Distribution Agreement - Sonic Systems Inc. and Sumitomo Metal Systems Development Co. Ltd.


                       CONFIDENTIAL TREATMENT REQUESTED
 [*] Denotes information for which confidential treatment has been requested. 
 Confidential portions omitted have been filed separately with the Commission.

THIS AGREEMENT is made on July 5,1998.
                          ----------- 

BETWEEN:  Sonic Systems, Inc. of 575 N. Pastoria Ave., Sunnyvale, CA, 94086 USA
          ('SONIC')

AND:      Sumitomo Metal Systems Development Co., Ltd, SMISoft Products
          -------------------------------------------------------------
          Division, 3-11-36 Mita, Minato-ku, Tokyo 108, Japan ('DISTRIBUTOR')
          ---------------------------------------------------

WHEREAS:

A.   SONIC owns or has the right to license and/or arrange the distribution of
     certain complete computer hardware and related software programs known as
     Products, more fully described in Schedule One.

B.   DISTRIBUTOR has requested SONIC to permit it to distribute such computer
     hardware and software Products in the countr(y/ies) listed in Schedule Two
     and has submitted to SONIC a Business Plan specifying the manner in which
     it proposes to distribute and support the same.

C.   If so noted in Exhibit One, DISTRIBUTOR has agreed to translate the English
     language version of the Product packaging, documentation and software
     programs into the language used in the pertinent countr(y/ies) and to
     assign copyright in that translation to SONIC on the condition that SONIC
     provide DISTRIBUTOR with code suitably designed to support localization
     into said local language.

D.   SONIC has agreed to grant the DISTRIBUTOR the right to distribute such
     Products upon and subject to the terms and conditions of this Agreement.

NOW THE PARTIES AGREE as follows:

1.   Definitions

(a)  'Business Plan' means the business plan referred to in Recital B above,
     which is annexed to this Agreement and marked Exhibit One, as amended or
     added to pursuant to this Agreement, or any business plan substituted
     therefor pursuant to this Agreement.

(b)  Effective Date' means the date of execution of this Agreement by the final
     party to execute this Agreement.

(c)  'Products' means:

     (i)  the before recited computer hardware and related software Products,
     including upgrades and enhancements thereof from time to time, and any
     other computer hardware and related software Products agreed between SONIC
     and DISTRIBUTOR to be incorporated herein; and

     (ii) all documentation including (without limitation all user manuals
     pertaining to such Products;

(d)  'Sub-Distributor' means any person or corporation to whom the DISTRIBUTOR
     grants distribution rights;

(e)  'Territory' means the countr(y/ies) listed in Schedule Two.

 
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2.   Term

2.1  This Agreement shall commence on the Effective Date and shall continue for
     the term set out in Schedule Two from the Effective Date, unless earlier
     terminated in accordance with the terms hereof, and thereafter shall be
     automatically renewed after the initial term for successive periods of 1
     year each unless terminated by 3 months notice in writing by one party to
     the other.

3.   Distributor Rights and Duties

3.1  During the term of this Agreement and subject to its terms and conditions,
     SONIC grants to the DISTRIBUTOR a non-exclusive, non-transferable right to
     market and distribute the Products either directly or through its Sub-
     Distributors, limited to the Territories set out in Schedule Two only and
     only as expressly permitted by this Agreement.  DISTRIBUTOR shall have no
     right to reproduce the Products in whole or in part.

3.2  Should SONIC appoint a new distributor in the Territory or enter into an
     OEM Agreement that will cover the territory, SONIC shall notify the
     DISTRIBUTOR prior to or immediately after such an appointment or execution
     of an OEM agreement.  Upon such notification, both Parties shall negotiate
     in good faith to determine the anticipated impact in the Territory of this
     new SONIC partnership and to modify the level of commitment in this
     Agreement.

3.3  The grant herein is subject to and conditional upon the DISTRIBUTOR
     obtaining all the necessary Territory's governmental licenses or permits,
     other than the obligation of the producer under the laws in the Territory,
     necessary to enable it to effectively exercise all or any of the rights
     herein granted in the Territory.  The grant herein is subject to and
     conditional upon the SONIC obtaining all necessary export license or
     permits of the Products from the United States Government.

3.4  Distribution of Products

     (a)  The DISTRIBUTOR may within the Territory appoint non-exclusive Sub-
     Distributors of the Products to assist in the marketing and distribution of
     the Products in the Territory, and shall keep SONIC advised from time to
     time of the names and addresses of the Sub-Distributors so appointed.  Such
     Sub-Distributors shall not be granted permission or any right by
     DISTRIBUTOR to reproduce the Products, in whole or in part, for any purpose
     whatsoever.

     (b)  The appointment by DISTRIBUTOR of any Sub-Distributor shall not
     operate as an assignment of any or all of DISTRIBUTOR's obligations
     hereunder. The DISTRIBUTOR shall remain responsible for the acts and
     omissions of such Sub-Distributors and shall cause each Sub-Distributor to
     covenant to comply with the obligations of the DISTRIBUTOR herein.

     (c)  DISTRIBUTOR shall not provide the Products to any person or
     organization whom DISTRIBUTOR reasonably suspects will re supply the
     Products outside the Territory.  SONIC shall not provide the Products to
     any person or organization whom SONIC reasonably suspects may export to
     supply the Products in the Territory.

     (d)  DISTRIBUTOR shall pass to SONIC any leads it obtains as to persons or
     organizations interested in obtaining copies of the Software outside the
     Territory.  SONIC shall pass to DISTRIBUTOR any leads it obtains as to
     persons or organizations interested in obtaining copies of the Products
     inside the Territory.

 
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     (e)  DISTRIBUTOR shall within thirty days of the end of each quarter
     prepare a list of the names and addresses of any people (including
     organizations) who have registered with DISTRIBUTOR or its Sub-Distributors
     as a user of the Products.

     (f)  Sub-Distributors shall be free to set their own price for the
     Products, however, DISTRIBUTOR will specify a recommended retail price of
     the Products as set out in Schedule Two and shall vary this recommended
     retail price, subject to prevailing market and exchange rate conditions, to
     ensure that competitive price positioning of the Products is maintained.
     DISTRIBUTOR shall notify SONIC in writing 14 days in advance of changes to
     the recommended retail price which shall be subject to the consent of SONIC
     and which consent shall not be unreasonably withheld.

     (g)  DISTRIBUTOR shall market and distribute the Products only in the
     packaging supplied by SONIC, including without limiting the generality
     foregoing, the SONIC standard license agreement.  The License agreement may
     be amended by the DISTRIBUTOR for localization purposes, which amendments
     shall be subject to the consent of SONIC and which consent shall not be
     unreasonably withheld.

     (h)  DISTRIBUTOR will participate in sales of the Products to Original
     Equipment Manufacturers (OEM's) for inclusion with OEM's product(s).  Such
     transactions will be negotiated individually and at pricing not necessarily
     relating to standard pricing for the Products.  DISTRIBUTOR's participation
     in such transactions will vary with the degree of involvement as set out in
     Schedule Two.

3.5  Advertising of Products

     (a)  DISTRIBUTOR at its expense shall diligently seek to develop in the
     Territory the market for and to exert its best efforts to advertise and
     promote in the Territory distribution of the Products to the extent
     practicable under the circumstances and shall make such provisions as it
     deems adequate to supply Products in sufficient quantity to reasonably
     satisfy such market.

     (b)  Such advertising and promotion shall at all times fairly and
     accurately represent the Products in relation to other products of its type
     and shall comply with any reasonable directions as to content or format
     that SONIC may from time to time give to DISTRIBUTOR in that regard. Copies
     of all advertising and promotional material shall be supplied to SONIC in
     the form published within a reasonable time after publication provided,
     however, that SONIC will not reproduce or republish any such advertising or
     promotional material bearing the name of DISTRIBUTOR or any of its trade
     marks at any time during or after termination of this Agreement without the
     written consent of DISTRIBUTOR.

     (c)  In support of DISTRIBUTOR's best efforts in the marketing and
     promotion of the Products, SONIC shall make available to DISTRIBUTOR
     without charge examples of creative material, artwork, and editorial
     already in its possession from other markets in which the Products are
     distributed which may be of assistance to DISTRIBUTOR.

     (d)  Every six (6) months from the date of this Agreement, DISTRIBUTOR
     shall provide a report to SONIC detailing methods and frequency of
     advertising, marketing, and promotional activity by DISTRIBUTOR in relation
     to the Products for the previous 6 month period.

3.6  Marketing

     No later than thirty (30) days prior to the start of any calendar year
     during the term hereof, DISTRIBUTOR shall prepare and deliver to SONIC for
     SONIC's review and 

 
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      comment, a marketing plan for the Products including without limitation, a
      description of:

      (a)  the market trends in the Territory

      (b)  the DISTRIBUTOR's channels of distribution

      (c)  promotional activities contemplated by the DISTRIBUTOR; and

      (d)  other marketing activities contemplated by the DISTRIBUTOR.

      All such marketing information shall be confidential information in
      accordance with Clause 9.4.

3.7   Title

      The original and any copies or versions of the Products, in whole or in
      part, whether or not incorporated in other Products, including without
      limitation translations, partial copies, modifications and updates are and
      shall be the property of SONIC or a third party which has licensed its
      right in the Products to SONIC. This Agreement shall not convey title nor
      grant any rights of ownership in the Products to the DISTRIBUTOR, nor
      shall the DISTRIBUTOR grant or purport to grant any rights of ownership in
      the Products to any third parties.

3.8   Compliance with Business Plan

      In the exercise of its rights hereunder, and performance of its
      obligations, DISTRIBUTOR shall use its best efforts to conduct business in
      accordance with its representations and performance forecasts in the
      Business Plan, unless and to the extent that the Business Plan is amended
      by agreement between SONIC and DISTRIBUTOR. As a condition to its
      agreement to any such amendment, each party may desire additions to the
      Business Plan. DISTRIBUTOR shall be entitled to amend the Business Plan
      according to the prevailing market conditions with the approval of SONIC,
      which approval shall not be unreasonably withheld.

3.9   Copyright

      The DISTRIBUTOR acknowledges that it has no interest in the copyright of
      the Products.

3.10  Minima

      For the term of this Agreement DISTRIBUTOR shall obtain Products from
      SONIC in the minimum quantities set out in Schedule Four. Upon the signing
      of this Agreement, DISTRIBUTOR shall place an Initial Stocking Order with
      Sonic for the minimum quantities set out in Schedule Four. After the first
      6 months of this Agreement, failure by DISTRIBUTOR to achieve these
      minimum quantities in any period, except if such failure is due to force
      majeure or to any action or omission of SONIC, shall allow SONIC to
      terminate this Agreement.

4.    Trade Marks

4.1   SONIC grants to the DISTRIBUTOR for the duration of this Agreement the 
      non-exclusive, non-assignable right to use and display the trade marks and
      the names set out in Schedule Three ('the Trade Marks') only in the
      Territory and only in relation to the Products subject to the terms and
      conditions herein contained. Such use shall at all times comply with
      SONIC's corporate and/or product identity guidelines from time to time
      notified to DISTRIBUTOR.

4.2   DISTRIBUTOR acknowledges, and SONIC warrants, that SONIC is the sole owner
      of all rights including, but not limited to, patent, trademark and
      copyright in the Product supplied pursuant to this Agreement. DISTRIBUTOR
      agrees not to remove any Product identification or notices of such
      proprietary restrictions from SONIC's Product and

 
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     agrees to reproduce such identification or notices as reasonably necessary
     to protect SONIC's proprietary rights.

4.3  DISTRIBUTOR will market the Products only in the packaging supplied or
     approved by SONIC.

4.4  Agreement to Use

     DISTRIBUTOR covenants and agrees to ensure that the said trade marks appear
     in all catalogs and other promotional material relating to the Products.
     DISTRIBUTOR shall not give undue prominence to its own names and marks in
     such catalogs or other promotional material.  In all such catalogs and
     promotional material DISTRIBUTOR shall:
     
     (a)  acknowledge the proprietorship of SONIC's trade marks; and

     (b)  insert the following wording in the language or languages used in the
     materials: '__________ is the trade mark and the product of Sonic Systems,
     Inc. of the U.S.A.'.  In the event that DISTRIBUTOR is requested to supply
     information in relation to the Products for the preparation of promotional
     materials, newspaper articles or trade journals, DISTRIBUTOR shall supply
     accurate details as to the proprietorship of SONIC trade marks and
     production of the Products.

5.   Payment Terms

5.1  In consideration of the rights herein granted, DISTRIBUTOR shall pay to
     SONIC for each unit of the Products ordered by DISTRIBUTOR from SONIC per
     the current DISTRIBUTOR Price List (Exhibit Three to this Agreement).  Such
     amount shall be paid in accordance with the terms specified in Schedule
     Five.

5.2  In consideration of the marketing and localization costs which will be
     borne by the DISTRIBUTOR in establishing the Products in the Territory,
     SONIC shall negotiate with the DISTRIBUTOR in good faith appropriate
     pricing concessions to ensure amortization of these costs over the term of
     this Agreement, subject to DISTRIBUTOR achieving performance goals of the
     Agreement.

5.3  Interest at the rate of two percent (2%) per month on the amount of any
     unpaid invoice may be added to any overdue amounts owed to SONIC.  When the
     DISTRIBUTOR will pay the amount within fifteen (15) days from issue date of
     invoice, DISTRIBUTOR may receive two percent (2%) discount from the payment
     obligations.

5.4  Ordering procedures for the Products shall be as set out in Schedule Five
     to the Agreement.  SONIC will use its best efforts to deliver orders within
     20 days of receipt of such orders and SONIC will endeavor to do all that is
     necessary to facilitate delivery of the Products PROVIDED HOWEVER that
     SONIC shall not be liable for any delay in delivery or cancellation of any
     order arising from the unavailability of any goods ordered or any other
     circumstance beyond SONIC's control.  SONIC shall be entitled to allocate
     orders in such manner as it deems fit.

5.5  The DISTRIBUTOR shall be solely responsible for all costs and expenses
     (including without limitation, all taxes, levies, duties and export or
     import duties and similar charges of whatever nature, whether imposed by
     local, state or federal governments or agencies) incurred by it in the
     Territory in the marketing, sub-distributing and distribution of the
     Products.

5.6  SONIC may declare all sums immediately due and payable in the event of a
     material breach by DISTRIBUTOR of any of its obligations to SONIC contained
     in this Agreement, including without limitation, the failure of DISTRIBUTOR
     to comply with 

 
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     credit terms if not remedied within thirty (30) days after written notice
     thereof has been given to DISTRIBUTOR. No property in or title to any of
     the goods embodying the Products shall pass to DISTRIBUTOR until the full
     price thereof has been duly paid to SONIC and SONIC shall have received in
     cash the full amount thereof.

6.   Purchase of goods from SONIC

6.1  Orders, Terms & Title

     DISTRIBUTOR may purchase, whether for re supply or otherwise, any SONIC
     products on its product price list from time to time at such discount as
     may be agreed between SONIC and DISTRIBUTOR from time to time.  In
     addition, DISTRIBUTOR may purchase from SONIC in quantity any marketing
     materials, such as point of sale materials, brochures and product
     specifications, or packaging materials, produced by or for SONIC, at cost
     plus reasonable handling and shipping charges, in order to assist it in the
     carrying out of its obligations hereunder.  All prices for any SONIC
     products shall be FOB the offices of SONIC, exclusive of sales tax (if
     any).  Orders may be placed upon SONIC at its address first hereinbefore
     appearing by facsimile transmission, first class mail or any other written
     means, and shall be effective upon the execution by SONIC of an order
     confirmation.  Title shall not pass in any goods ordered by DISTRIBUTOR
     until full payment has been received therefor.  DISTRIBUTOR shall have the
     right to nominate the freight forwarder and customs agents of its choice.

6.2  Price Changes

     SONIC shall have the right to revise product prices by giving thirty(30)
     days advance written notice to DISTRIBUTOR.  Such revisions shall apply to
     all orders received after the effective date of revision.

6.3  Stock Rotation

     DISTRIBUTOR shall be allowed once every six months to return to SONIC any
     slow moving products in its inventory for credit.  If and when DISTRIBUTOR
     intends to take this action, DISTRIBUTOR must first contact SONIC to make
     this request and SONIC shall authorize this request and issue a RMA
     ('Return Merchandise Authorization') number for this return.  In this
     event, DISTRIBUTOR must place an offsetting order equal to or greater than
     in value to the return; the offsetting order must be placed at the same
     time as the request is made to return the slow moving products.  SONIC
     shall ship the offsetting order upon return of the slow moving products.
     If the offsetting order is greater in value than the return, then the
     excess shall be treated as a standard order with standard terms as outlined
     in section 6. 1.

7.   Product support

7.1  Product Enhancements

     DISTRIBUTOR will maintain and support the Products in the Territory at no
     charge to SONIC provided that SONIC shall provide DISTRIBUTOR promptly and
     without charge such technical advice and assistance as DISTRIBUTOR may
     reasonably require to enable it to provide such maintenance and support.
     DISTRIBUTOR will promptly disclose to SONIC in writing any errors, bugs and
     required corrections in the Products of which it becomes aware.  SONIC will
     promptly rectify or notify DISTRIBUTOR in writing of any errors, bugs and
     required corrections in the Products of which it becomes aware and will
     advise DISTRIBUTOR as to a recommended course of action in supporting
     customers who may be affected by such defects and will advise DISTRIBUTOR
     of SONIC's timetable for providing correction of said defects.

7.2  Enhancements and Upgrades

     SONIC will use its best efforts to ensure that at all times the Products
     are enhanced in accordance with the changes necessary to ensure the
     Products continue to be up to date and competitive.  DISTRIBUTOR will
     advise SONIC of market conditions and reactions 

 
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     to the Products which indicate needs or opportunities to enhance the
     Products. SONIC will consult with DISTRIBUTOR in relation to the provision
     of enhancements or upgrades and shall give DISTRIBUTOR as much advance
     notice as possible of its intention to provide an enhancement or upgrade,
     such information shall be treated as confidential under clause 8.2 of this
     Agreement. SONIC will provide upgrades and enhancements of the Products to
     DISTRIBUTOR for re supply to registered end users on the following terms:

     (a)  Enhancements and upgrades shall be in one of two categories as
          determined by SONIC:

          (i)  Error corrections ('error corrections' ), which shall be supplied
          to DISTRIBUTOR by SONIC without accompanying manuals or packaging;

          (ii) Upgrades in functionality ('upgrades' ) which shall be supplied
          to DISTRIBUTOR by SONIC packaged in a manner which replaces the
          packaging in which the Products was previously marketed.

     (b)  Error corrections shall be supplied to registered end users free of
          charge.

     (c)  DISTRIBUTOR may render a reasonable charge for upgrades based on the
          price paid by DISTRIBUTOR to SONIC for said upgrade.

     (d)  Prior to the formal announcement of an error correction or an upgrade
          DISTRIBUTOR shall inform SONIC of the number of copies of the error
          correction or minor upgrade it reasonably believes it will need to
          satisfy the likely demand of registered end users. SONIC will supply
          the nominated number of copies to DISTRIBUTOR.

     (e)  Error corrections will be provided to DISTRIBUTOR by SONIC at the
          expense of SONIC and DISTRIBUTOR will, where necessary, at its expense
          repackage them and provide them to end users in accordance with this
          clause.

     (f)  Upgrades will be supplied by DISTRIBUTOR to end users from the normal
          stock of the Products kept by DISTRIBUTOR and shall be priced to the
          DISTRIBUTOR at the discretion of SONIC.

     (g)  SONIC will provide DISTRIBUTOR notice in writing at least 15 days in
          advance of the release of an upgrade.

     (h)  SONIC will provide DISTRIBUTOR free of charge with a reasonable number
          of copies of error corrections and upgrades for demonstration purposes
          and for the purpose of exhibition thereof.

7.3  Outdated Stock

     In the event of an upgrade or enhancement being released, the following
     clauses shall apply:

     (a)  In the case of an error correction DISTRIBUTOR shall continue to
     market such stock as it has on hand and will offer end users who register
     with DISTRIBUTOR a free copy of the upgrade or enhancement.

     (b)  In the case of upgrades such stock of the Products as remains on the
     premises of DISTRIBUTOR may be returned to SONIC or to such address as
     SONIC may reasonably direct.  The transportation costs of such returns
     shall be shared equally by SONIC and DISTRIBUTOR.  Upon receipt of such
     returned packages SONIC shall send the same number of replacement major
     upgrade packages to DISTRIBUTOR.

7.4  Customer Support

     DISTRIBUTOR shall train and maintain a sufficient number of capable sales
     and technical personnel sufficient to market and support the Products so as
     to assure customer satisfaction, and otherwise to carry out its obligations
     and responsibilities under this Agreement.  Where requested by any
     organization which is authorized by DISTRIBUTOR (whether directly or
     indirectly) to market directly to end users and which provides the Products
     to end users, DISTRIBUTOR shall conduct such sales training of its
     personnel as may be necessary to impart such knowledge.

 
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8.   Translations

8.1  SONIC has made and will make translation of the manuals and user interface
     of the software of the Products into the local language of the Territory.

8.2  The DISTRIBUTOR shall consult with SONIC as to the appropriate wording for
     the packaging of the Products in the Territory.

8.3  The DISTRIBUTOR hereby assigns to SONIC the copyright and all other rights
     of a like nature which do now, or will, subsist in the Territory or in any
     other part of the world, in the translation of the Products including all
     plans, notes, memoranda and documentation related to the said translation
     and future amendments and versions of the translation as specified in
     Section 8. 1.

9.   Representations warranties and covenants

9.1  Warranty Claims

     SONIC agrees to replace at no charge any and all Products supplied by
     DISTRIBUTOR to users as replacement of goods returned under terms of the
     Limited Warranty set out on the Products License Agreement as attached
     hereto.

9.2  Right to Distribute

     SONIC represents and warrants that it has a right and will have a right to
     distribute the Products in accordance with the terms of this Agreement, and
     has a right and will have a right to grant to DISTRIBUTOR the non-exclusive
     right to market and distribute the Products in the Territory.

9.3  Confidentiality of Source Codes

     DISTRIBUTOR acknowledges that the source codes of the Products and all
     corrections, amendments, variations, extensions or additions to such source
     codes is confidential information of SONIC.

     Nothing in this Agreement shall entitle DISTRIBUTOR access to the whole or
     any part of the source code of any of the Products unless otherwise
     authorized by SONIC in writing in which case source code shall be held in
     confidence in accordance with the terms of Clause 9.4.

9.4  Both parties acknowledge that any confidential information which is marked
     as such and which is disclosed by a party to the other is confidential to
     that party and shall not be disclosed to any third party and DISTRIBUTOR
     agrees that confidential information or material provided to DISTRIBUTOR in
     relation to the Products shall not be disclosed to any third person or used
     for any purpose by DISTRIBUTOR other than for the purpose of performing its
     obligations under this Agreement unless such information or material or use
     thereof has been disclosed or has otherwise come into the public domain
     without fault or neglect on the part of DISTRIBUTOR, its servants or
     agents, or has been disclosed by the party which has the right to the
     information to a third party without restrictions of confidentiality, or
     has been independently developed by the receiving party, or can be shown to
     have been known to the receiving party prior to receipt or has been
     received from a third party as a matter of right.

9.5  If notified promptly in writing of any action (and all prior claims
     relating to such action) against DISTRIBUTOR, based upon any claim that the
     sale or use of the Products by DISTRIBUTOR or its customers under this
     Agreement infringes a patent, trade mark, trade secret or copyright
     enforceable in the Territory, SONIC shall at its own expense undertake the
     defense of such action and shall pay all costs (including but not limited
     to, legal, and traveling expenses and communication expenses) and damages
     (if any) 

 
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      awarded in any such action. SONIC will not have any liability to
      DISTRIBUTOR under this clause if the alleged infringement is based upon
      the use of the Products in combination with any other application software
      not supplied by SONIC.

      SONIC may, on the advice of its counsel remove any infringing product from
      the possession of DISTRIBUTOR, refund any amounts paid by DISTRIBUTOR for
      that product, and cease to supply such product to DISTRIBUTOR. SONIC shall
      indemnify and hold DISTRIBUTOR harmless from and against all and any
      damage, liability, costs or expenses including legal and traveling
      expenses incurred by DISTRIBUTOR as a result of a finding by a court, or a
      decision reached through settlement.

9.6   Prohibition of Reverse Engineering, Modification

      (a)  The DISTRIBUTOR covenants that the DISTRIBUTOR will not disassemble
      or reverse engineer the Products, in whole or in part, however the
      DISTRIBUTOR may open the case of the Product for maintenance provided that
      SONIC has made an instruction to do so.

      (b)  In addition, DISTRIBUTOR shall not knowingly permit any contractor or
      third party to have access or gain access to, or work on or do any work on
      the Products (or effect any part thereof) or make any correction,
      amendment, variation, extension or addition thereto.

9.7   Other than as set out in this clause 9, SONIC makes no warranties
      whatsoever to DISTRIBUTOR as to the merchantability or fitness for purpose
      of the Products and to the full extent permitted by United States law
      SONIC excludes any implied warranties or conditions including any
      warranties of merchantability or fitness for a particular purpose.
      DISTRIBUTOR acknowledges that it has exercised its own skill and judgment
      in deciding to distribute the Products. In no event will SONIC be liable
      to DISTRIBUTOR for any loss of profits, or loss of business resulting from
      warranty claims made by end users against DISTRIBUTOR. In no event will
      either party be liable to the other for any indirect or consequential
      damages of any kind.

9.8   SONIC warrants that the hardware of the Products and all related parts
      shall be free from defects in design, materials and workmanship for a
      period of one (1) year from the date of purchase by any end user of the
      Products. SONIC shall be liable for the proven claim and arising from the
      defects of the Products hereof and shall reimburse the cost of DISTRIBUTOR
      related to such a claim, provided that such claim is related to the
      material safety of the Products.

9.9   Other than as set out in this clause 9, under no circumstances shall SONIC
      be liable for any loss of profit, indirect or consequential loss, damage
      or injury arising from the supply or use of the Products PROVIDED THAT
      DISTRIBUTOR shall be entitled to recover direct compensatory damages from
      SONIC arising from the material breach by SONIC of any of its obligations
      under this agreement. Such compensatory damages shall be limited to the
      value of the Products purchased by DISTRIBUTOR which caused the loss.

10.   Termination

10.1  Either party hereto may terminate this Agreement forthwith upon the
      happening of any of the following events:

      (a)  the other party fails to observe or perform any material provision of
      this Agreement and fails to remedy such breach within thirty (30) days
      after written notice thereof has been given to the party in breach;

 
                                                                         page 10

      (b)  the other commits any act of bankruptcy or insolvency or a petition
      is presented for the bankruptcy or winding up of the other or a resolution
      is passed for the winding up of the other otherwise than for the purposes
      of amalgamation or reconstruction;

      (c)  the other enters a compromise or arrangement with creditors or a
      receiver or official manager of the other or of any of its assets is
      appointed.

      Either party may terminate this Agreement if the corporate entity of
      either is substantially changed or modified through acquisition or merger.

10.2  In the event that this Agreement is terminated pursuant to clause 2.1
      then:

      (a)  neither party shall have any liability to the other by virtue of such
      termination;

      (b)  where such survival is not inconsistent with the termination of this
      Agreement, the obligations of each party to the other with respect to
      names of registered users, copyright, payment of monies owed - including
      applicable interest, payments pursuant to Clause 5.5, confidentiality of
      source codes and financial information, rights of inspection, rights in
      relation to trade marks, and prohibition of reverse engineering shall
      survive termination.

      (c)  each party shall within seven (7) days of the effective date of
      termination deliver to the other all documents and other things (including
      microfiche, magnetic tape, disks, or other storage media) embodying any
      confidential information obtained from the other during the term hereof or
      before this Agreement and relating thereto, or, in the event that any such
      information is embodied in valuable property belonging to the receiving
      party thereof, the receiving party shall certify its obliteration by
      erasure or other appropriate means.

      (d)  DISTRIBUTOR will forthwith deliver to SONIC copies of all customer
      lists, prospect lists, copies of license agreements, lists of distributors
      and all other material relating to the distribution of the Products.

      (e)  DISTRIBUTOR may sell the Products in its stock at the termination
      day.

10.3  In the event that this Agreement is terminated by either party upon the
      happening of any of the events set forth in Clause 10.1 then the
      provisions of Clauses 10.2 (b), (c), and (d) shall apply mutatis mutandis
      to such termination, provided however, that Clause 10.2 (d) and (e) shall
      not apply to such termination in the event that DISTRIBUTOR is the party
      terminating the Agreement.

11.   Relationship of the Parties

      DISTRIBUTOR is an independent contractor and neither has nor shall have
      any power, right or authority, nor will DISTRIBUTOR represent that
      DISTRIBUTOR has any power, right or authority, to bind SONIC, or to assume
      or to create any obligation or responsibility, express or implied, on
      behalf of SONIC or in SONIC's name. Nothing stated in this Agreement shall
      be construed as constituting DISTRIBUTOR and SONIC as partners, or as
      creating the relationships of employer and employee, master and servant,
      or principal and agent between the parties hereto.

12.   Waiver

      No waiver by either party whether express or implied of any provisions of
      this Agreement or of any breach or default of either party shall
      constitute a continuing waiver or a waiver of any other provision of this
      Agreement unless made in writing and signed by the party against whom the
      waiver would otherwise be enforced.

13.   Entire Agreement

      This Agreement constitutes the entire agreement between the parties
      regarding the subject matter hereof, and supersedes and replaces all
      agreements, arrangements and understandings relating to the subject matter
      hereof, whether reduced to writing or not, that may have preceded this
      Agreement.

 
                                                                         page 11

14.  Force Majeure

     Notwithstanding any other provision in this Agreement, no default, delay or
     failure to perform on the part of either party shall be considered a breach
     of this Agreement if such default, delay or failure to perform is shown to
     be due entirely to causes beyond the reasonable control of the party
     charged with such default including, but not limited to causes such as
     strikes, lock-outs or other labor disputes, riots, civil disturbance,
     actions or inaction of governmental authorities or suppliers, epidemics,
     wars, embargoes, storms, floods, fires, earthquakes, acts of God or the
     public enemy, nuclear disasters or default of a common carrier.

15.  Assignment

     Neither party may assign its rights and obligations under this Agreement
     without obtaining the prior written consent of the other party to this
     Agreement PROVIDED HOWEVER, that such consent shall not be unreasonably
     withheld in the event that assignment is to be made to an affiliate, or
     necessitated due to a transfer of business.

16.  Severability

     If any clause or section of this Agreement is now or should become in
     contravention of any local, state or federal law, such clause or section
     shall be null and void and the terms of said prevailing local, state or
     federal law shall govern the transaction. The clauses or sections of this
     Agreement are independent and severable and the nullification of any
     particular clause or section shall in no way impair the validity of this
     Agreement nor the intent of the parties to remain bound by its terms and
     conditions.

17.  Counterparts

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

18.  Governing Law

     This Agreement shall be governed by and construed in accordance with the
     laws of the State of California in the United States of America. Any
     dispute, resolution, or proceeding regarding this Agreement shall be
     resolved through Binding Arbitration, with the loser of arbitration held
     responsible for payment of the winner's attorney fees.

 
                                                                         page 12

In witness of the above the parties have executed this Agreement on the day and
date first set out above.

Executed for and on behalf of    )
Sonic Systems, Inc. by           )
its duly authorized officer and  )
in the presence of:

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

          /s/ Steven Perricone
          --------------------------------
          Witness

Executed for and on behalf of    )
________________________         )
its duly authorized officer      )
and in the presence of:          )

          /s/ Masao Tatsuwaki
          --------------------------------
          Signatory

          /s/ Hidekazu Yasuda
          --------------------------------
          Witness

 
                                                                         page 13

SCHEDULE ONE

Description of Products:
-----------------------

The Products known as Interpol, SonicWALL, and others listed in the SONIC
Distributor Price List (Exhibit Three) and future additions and enhancements
thereof.


                                 SCHEDULE TWO

Term: Provided the minimum quantities set out in Schedule Four hereof are met,
this agreement shall commence on the 'Effective Date' and shall continue for a
period of one (1) year from the 'Effective Date', unless earlier terminated in
accordance with the terms hereof.

Territory:  Japan

Translation Language:  Japanese

     SONIC will provide localized materials for the Products as listed below:

     Interpol: localized Web management interface and localized QuickStart
     User's Guide.

     SonicWALL: localized Web management interface and localized QuickStart
     User's Guide.


Price per unit:

1.   The Recommended Retail Price (R.R.P.) shall be the local currency
equivalent of the U.S. dollar prices set out in the SONIC Distributor Price List
(Exhibit Three) except as specifically amended by agreement between SONIC and
DISTRIBUTOR.

Initially established local currency prices will be based on the U.S. dollar
exchange rate in effect in the territory at the time of introduction. Subsequent
variation in exchange rate of greater than (plus minus) 10% will cause the local
currency price to be adjusted subject to negotiation in good faith between
DISTRIBUTOR and SONIC.

The R.R.P. and the line up of the PRODUCTS shall be equal to the R.R.P and the
line up for the other distributors in the Territory.

2.   The Distributor Cost for each Product shall be as set out in the Sonic
Distributor Price List and will be based on U.S. dollar prices.

OEM pricing:

 
                                                                         page 14

1.   SONIC and DISTRIBUTOR shall negotiate in good faith appropriate pricing and
margin allocation for all OEM sales in the territory in which DISTRIBUTOR
actively participates either before, during, or after conclusion of the sale.

 
                                                                         page 15

                                SCHEDULE THREE

Trade Marks and names referred to in 4.1


Sonic Systems, Inc.    Sonic        SonicWALL
Interpol
SonicWALL Plus DMZ


                                 SCHEDULE FOUR

Minimum purchase volume as per section 3.9 hereof shall be as follows:

Total Minimum Purchase Volume for Initial Term of Agreement:

[*]

Minimum initial Stocking Order:

Interpol - [*] Units (to be purchased on or before July 31, 1998 as Interpol
   will not be available after that date)

SonicWALL - [*] Units (any mix of models, to be purchased on or before August
   31, 1998, as long as the Japanese version of the product is available. If it
   is not available prior to that date the product is to be purchased as soon as
   it is.)

Minimum Quarterly Purchases (after first Quarter after signing Agreement):

Accumulative from signing to the end of second quarter from signing   US$[*]

Accumulative from signing to the end of third quarter from signing    US$[*]

   It is agreed that purchases against the Minimum Quarterly Purchase
   requirements shall not roll over from one term of the Agreement to the next.


                                 SCHEDULE FIVE

Ordering Procedures and Payments:

1.   Upon receipt of a numbered purchase order from DISTRIBUTOR, SONIC will
     process order promptly and dispatch via the carrier nominated by
     DISTRIBUTOR. All invoices will include the following data. SONIC shall fax
     a copy of the original invoice to DISTRIBUTOR the day of each shipment and
     the original itself by regular mail within 5 days from issuance.

     a)   description of goods

 
                                                                         page 16

     b)   number of units shipped
     c)   date of invoice
     d)   invoice number
     e)   name of intended forwarder nominated by DISTRIBUTOR
     f)   purchase order number of DISTRIBUTOR
     g)   _______________ DISTRIBUTOR to SONIC
     h)   payment terms of Net 30 days unless otherwise arranged will apply.

2.   DISTRIBUTOR will make payment for the full invoice amount within thirty
     (30) days by wire transfer of funds to:

          Bank information:                   ComericA Bank California
                                              1299 Oakmead Parkway
                                              Sunnyvale, CA 94086

          SWIFT address:                      MNBD US33CAL
 
          ***Please advise your bank to use the SWIFT address when transferring
          funds ***

          Federal Routing Number:             1211-37522
 
          ABA number:                         1211-37522
 
          Beneficiary Address:                Sonic Systems, Inc.
                                              575 N. Pastoria Avenue
                                              Sunnyvale, CA 94086
 
          Beneficiary account name:           Sonic Systems, Inc.

          Sonic bank account number:          [*]

     All payments made to SONIC pursuant to this Agreement shall be made in
     United States currency.

 
                                                                         page 17

                                  EXHIBIT ONE

The 'Business Plan' referred to in Section 1 (a) hereof is outlined below:

[OUTLINE OF SALES AND MARKETING TASKS TO BE UNDERTAKEN BY DISTRIBUTOR]


                                  EXHIBIT TWO


                               LICENSE AGREEMENT

Copyright Notice
(C) 1998 Sonic Systems, Inc. All rights reserved.

Under the copyright laws, this manual or the software described within, may not
be copied, in whole or part, without the written consent of the manufacturer,
except in the normal use of the software to make a backup copy. The same
proprietary and copyright notices must be affixed to any permitted copies were
affixed to the original. This exception does not allow copies to be made for
others, whether or not sold, but all of the material purchased (with all backup
copies) may be sold, given, or loaned to another person. Under the law, copying
includes translating into another language or format. SonicWALL, SonicWALL Plus,
and SonicWALL Plus DMZ are trademarks of Sonic Systems, Inc.

All other trademarks and trade names belong to their respective holders.

Specifications in this manual are subject to change without notice.

Limited Warranty

Sonic Systems, Inc. warrants SonicWALL (the Product) for one (1) year from the
date of purchase against defects in materials and workmanship. If there is a
defect in the hardware, Sonic Systems will replace the product at no charge to
you, provided you return it to Sonic Systems with transportation charges
prepaid. A Return Materials Authorization (RMA) number must be displayed on the
outside of the package for product(s) being returned for replacement or the
product(s) will be refused. This may be obtained by calling Sonic Systems
Customer Service between the hours of 7:00 AM and 5:00 PM Pacific Standard Time,
Monday through Friday.

Phone:  (408) 736-1900
Fax:    (408) 736-7228
E-mail: [email protected]
        --------------------

This warranty does not apply if the Product has been damaged by accident, abuse,
misuse, or misapplication or has been modified without the written permission of
Sonic Systems.

 
                                                                         page 18

In no event shall Sonic Systems, Inc. or its suppliers be liable for any damages
whatsoever (including, without limitation, damages for loss of profits, business
interruption, loss of information, or other pecuniary loss) arising out of the
use of or inability to use the Product.

Some states do not allow the exclusion or limitation of implied warranties or
liability for incidental or consequential damages, so the above limitation or
exclusion may not apply to you. Where liability may not be limited under
applicable law, Sonic's liability shall be limited to the amount you paid for
the Product. This warranty gives you specific legal rights, and you may have
other rights which vary from state to state. By using this Product, you agree to
these limitations of liability.

THIS WARRANTY AND THE REMEDIES SET FORTH ABOVE ARE EXCLUSIVE AND IN LIEU OFALL
OTHER WARRANTIES, ORAL OR WRITTEN, EXPRESS OR IMPLIED. No dealer, agent, or
employee of Sonic Systems is authorized to make any extension or addition to
this warranty.

 
                                                                         page 19

                                 EXHIBIT THREE

                        JAPANESE DISTRIBUTOR PRICE LIST

Note: It is agreed that the following price list shall be used by all SONIC
Distributors in the Territory and that only the Internet products listed shall
be available in the Territory (excluding Macintosh LAN Products which do not
pertain to this Agreement):

                         Internet Solutions Price List

                                 Japanese SRP




Sonic #            Lbs     Kgs       Description                                     Retail        JSRP           Cost
 
                                     QuickStream
                                     PPP      Remote     Access      Hardware
                                     Server
                                                                                              
01-SSC-            3.5     1.5       QuickStream Pro (110v) 3-port w/Web-based       [*]         [*]            [*] 
2110                                 Management & IPX
                   
                   
                   
                                     SonicWALL
                                     Internet Filter & Firewall Hardware
01-SSC-              3     1.3       SonicWALL 50 User (110v)                        [*]         [*]            [*] 
2552                       
01-SSC-              3     1.3       SonicWALL 50 User w/1 Year Filter               [*]         [*]            [*] 
2590                                 Subscription (110v)
                           
                           
                           
01-SSC-              3     1.3       SonicWALL Unlimited Plus (110v)                 [*]         [*]            [*] 
2554                       
01-SSC-              3     1.3       SonicWALL Unlimited Plus w/1 Year Filter        [*]         [*]            [*] 
2591                                 Subscription (110v)
                           
                           
                           
01-SSC-              3     1.3       SonicWALL Plus DMZ (110v)                       [*]         [*]            [*] 
2556                       
01-SSC-              3     1.3       SonicWALL Plus DMZ w/1 Year Filter              [*]         [*]            [*] 
2592                                 Subscription (110v)
                           
                           
                           
01-SSC-                              1 Year Filter Subscription for SonicWALL        [*]         [*]            [*] 
2566                       
                           
                                     Bandit
                                     Bandwidth Aggregation Internet Router
01-SSC-              3     1.3       Bandit (110v)                                   [*]         [*]            [*] 
2200                       
01-SSC               0       0       Bandit Dial-In Upgrade                          [*]         [*]            [*] 
2200