event that VENDOR is self-insured, this shall not in
          any way limit the liabilities assumed by VENDOR under this Agreement.

          (viii) Should any of the work under this Agreement be subcontracted,
          VENDOR shall either require each of its subcontractors to provide the
          aforementioned coverage, or VENDOR may insure subcontractor(s) under
          its own policy(ies). Irrespective of the option so selected by VENDOR,
          VENDOR shall retain the sole obligations to comply with the insurance
          policy requirements. Any subcontracting must be approved in writing by
          MCG.

          (ix)   The procurement and maintenance of insurance specified in this
          Section 19 shall not limit or affect any liability which VENDOR might
          have by virtue of this Agreement or otherwise.

20.  LIMITATION OF LIABILITY

     (a)  Each party's liability for actual damages from any cause whatsoever,
except as otherwise stated in this section, will be limited to $2,000,000 in
aggregate per year. This limitation will apply, regardless of the form of
action, whether in contract or tort, including negligence.

     (b)  IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY LOST PROFITS, LOST
SAVINGS, INCIDENTAL DAMAGES, OR CONSEQUENTIAL DAMAGES THAT MAY RESULT FROM THIS
AGREEMENT, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.

     (c)  The foregoing limitations of Section 20(a) will not apply to claims by
either party for bodily injury or damage to real property or tangible personal
property for which the other party is legally

                                      -17-


 
liable. The foregoing limitations also shall not limit any of MCG's rights to
recover fully against matters for which VENDOR has insurance coverage as set
forth in Section 19.

21.  GENERAL PROVISIONS

     (a)  Independent Contractor. At all times in its performance of the
          ----------------------
Services under this Agreement, VENDOR will be acting solely as an independent
contractor and MCG shall exercise no control, other than as specified herein,
over the activities or operations of VENDOR. The parties understand and agree
that MCG is in no way associated with or otherwise connected with the
performance of this Agreement by VENDOR, nor the employment by VENDOR of labor
or the incurring by VENDOR of expenses in connection herewith (except as
otherwise expressly provided for herein).

     (b)  Force Majeure. Neither party shall be liable for delays caused by
          -------------
revolution, insurrection, riot, war, act of the public enemy, national
emergency, strike, flood, fire, act of God, or by any other cause, whether
similar or dissimilar, not within the control of the party.

     (c)  No Implied Licenses. Except as otherwise stated herein, no licenses
          -------------------
are implied or granted by this Agreement under any patents or other industrial
property rights owned or controlled by or licensed to MCG, in particular, VENDOR
acknowledges that no rights to manufacture the Eligible Products are granted by
this Agreement.

     (d)  Assignment. Neither party shall, directly or indirectly, sell,
          ----------
transfer or assign its rights or delegate performance of any of its obligations
under this Agreement to a third party, without the prior written consent of the
other party (which consent shall not be unreasonably withheld), except that
either party may make such an assignment in connection with a merger, sale or
transfer of all or substantially all of its assets, provided that such party
shall notify the other party of such assignment as soon as permitted under
contract and law. Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of the parties and their legal representatives,
successors and assigns.

     (e)  Entire Agreement; No Third Party Beneficiaries. This Agreement
          ----------------------------------------------
constitutes the entire understanding between the parties in respect of the
matters set forth herein. Nothing in this Agreement or in any schedule or
exhibit referenced herein is intended to confer on any person or entity, other
than the parties hereto, any rights, benefits or remedies under or by reason of
this Agreement. Notwithstanding the foregoing, this subsection 21(e) shall not
apply to subsection 12(c) above.

     (f)  Notice. Any notices, consents, objections, demands, requests or other
          ------
communications required or permitted to be given pursuant to this Agreement
shall be in writing, and shall be sent by certified mail, return receipt
requested, to the addresses of the parties set forth in the heading to this
Agreement. Either party may designate, by notice, a change of address hereunder.
Notices shall be deemed to have been given when deposited in the United States
mail.

     (g)  Choice of Law and Dispute Resolution. This Agreement shall be governed
          ------------------------------------
and interpreted by the laws of the State of Arizona (excluding its conflict of
laws principles and

                                     -18-


 
excluding that law known as the United Nations Convention for the International
Sale of Goods). The parties agree to attempt to settle any claim or controversy
arising out of this Agreement through consultation and negotiation in the spirit
of mutual friendship and cooperation. If such attempts fail, the dispute shall
first be submitted to a mutually-acceptable neutral advisor for non-binding
mediation, fact-finding or other form of non-binding alternative dispute
resolution (ADR) selected by the parties. Neither party may unreasonably
withhold acceptance of such an advisor, and his or her selection must be made
within 45 days after written notice by the party demanding the use of ADR. The
cost of such mediation or other ADR procedure shall be shared equally by the
parties. Any dispute which cannot be resolved between the parties within six
months of the date of the initial demand shall be finally determined by the
courts within Arizona. The use of an ADR procedure under this subsection shall
not be construed (under such doctrines as laches, waiver or estoppel) to have
affected adversely either party's ability to pursue its legal remedies. And
nothing in this subsection shall prevent either party from resorting to judicial
proceedings if (1) good faith efforts to resolve a dispute under these
procedures have been unsuccessful or (2) interim resort to a court is necessary
to prevent serious and irreparable injury to either party or to others. In such
proceedings, the prevailing party shall be entitled to reasonable attorney's
fees and costs.

     (h)  Headings. The headings of this Agreement are for convenience only and
          --------
are in no way intended to affect the meaning or interpretation of any provision
of this Agreement.

     (i)  Waivers, Amendments and Modifications. No provisions of this Agreement
          -------------------------------------
or any Schedule or Exhibit attached hereto shall be deemed waived, amended or
modified by either party unless such waiver, amendment or modification is in
writing and signed by both parties hereto.

     (j)  Hazardous Substances and Materials. MCG does not require in any way
          ----------------------------------
that VENDOR use any "hazardous substances" as defined in 29 CFR 1910.1200.
VENDOR shall indemnify and hold MCG harmless for any such use on its own.

     (k)  Counterparts. This Agreement may be executed by both MCG and VENDOR
          ------------
with original signatures on one or more documents. Duplicate original documents
or copies of this document shall be deemed to have the same force and effect as
a signed original document. VENDOR agrees that it will take all actions required
by law in order to ensure that all workers assigned to perform services under
this Agreement are authorized to engage in such employment in accordance with
the Immigration Reform and Control Act of 1986. VENDOR further agrees that, upon
request by MCG, it shall provide MCG with a copy of the Form I-9 completed for
any of its employees assigned to perform services.

                                     -19-


 
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first-above written.

MCG                                     VENDOR
---                                     ------

MOTOROLA, INC. COMPUTER GROUP           LINUXCARE, INC.

By: /s/ Christine M. Aumann             By: /s/ Thomas W. Phillips    
Name: Christine M. Aumann               Name: Thomas W. Phillips 
      -------------------                     ------------------
Title: V.P. Customer Services           Title: V.P. Sales
       ----------------------                  ----------
Date: 12/13/99                          Date: 12/13/99
      --------                                --------

                                     -20-


 
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first-above written.

MCG:                                    VENDOR:
---                                     ------

MOTOROLA, INC. COMPUTER GROUP           LINUXCARE, INC.

By: ________________________________    By: /s/ Thomas W. Phillips    
Name: ______________________________    Name: Thomas W. Phillips 
                                              -----------------
Title: _____________________________    Title: V.P. Sales
                                               ----------
Date: ______________________________    Date: 12/13/99
                                              --------

                                     -20-


 
                                   Exhibit A

                               STATEMENT OF WORK



                              Exhibit A - Page 1


 
                                   Exhibit B

                           MOTOROLA CODE OF CONDUCT

                         (AS AMENDED AUGUST 27, 1993)

POLICY
------

     Since its inception, the keystone of Motorola's business success has been
integrity with respect to its dealing with customers, suppliers and governments.
The highest order of ethical conduct has and continues to be the very foundation
of our enterprise. These qualities have been instilled and transmitted
throughout the Company.

     The following statement of business philosophy and objectives applies to
all components of our Company. It is intended to be read and applied as part of
and supplementary to our already widely disseminated statements on the subject
of business ethics and standards of conduct set forth in our For Which We Stand
document.

     This Code of Conduct provides firm, uncompromising standards for each of us
in our dealings with agents, customers, suppliers, political entities and
others. The Code reemphasizes and provides further guidance regarding policies
which have been an integral part of Motorola's business philosophy from the
beginning.

     Adherence to this Code is the responsibility of each employee of Motorola
and a condition of continued employment. It will be administered uniformly
throughout the company and independent of the practices of other companies.
Adherence to the Code will continue to be the subject of management attention,
periodic audits of our Internal Audit Department and review by the Business
Ethics Compliance Committee.

     The terms "Motorola" and "Company" as used in this Code of Conduct include
Motorola, Inc. and all of its affiliated companies.

A.   IMPROPER USE OF COMPANY FUNDS AND ASSETS
     ----------------------------------------

     Section 1.  The funds and assets of Motorola shall not be used, directly or
indirectly, for illegal payments of any kind.

Example: The payment of a bribe to a public official or the kickback of funds to
-------
an employee of a customer would be in direct violation of this section of the
Code.

                              Exhibit B - Page 1


 
     Section 2.  The funds and assets of Motorola shall not be used, directly or
indirectly, for payments, gifts or gratuities of any kind, whether legal or
illegal, which directly or indirectly inure to the personal benefit of any agent
or employee of any entity with which Motorola does business, with the following
exception:

     (a)  Unless prohibited by the policy of the Customer, Motorola may give as
social amenities to customer and employees of non-government customers normal
sales promotional items bearing the Company's name or items of insignificant
value such as flowers and candy.

     Under no circumstances may the payment of a gratuity or fee (or gift of any
kind) be made to a government employee whether in recognition of efficient
service or otherwise.

     Section 3.  The funds and assets of Motorola shall not be used, directly or
indirectly, for political contributions, whether legal or illegal. The term
"political contributions" is used in its broadest sense and includes local,
state or national fund-raising dinners, banquets, raffles or any funds or gifts
(including the free or discounted use of property or services) which could be
routed, directly or indirectly, to a political candidate, party, committee or
organization.

     Example: The foregoing prohibition of political contributions would be
     -------
violated if a manager directed any employees to work for a political candidate
or party or used company funds to reimburse employees for political
contributions made with their private funds.

     This section is not intended to limit or otherwise restrict: (1) the
personal political activities of Motorola employees, or (2) the right of
Motorola employees to make personal contributions to any Motorola political
action committee.

     Section 4.  Motorola shall not enter into any agreements with dealers,
distributors, agents or consultants:

          (a)  which are not in compliance with the applicable laws of the
United States and with the laws of any other country that may be involved; or

          (b)  which provide for a commission rate or fee that is not reasonable
and commensurate with the functions or services to be rendered.

     Example: It would be a violation of this section of the Code to provide a
     -------
sales agent with a commission on sales of Motorola products which the Motorola
employee knows is intended to be used in part as a kickback to employees of the
customer. (See the relevant Corporate Financial Practice for further guidance
regarding these matters.)

     Section 5.  The funds and assets of Motorola must be properly and
accurately recorded on the books and records of the Company in accordance with
generally accepted accounting principles and practices and no false or
artificial entries shall be made in the books, records or accounts of the
Company. No payment made on behalf of Motorola shall be approved or made with
the intention or understanding that any part of such payment is to be used for
any purpose other than that described by the documents supporting the payment.

                              Exhibit B - Page 2


 
     Example:  It would be a violation of this section of the Code of Conduct to
     -------
purposefully issue an invoice or other document which inaccurately reflects a
transaction.

B.   CUSTOMER/SUPPLIER/GOVERNMENT RELATIONSHIPS
     ------------------------------------------

     Section 1.  Information disclosed by a customer to a Motorola employee and
clearly identified verbally or in writing as sensitive, private or confidential
shall be protected from disclosure to unauthorized persons inside and outside
the Company to the same extent as Motorola sensitive, private or confidential
information is protected, except where such information was already known to
Motorola, is available from other sources, or is generally known outside the
Motorola or customer organizations.

     Example (a):  A customer makes Motorola aware of a confidential project for
     -----------
which he is contemplating use of Motorola products. He asks Motorola to hold the
discussion in confidence. His request will be honored. The information will not
be disclosed within the Company to persons without a reasonable need to know in
order to serve the best interests of that customer. Nor will the information be
disclosed to any persons outside the Company except where required to comply
with a law or regulation.

     Example (b):  Motorola's price and delivery quotation to a customer will
     -----------
not be disclosed to Motorolans without a need to know and never outside the
Company unless the information has been released by the customer or supplier or
is required to be released by law or regulation.

     Section 2.  Employees of Motorola will respect the laws, customs and
traditions of each country in which they operate, but will, at the same time,
engage in no act or course of conduct which, even if legal, customary and
accepted in any such country, could be deemed to be in violation of the accepted
business ethics of Motorola or the laws of the United States relating to
business ethics.

     Section 3.  Employees of Motorola shall not accept payments or gifts (other
than advertising novelties or other items of nominal value), including any
favors which might be regarded as placing the employee under some obligation to
a third party dealing or desiring to deal with Motorola, provided, however, in
rare circumstances, where the refusal to accept a gift (other than gifts of
nominal value referred to above) may be impossible without injuring the
legitimate business interests of Motorola, such gifts may be accepted so long as
the gift inures to the benefit of Motorola and will not inure to the benefit of
the Motorola employee.

     Example (a):  Included within the scope of this prohibition is the
     -----------
acceptance by Motorolans of presents from suppliers at Christmas as well as the
acceptance by Motorolans of money, property or services (e.g., free trips) from
business associates.

     Example (b):  A Motorolan traveling on Motorola business may accept the
     -----------
courtesy of free lodging in a Customer facility so long as properly noted on
Motorolan's travel expense records.

     Example (c):  Suppliers win Motorola business on the basis of product or
     -----------
service suitability, price, delivery and quality. There is no other basis.
                                                  -----------------------
Attempts to influence procurement decisions by offers of any compensation,
commission, kickback, paid vacation, special discount on

                              Exhibit B - Page 3


 
a product or service, entertainment or any form of gift or gratuity must be
firmly rejected by all Motorolans.

     Section 4.  Motorola may, unless otherwise prohibited, pay the
transportation and lodging expenses incurred by customers, agents or suppliers,
prospective or otherwise, in connection with a visit to a Motorola facility or
product installation for any reasonable business purpose, including on-site
examination of equipment, the participation in a training session or contract
negotiations with Motorola, but (except for ground transportation provided by an
accompanying Motorolan) only in such cases where prior to any such visit:

          (i)    the written approval for the payment of such expenses has been
obtained from both the Office of the Division General Manager and the General
Counsel, and whenever practicable, the senior management of the traveler has
been informed of the payment of such expenses by Motorola, or

          (ii)   Motorola is obligated by contract to pay such expenses and the
obligation is specifically delineated.

     All such expenses must be accounted for in accordance with standard travel
procedures. General accounts such as sales promotion, should not be charged for
                                                             ---
travel expenses. Payment of such expenses by Motorola may only be made if they
are not otherwise prohibited. For example, payment of such expenses by Motorola
could be prohibited in a particular situation by applicable law or regulation,
by a contract, or by the policy of the customer, agent or supplier.

     Section 5.  Motorola will not employ any individuals known to be related,
by blood, marriage or adoption (except relations more remote than first cousin),
to any person having influence over the purchasing decisions of any private or
public entity to which Motorola sells any of its products unless such employment
is first disclosed to and approved in writing by (1) the senior management of
such private or public entity; and (2) the general manager of the Motorola
Group/Division involved.

C.   CONFLICT OF INTEREST

     Section 1.  Secondary Employment
                 --------------------

     (a)  A Motorola employee shall not:

          (i)    be employed by any other firm or person, including self-
                                                          ---------------
employment, if such firm or person is a competitor or supplier of Motorola, or
----------

          (ii)   be employed by any other firm or person, excluding self-
                                                          ---------------
employment, if such firm or person is a customer of Motorola, or
----------

          (iii)  engage in any activity where the skill and knowledge the
employee develops or applies in the employee's Motorola position is transferred
or applied to such activity in derogation of the present or prospective business
interests of Motorola.

                              Exhibit B - Page 4


 
     (b)  A Motorola employee shall not have any relationship with any other
business enterprise which might affect the employee's independence of judgment
in transactions between Motorola and the other business enterprise or otherwise
conflicts with the proper performance of the employee's duties at Motorola.

     (c)  A Motorola employee may not accept any appointment to membership of
the Board of Directors, standing committee, or similar body of any outside
company, organization, or government agency (other than charitable, educational,
fraternal, political, community or religious organizations or similar groups)
without first receiving the prior approval of Motorola's Chief Executive
Officer, whether or not a possible conflict of interest might result from the
acceptance of any such appointment.

     Section 2.  Personal Financial Interest
                 ---------------------------

     (a)  Supplier-Customer Relationships. A Motorola employee may not have any
          -------------------------------
interest in any supplier or customer of Motorola which interest could in any
respect compromise the employee's loyalty to Motorola.

     (b)  Competitor Relationships. A Motorola employee may not have any
          ------------------------
interest in another enterprise which might appear to adversely affect the
employee's judgment regarding the employee's job or loyalty to Motorola. The
proper application of criteria concerning the effect of a specific interest on
an employee's judgment and loyalty will vary somewhat with the circumstances of
each employee, but generally, the greater the job responsibility of the employee
within Motorola, the higher the employee's duties are in these regards. Careful
consideration must be given by all employees to investments in enterprises
similar to Motorola. For instance, investments in companies primarily engaged in
semiconductor manufacturing and major competitors in wireless communications
equipment manufacture should be avoided. Other limitations may arise from
investments in companies whose business is similar to the Motorola employee's
group or sector organization and even more so regarding investments which are
similar to the employee's day-to-day responsibilities.

     In case of a remote or relatively minor business similarity which does not
adversely affect one's judgment or loyalty, an employee may find that there is
no conflict in owning interests:

          (i)  in a company, the shares of stock of which are publicly held and
traded on a national securities exchange or automated quotation system; and

          (ii) where the amount of stock owned by the employee is (a) less than
one one-hundredth of one percent of the class outstanding, and (b) less than 5%
of the employee's net worth.

     (c) Interest of Associates. The interest of a Motorola employee's associate
         ----------------------
in a supplier, customer or competitor of Motorola may create a conflict-of-
interest depending upon the facts and circumstances of the particular case.

     "Associate" for purposes of this policy statement shall mean:

                              Exhibit B - Page 5


 
          (i)   any relative of a Motorola employee, any person living in the
employee's household or to whom the employee furnishes support or any person
having a personal relationship, similar to the above, with a Motorola employee;

          (ii)  any business in which the employee has a financial interest, any
creditor or debtor of the Motorola employee, or any other person benefits to
whom could reasonably be expected to relieve the Motorola employee of some
obligation or obtain for the employee some personal advantage or gain; or

          (iii) any trust or estate administered by such persons or in which
they may have a financial interest as a beneficiary.

     (d)  Business Involvement with Associates. A Motorola employee may not
          -------------------------------------
cause or Motorola to do business with any business in which the employee or an
associate is interested. If an instance occurs where it is important to
Motorola's advantage to enter into such a transaction, the proposed situation
shall be submitted in writing to, and receive prior written approval of
Motorola's General Counsel before any commitment is made. Such approval will not
be granted unless it can be ascertained that the terms of the transaction are to
be determined by competitive bidding or are established by law, or are
determined under other conditions which clearly establish an arm's length
fairness of terms.

     Section 3.  Inside Information
                 ------------------

     (a)  A Motorola employee may not buy or sell or recommend to others to buy
or sell, any security or other interest in property based on knowledge derived
from such person's employment. Employees should avoid transactions in the area
of real estate which Motorola may be considering buying or selling or has
decided to buy or sell.

     (b)  A Motorola employee may not disclose confidential Motorola information
to any person other than in the proper discharge of the employee's Motorola
duties.

D.   OPERATING PROCEDURES
     --------------------

     Section 1.  If at any time a Motorola employee (or a subordinate or an
associate of a Motorola employee) has engaged, or is about to engage in any
activity covered by the Code of Conduct, the employee should promptly make all
facts known to Motorola's Corporate Vice President and General Counsel who will:

     *    Give advice to employees concerning the Code of Conduct;

     *    Make factual investigations where indicated;

     *    Determine whether the facts give rise to a violation of the Code of
Conduct and advise the Chief Executive Office of each violation, and recommend
the remedial action to be taken; and

     *    Consider exceptions from the Code of Conduct on a case by case basis.

                              Exhibit B - Page 6


 
     Section 2. Motorola's Corporate Vice President and General Counsel will
cause the Code of Conduct to be circulated periodically to each officer,
director and certain other employees.

     Section 3. In all substantive matters relating to the administration of
this Code of Conduct, the Corporate Vice President and General Counsel shall
confer with the Business Ethics Compliance Committee.

                              Exhibit B - Page 7


 
                                   Exhibit C

                   I.  U.S. GOVERNMENT TERMS AND CONDITIONS

     CLAUSES FOR A NEGOTIATED FIXED PRICE, TIME AND MATERIALS, OR LABOR HOUR
SUPPLY OR SERVICE CONTRACT.

     This contract incorporates the following clauses by reference, with the
same force and effect as if they were given in full text. Upon request, a full
copy text will be made available.




FAR             FAR                                                                CLAUSE
CLAUSE          NUMBER            CLAUSE TITLE                                     DATE
                                                                          
52.202-1        252.202-0001      Definitions                                      April 1984
                               
52.203-1        252.203-0001      Officials Not to Benefit                         April 1984
                               
52.203-3        252.203-0003      Gratuities                                       April 1984
                               
52.203-5        252.203-0005      Covenant Against Contingent Fees                 April 1984
                               
52.203-6        252.203-0006      Restrictions on Subcontractor Sales to the       July 1985
                                  Government
                               
52.203-7        252.203-0007      Anti-Kickback Procedures. The following          October 1988
                                  is added to paragraph (c)(2): "seller shall
                                  notify Buyer when such action has been
                                  taken." In the first sentence of paragraph
                                  (c)(4) "the contracting officer may..." is
                                  replaced by "after the contracting officer
                                  has effected an offset at the contract level
                                  or has directed Buyer to withhold any sum
                                  from the Seller, Buyer shall...".
                               
52.210-6                          Listing of Used or Reconditioned Material,       April 1984
                                  Residual Inventory and Former
                                  Government Surplus Property. Seller
                                  discloses hereunder that spare and/or repair
                                  parts provided under this Agreement may
                                  include components which have been
                                  refurbished. Such components will be
                                  provided in "like new" condition and will
                                  include warranty coverage equivalent to
                                  new components.
 

                              Exhibit C - Page 1


 



FAR            FAR                                                     CLAUSE
CLAUSE         NUMBER        CLAUSE TITLE                              DATE
                                                              
52.212-8                     Defense Priority and Allocation           September
                             Requirements                                    1990
 
52.215-1       252.215-0001  Examination of Records by Controller      April 1984
                             General
 
52.222-4                     Contract Work and Safety Standards Act-   March 1986
                             Overtime Compensation
 
52.222-24                    Pre-award On-Site Equal Opportunity       April 1984
                             Compliance Review
 
52.222-25                    Affirmative Action Compliance             April 1984
 
52.222-40                    Service Contract Act of 1965, as amended  April 1984
                             - Contracts of $2,500
 
52.222-41 1                  Service Contract Act of 1965, As          May 1989
                             Amended (Over $2,500)
 
52.222-42 1                  Statement of Equivalent Rates for Hire    May 1989
 
52.223-2       252.223-0002  Clean Air and Water (Over $100,000)       April 1984
 
52.223-6       252.223-0006  Drug Free Workplace                       July 1990
 
52.225-13                    Restrictions on Contracting With          May 1989
                             Sanctioned Persons
 
52.227-2                     Notice and Assistance Regarding Patent    April 1984
                             and Copyright Infringement
 
52.227-14                    Rights in Data - General                  June 1987
 
52.228-5       252.228-0005  Insurance - Work on Government            April 1984
                             Installation


______________________

     1 Seller represents only that it shall pay its employees performing under
this Agreement not less than the minimum wage specified under 6(20(1) of the
Fair Labor Standards Act of 1938, as amended (29 U.S.C. 201-206), unless wage
determination(s) applicable to particular customer orders are provided to the
Seller for review and validation of affected employees' wages and fringe
benefits.

                              Exhibit C - Page 2


 



FAR          FAR                                               CLAUSE
CLAUSE       NUMBER        CLAUSE TITLE                        DATE
                                                      
52.232-23    252.232-0023  Assignment of Claims                January 1986
 
52.232-28                  Electronic Funds Transfer Payment   April 1989
                           Method
 
52.243-1     252.243-0001  Changes - Fixed Price Alternate II  August 1987
 
52.246-25    252.246-0025  Limitation of Liability - Services  April 1984

52.249-1                   Termination for Convenience of the
                           Government (Fixed-Price)(Short Forms)
 


                    II.  STATE & LOCAL TERMS AND CONDITIONS

Rules of the Procurement Policy Board of the City of New York dated August 1,
1990.

                              Exhibit C - Page 3


 
                                  Schedule 16
                                  -----------

                         EQUAL EMPLOYMENT OPPORTUNITY

     A)   PROVISIONS OF FEDERAL ACQUISITION REGULATION (FAR) 52.222-26(B)(1)-
(11) PERTAINING TO EQUAL OPPORTUNITY CLAUSE;

     B)   ALL PROVISIONS OF 41 C.F.R. 60-250 AS IMPLEMENTED BY FAR 25.222-35 AND
-37 PERTAINING TO EMPLOYMENT REPORTS AND AFFIRMATIVE ACTION FOR DISABLED
VETERANS AND VETERANS OF THE VIETNAM ERA; AND

     C)   ALL PROVISIONS OF C.F.R. 60-741 AS IMPLEMENTED BY FAR 52.222-36
PERTAINING TO AFFIRMATIVE ACTION FOR HANDICAPPED/DISABLED WORKERS.

     VENDOR REPRESENTS THAT IT HAS SUBMITTED STANDARD FORM 100 (EEO-1).
COMPLIANCE REPORTS AS REQUIRED BY C.F.R. 60-1.7 AS IMPLEMENTED BY FAR 52.222-22.
VENDOR CERTIFIES THAT, IN COMPLIANCE WITH 41 C.F.R. 60-1.8 AS IMPLEMENTED BY FAR
52.222-21, IT DOES NOT AND WILL NOT MAINTAIN OR PROVIDE FOR ITS EMPLOYEES ANY
SEGREGATED FACILITIES AT ANY OF ITS ESTABLISHMENTS, AND THAT IT DOES NOT AND
WILL NOT MAINTAIN OR PROVIDE FOR ITS EMPLOYEES ANY SEGREGATED FACILITIES AT ANY
OF ITS ESTABLISHMENTS, AND THAT IT DOES NOT AND WILL NOT PERMIT ITS EMPLOYEES TO
PERFORM THEIR SERVICES AT ANY LOCATION UNDER ITS CONTROL WHERE SEGREGATED
FACILITIES ARE MAINTAINED. VENDOR AGREES THAT BREACH OF THIS CERTIFICATION IS A
VIOLATION OF THE EQUAL OPPORTUNITY CLAUSE INCORPORATED HEREIN. VENDOR FURTHER
AGREES THAT IT WILL EITHER (A) OBTAIN CERTIFICATIONS OF NONSEGREGATED FACILITIES
FROM PROPOSED SUBCONTRACTOR FOR SPECIFIC TIME PERIODS; OR (B) OBTAIN
CERTIFICATIONS OF NONSEGREGATED FACILITIES FROM PROPOSED SUBCONTRACTORS PRIOR TO
AWARD OF ANY SUBCONTRACT SUBJECT TO THE EQUAL OPPORTUNITY CLAUSE, WILL RETAIN
SUCH CERTIFICATIONS IN ITS FILES, AND FORWARD THE NOTICE SET FORTH IN FAR
52.222-21 TO PROPOSED SUBCONTRACTORS. VENDOR AGREES TO COMPLY WITH ANY AND ALL
STATE AND LOCAL GOVERNMENT EQUAL EMPLOYMENT OPPORTUNITY AND AFFIRMATIVE ACTION
LAWS, INCLUDING ANY AND ALL APPLICABLE STATUTES, RULES, REGULATIONS, ORDINANCES
AND OTHER GUIDELINES.

                                      -1-


 
                                 Schedule 1(h)
                                 -------------

                                 SERVICE AREA

The Service Area under this Agreement shall be all major areas of the world
including, but not limited to, North America, South America, Europe, Asia
Pacific and Japan.

                                      -1-