IBM [Logo]

January 11, 2000

Mr. Phil Koussey
Senior Vice President of Marketing
Bell Microproducts, Inc.
1941 Ringwood Avenue
San Jose, CA 95131-1721

Dear Phil,

This memo  summarizes  the  agreement  under  which Bell  Microproducts  Inc. is
participating in a program called  "Technology Group Solutions  Partner" for the
distribution  of certain  defined IBM Technology  Group products  throughout the
Americas effective January 12, 2000.

Under  this  arrangement,  you will be  provided  with  certain  privileges  and
considerations  consistent  with  IBM's  Technology  Group  Master  Distribution
Agreement and IBM's Technology Group Solutions Partner program.

It is our  joint  objective  to  achieve  sales of $2  Billion  over a four year
period, although there is no guarantee that these expectations will be met.

Sincerely,

/s/ Henri Richard

Henri Richard
Vice President,
WW Distribution Sales & Support

<PAGE>


                          MASTER DISTRIBUTION AGREEMENT
                                     BETWEEN
                   INTERNATIONAL BUSINESS MACHINES CORPORATION
                                       AND
                        BELL MICROPRODUCTS INCORPORATION


                                       1

<PAGE>


                          MASTER DISTRIBUTION AGREEMENT


Customer: Bell Microproducts                          Agreement Number: OEM10399

International Business Machines Corporation,  a New York corporation ("IBM") and
Bell Microproducts  Inc. a California  corporation with its principal offices at
1941  Ringwood  Avenue,  San Jose,  California  ("Distributor")  enter into this
Master Distribution  Agreement for the purchase and distribution of IBM Products
by Distributor on a non-exclusive  basis in the Authorized  Territory as defined
in the attached Product Attachment(s).  This Master Distribution Agreement,  any
Attachments,  and order acceptances issued hereto shall collectively be referred
to as the "MDA".

In  consideration  of the mutual  covenants  contained herein and other good and
valuable  consideration,  the  receipt  and  sufficiency  of which both  parties
acknowledge,  IBM and Distributor,  intending to be legally bound,  agree to the
following terms and conditions of this MDA:

The term of this MDA commences on January 1, 2000 and shall remain in effect for
a period of two (2) years  expiring  on January 1, 2002,  unless  terminated  in
accordance with Section 15 of the MDA.


IN WITNESS  WHEREOF,  the parties  have caused their duly  authorized  agents to
execute this MDA on the date below indicated.


INTERNATIONAL BUSINESS MACHINES              BELL MICROPRODUCTS, INC.
CORPORATION



BY:    /s/ Robert C. Melendres               BY:    /s/ Phil Roussey
       ---------------------------------            ----------------------------

NAME:  Robert C. Melendres                   NAME:  Phil Roussey

TITLE: Director, WW Contracts &              TITLE: SR V-P of Marketing
       Business Practices TG

DATE:  January 11, 2000                      DATE:  January 11, 2000

                                       2

<PAGE>


                                TABLE OF CONTENTS


GENERAL TERMS

SECTION 1.        DEFINITIONS

SECTION 2.        SALES ACTIVITY OF THE DISTRIBUTOR

SECTION 3.        PAYMENT TO IBM

SECTION 4.        RIGHTS AND OBLIGATIONS OF IBM

SECTION 5.        ORDERING

SECTION 6.        PRICING

SECTION 7.        TRANSFER OF TITLE AND RISK OF LOSS OR DAMAGE

SECTION 8.        WARRANTY

SECTION 9.        DISTRIBUTORS WARRANTY TO ITS CUSTOMERS

SECTION 10.       SOFTWARE AND MANUALS

SECTION 11.       PRODUCT WITHDRAWAL

SECTION 12.       TAXES

SECTION 13.       PATENT INDEMNITY

SECTION 14.       LIMITATION OF LIABILITY

SECTION 15.       TERMINATION

SECTION 16.       TRADEMARKS AND TRADE NAMES

SECTION 17.       EXPORT

SECTION 18.       MISCELLANEOUS

List of Product Attachment(s):

ATTACHMENT A      SSD PRODUCT ATTACHMENT

EXHIBIT 1         MICRODRIVE

ATTACHMENT B      MD PRODUCT ATTACHMENT

ATTACHMENT C      NHD PRODUCT ATTACHMENT [TBD]

ATTACHMENT D      EXCLUDED COUNTRIES

                                       3

<PAGE>


ATTACHMENT E      IBM BUSINESS PARTNER EMBLEM AUTHORIZATION

                                       4

<PAGE>


SECTION 1. DEFINITIONS

1.1      "Product(s)"  are  listed in the  Product  Attachments  and shall  mean
         products  purchased  from IBM  Technology  Group  that  Distributor  is
         authorized  to  sell  in  the  Authorized   Territories.   The  Product
         Attachment(s)  may  contain  specific  terms  applying  to  the  listed
         Products.

1.2      "IBM  Technology  Group" shall mean the group of IBM business  units or
         divisions   currently  known  as:  Storage   Systems   Division  (SSD),
         Microelectronics  Division (MD),  Networking  Hardware  Division (NHD),
         Displays  Business  Unit (DBU),  and  Embedded  Systems  Business  Unit
         (ESBU).  The group of IBM  business  units may change from time to time
         without notice.

1.3      "Distributor"  shall mean the entity  executing this MDA, a Subsidiary,
         and any other entity authorized to purchase Product(s) under this MDA.

1.4      "End User" shall mean a third party who: i) is not a Subsidiary and who
         is otherwise  unaffiliated with Distributor or Customer;  ii) purchases
         Products  from a Customer for its own use; and iii) places such Product
         in productive use. An End User does not remarket,  sell, license,  rent
         or lease the  Product(s) to other parties in the regular  course of the
         End User's business.

1.5      "Customer"  shall mean a third  party which is not a  Subsidiary  of or
         which  is  otherwise  unaffiliated  with  Distributor,   and  purchases
         Product(s)  from  Distributor for the purpose of reselling to End Users
         or to resellers such as VARs, retailers, integrators and OEMs.

1.6      "Base Agreement" shall mean the main body of the MDA, excluding Product
         Attachment(s).

1.7      "Product Attachment(s)" shall mean a written instrument executed by the
         parties  for the purpose of  specifically  identifying  Product(s)  the
         parties  intend to be covered by this MDA and the terms and  conditions
         unique to the particular Product(s).  A Product Attachment shall modify
         and  supplement  this Base  Agreement for the Products  covered by that
         Product Attachment. In the event of a conflict between the terms of the
         Base Agreement and the Product Attachment(s), the Product Attachment(s)
         shall control.

1.8      "Authorized Territory" shall mean the territory in which IBM authorizes
         Distributor, on a nonexclusive basis, to sell and promote Product(s) to
         Customer(s).  The  Authorized  Territory  for a  particular  Product is
         specified in the applicable Product Attachment.

1.9      "Excluded  Countries"  shall mean  countries  where  Distributor is not
         authorized  to  sell  Product(s)   directly  or  indirectly.   Excluded
         Countries  include those countries listed in Attachment D and any other
         countries  to which such sales are  prohibited  by U.S.  law or by this
         MDA.

1.10         "Subsidiary" shall mean a corporation, company, or other entity:

                  a.       more than fifty  percent  (50%) of whose  outstanding
                           shares or securities  (representing the right to vote
                           for the  election  of  directors  or  other  managing
                           authority) are; or

                  b.       which does not have outstanding shares or securities,
                           as may be the case in a  partnership,  joint venture,
                           or  unincorporated  association,  but more than fifty
                           percent   (50%)   of   whose    ownership    interest
                           representing  the  right to make  decisions  for such
                           corporation, company or other entity is;

                  now or hereafter, owned or controlled, directly or indirectly,
                  by a party hereto.

         Such corporation,  company or other entity, however, shall be deemed to
         be a Subsidiary only so long as such ownership or control exists.

                                       5

<PAGE>


SECTION 2. SALES ACTIVITY OF THE DISTRIBUTOR

Unless otherwise provided for in the Product Attachment(s), the sales activities
of the Distributor  shall be governed by the terms and conditions as provided in
this Section 2.

2.1      General Scope of Product Sales Activity - IBM shall determine the scope
         of Distributor's  Product sales activity  including but not limited to:
         (i) the Product(s)  that  Distributor  is authorized to sell;  (ii) the
         Authorized Territories; and, (iii) the Authorized Locations.

         a.       IBM Product Qualifications

                  IBM shall determine which Product(s) Distributor is authorized
                  to sell by evaluating  IBM's business needs and  Distributor's
                  ability to meet its needs by considering,  among other things,
                  the following:

                  (1)      Distributor's  technical  expertise  and knowledge of
                           the particular Product(s);

                  (2)      the  resources  available to  Distributor  to provide
                           services that support the particular Product(s);

                  (3)      Distributor's  ability to purchase minimum volumes of
                           the particular Product(s); and

                  (4)      Distributor's   performance   and   standing   as   a
                           distributor for other Product(s).

         b.       Authorized Territory

         Distributor  shall promote and sell  Product(s)  within its  Authorized
         Territory  in  accordance  with the  terms of this MDA.  The  following
         applies to Distributor's Authorized Territories:

                  (1)      Territory or Country Changes

                           In the event of political situations that result in a
                           change of geographical  borders,  a change of country
                           names or a similar  change in the  composition of any
                           such country,  IBM shall have the right to modify the
                           territory in which  Distributor is authorized to sell
                           or  exercise  any of its rights as set forth  herein,
                           including termination.

                  (2)      Excluded Countries

                           Distributor  is not authorized to sell,  promote,  or
                           otherwise transfer Product(s) or services directly or
                           indirectly in Excluded Countries as defined herein.

                  (3)      Out of Territory Sales

                           Distributor  is not  authorized  to  sell  Product(s)
                           directly  or  indirectly  outside  of its  Authorized
                           Territory,  unless  agreed  upon  by the  parties  in
                           writing, or if such prohibition is contrary to law.

         c.       Authorized Locations

                  Distributor   shall  receive   Product(s),   hold   inventory,
                  distribute Product(s) and perform its other duties only at the
                  locations  described in the Product  Attachment(s) to this MDA
                  ("Authorized Locations").

                                       6

<PAGE>


         d.       Review

                           In  addition  to IBM's  rights  under  Section 15 and
                  under law, if IBM, in its sole  discretion,  determines  that:
                  (1)  Distributor  is not  meeting the  qualification  criteria
                  established  for  any  Product(s);   (2)  Distributor  is  not
                  adequately  performing  in the  Authorized  Territory  for any
                  Product(s);  or (3)  Distributor is not adequately  performing
                  its obligations under this MDA at an Authorized  Location(s) ,
                  IBM may  discontinue  its  authorization  to  sell:  (i)  such
                  Products;  (ii) in such  Authorized  Territory;  or (iii) from
                  such  Authorized  Location upon ninety (90) days prior written
                  notice to the  Distributor  and  without  any  requirement  to
                  account for or incurring  any  liability  to the  Distributor.
                  Such modification of IBM's authorization, shall not constitute
                  a breach of IBM's obligations under this MDA or trigger a "For
                  Cause" termination of this MDA.

2.2      The primary  intent of this MDA is to service the  reseller  market and
         Distributor has represented  that the reseller  opportunity is the main
         source of sales and revenue.  Distributor represents that it is not now
         and will not itself be owned or controlled by any entity that sells the
         same or similar Products to End Users.

2.3      Minimum Sales Targets - IBM shall,  from time to time,  develop minimum
         sales targets for the Products which  Distributor  must meet or exceed.
         Such minimum sales targets shall be agreed upon by IBM and Distributor.
         In the event  that  Distributor  fails to meet or exceed any such sales
         targets,  IBM  shall  notify  Distributor  in  writing  about the sales
         shortfall.  If Distributor fails to cure the sales shortfall within the
         period,  if any, as set forth in the Product  Attachment(s) IBM may, at
         its sole option terminate this MDA or Product  Attachment(s) by written
         notice to Distributor.

2.4      Distributor's Support of its Customers - Distributor shall actively and
         diligently  promote,  with the  highest  quality  and with the  highest
         degree  of  professionalism,   the  sale  of  Products  and  after-sale
         satisfaction  of the Customers.  In connection  with  performing  these
         duties,   the  Distributor   shall  engage  in  all  of  the  following
         activities:

         a.       Customer  Satisfaction  Programs - Participate in IBM Customer
                  satisfaction programs as IBM requires,  and be responsible for
                  establishing  and  maintaining   Customer   satisfaction  with
                  respect  to all of the  Distributor's  responsibilities  under
                  this MDA.

         b.       Problem  Resolution  - Be  responsible  for  all,  or at IBM's
                  request, assist IBM with, problem determination and resolution
                  regarding  any Customer.  Distributor  will also assist IBM in
                  tracing and locating Products.

         c.       Sales Training - Participate in any sales training required by
                  IBM for the Distributor's sales personnel at such times as are
                  mutually agreed. Provide continuing  supplemental training for
                  Distributor's  personnel as necessary for the  performance  of
                  this  MDA.  Ensure  that  personnel  responsible  for  selling
                  Products  are  appropriately-trained,  highly-motivated  sales
                  personnel  who are  approved  and  qualified,  pursuant to any
                  formal IBM qualification  procedures or otherwise, if required
                  by IBM, to sell the Products.

         d.       IBM  Sales  Literature  - Use only  those  catalogs,  samples,
                  advertising  literature,  and sales aids which IBM provides or
                  approves   in   advance.   IBM-provided   catalogs,   samples,
                  advertising  literature,  and sales aids shall be  provided by
                  IBM at IBM's  expense  and remain the  property  of IBM.  Upon
                  termination  or  expiration  of this MDA, any  remaining  such
                  items shall be returned promptly to IBM.

         e.       Forecasts  - Provide  to IBM the  following  forecasts:  (i) a
                  monthly rolling  forecast that provides  weekly  estimates for
                  the following month; and (ii) a rolling forecast that provides
                  monthly  estimates for the following  six  subsequent  months.
                  Forecasts  shall be non  binding  but shall be

                                       7

<PAGE>


                  provided as an accurate  forecast and in good faith.  IBM will
                  use these forecasts to establish sales targets,  as referenced
                  in Section 2.3.


         f.       Duty to be  Informed - Become and remain  informed  concerning
                  all  information,  bulletins  and Price List or Price  Catalog
                  changes in  connection  with  Products and perform  faithfully
                  policies announced or communicated by IBM in writing.

         g.       Sufficient  Financial  Resources - Maintain adequate financial
                  resources to fully  support and perform all of its  activities
                  and obligations under this MDA.

         h.       Changes in  Business or  Financial  Condition - Provide IBM at
                  least  ninety  (90)  days  advance   written   notice  of  any
                  substantive  change  or  anticipated  change  to its  business
                  structure,  financial condition or operating environment.  For
                  example,  notice  shall be required  for a material  change in
                  equity  ownership or  management,  or any  material  change to
                  information  supplied  when the  Distributor  applied  to be a
                  Distributor or otherwise furnished to IBM under this MDA.

         i.       Ethical Compliance - Comply with the highest ethical standards
                  in performing under this MDA. The Distributor  shall not offer
                  or make  payments or gifts  (monetary or  otherwise) to anyone
                  for the purpose of influencing decisions.

         j.       Comments  About  Remarketers  - Not discuss with IBM any other
                  remarketer's  pricing or other marketing  practices.  IBM does
                  not wish to receive,  and will  disregard,  any such  comments
                  whether  written or oral. Any comments by our  representatives
                  contrary to this are expressly  unauthorized and disclaimed by
                  IBM.

         k.       Maintain  Records  and Permit  IBM Review - Maintain  adequate
                  records  of its  Customers,  inventories  and  sales to permit
                  appropriate  IBM staff or an independent  third party hired by
                  IBM to review Distributor's records to determine Distributor's
                  compliance with this MDA. IBM may, upon giving  Distributor 24
                  hour notice: (i) periodically inspect and review Distributor's
                  performance  under this MDA which  shall  include the right to
                  visit the  principal  business  location,  marketing  offices,
                  Authorized  Location(s),  or  the  distribution  center(s)  of
                  Distributor;  (ii) review  Distributor's files relating to its
                  sales,  marketing and inventory levels of Products;  and (iii)
                  request and receive from Distributor  information  relating to
                  Distributor's inventory of Products upon reasonable request by
                  IBM. IBM shall  conduct any such  inspection or review no more
                  frequently than semiannually. In the event that Distributor is
                  experiencing  unforeseen and exceptional  circumstances beyond
                  Distributor's  reasonable  control  which  prevents  IBM  from
                  performing its inspection, IBM will reschedule such inspection
                  date and notify Distributor of the revised date.

         l.       Customer  Documents - Furnish  packaging slips and invoices to
                  the Customers  before or upon delivery of Products  specifying
                  the Customer's  name and address,  the Product part number and
                  quantity, date of sale and price.

         m.       Inventory  Reports - Provide  inventory  reports,  either on a
                  daily or weekly basis, as specified in the applicable  Product
                  Attachment(s).  Inventory  reports shall include consigned and
                  bonded inventory, if any.

         n.       Physical   Inventory   Inspection  -  Distributor  shall  make
                  available for physical  inspection  any and all  Product(s) in
                  Distributor's  inventory  at any  time  IBM  deems  necessary.
                  Physical   inventory   inspection   may  take  place  no  more
                  frequently than semiannually. In the event that Distributor is
                  experiencing  unforeseen and exceptional  circumstances beyond
                  Distributor's  reasonable  control  which  prevents  IBM  from
                  performing its physical  inspection,  IBM will reschedule such
                  inspection date and notify Distributor of the revised date.

                                       8

<PAGE>


2.5      Distributor's   Customer  Agreements  -  In  its  Customer  agreements,
         Distributor  shall include a limitation of liability  that protects IBM
         as a  supplier  that is  substantially  similar  to the  limitation  of
         liability contained in Section 14 of this MDA.

         a.       Distributor's   limitation  of  liability   provision  in  its
                  Customer agreement shall state, in comparable words:

                  "The collective  liabilities of the seller and its third party
                  suppliers are subject to the limitation of liability described
                  in this  agreement.  The third party  suppliers  are  intended
                  beneficiaries of this limitation."

         b.       The Distributor's  Customer  agreement(s)  shall further state
                  that third party  suppliers  disclaim  all implied  warranties
                  (including    without    limitation    the    warranties    of
                  merchantability  and  fitness  for a  particular  purpose)  as
                  follows:

                  "THE   FOREGOING   WARRANTIES  ARE   DISTRIBUTOR'S   EXCLUSIVE
                  WARRANTIES AND REPLACE ALL OTHER WARRANTIES OR TERMS,  EXPRESS
                  OR IMPLIED, INCLUDING THE WARRANTY OF NON-INFRINGEMENT AND THE
                  IMPLIED WARRANTIES OR TERMS OF MERCHANTABILITY, FITNESS OR USE
                  FOR A PARTICULAR PURPOSE, OR SATISFACTORY QUALITY."

2.6      Prohibited Sales - IBM does not intend for Product(s) or services to be
         used in  conjunction  with  medical  devices,  or  military  or nuclear
         applications. Distributor agrees and warrants that Distributor will not
         use, promote,  sell or otherwise transfer any Product(s) or services to
         any Customer or End User for use in conjunction  with medical  devices,
         or  military  or  nuclear   applications.   Distributor  shall  include
         substantially  similar limitations on the use of Product(s) or services
         in its Customer agreements. IBM shall have no liability when Product(s)
         or services are used in conjunction with medical  devices,  or military
         or nuclear applications.

SECTION 3. PAYMENT TO IBM

3.1      Distributor  shall pay promptly to IBM any amounts which may become due
         as a result  of this MDA.  Unless  otherwise  set  forth in either  the
         Product  Attachment(s) or program offering  letters,  Distributor shall
         pay for all  Products  net  within  thirty  (30)  days  after  the date
         specified on the IBM invoice.

3.2       If Distributor's  account becomes delinquent or Distributor's  account
          balance  exceeds  its credit  limit  established  by IBM,  Distributor
          agrees that IBM may, in addition to any other right provided for under
          this MDA, do one or more of the following:

         a.       impose a  finance  charge  equal to the  lesser of 1.5% of the
                  balance due per month or the statutorily  allowed maximum rate
                  of interest in accordance with applicable law;

         b.       repossess any Products. If IBM does so, the Distributor agrees
                  to  pay  all  expenses   associated  with   repossession   and
                  collection,   including   reasonable   attorney's   fees.  The
                  Distributor  agrees to make the Products available to IBM at a
                  site requested by IBM;

         c.       require  payment  before  shipment  or  payment  via letter of
                  credit;

         d.       stop shipments to Distributor; or

         e.       terminate this MDA as a material breach.
                                       9

<PAGE>
                  3.3  IBM  reserves  the  right  to  pursue  any  other  remedy
                  available at law or in equity.  In addition,  if Distributor's
                  account  with  any  Subsidiary  or  affiliate  of IBM  becomes
                  delinquent  due to any other  reason  other  than a good faith
                  dispute, IBM may terminate this MDA as a material breach.

SECTION 4. RIGHTS AND OBLIGATIONS OF IBM

4.1      IBM shall:

         a.       supply  Products  to  Distributor  at  the  shipment  location
                  specified in the order  acceptance or order  confirmation,  as
                  applicable;

         b.       provide   warranty   service  as   described  in  the  Product
                  Attachment(s);

         c.       provide,  without  charge,  reasonable  quantities  of Product
                  information, marketing literature and promotional material for
                  use by Distributor when promoting and marketing the Product(s)
                  (Additional   quantities   thereof  may  be  available  for  a
                  charge.); and;

         d.       provide  specified  levels of training to the  Distributor  if
                  provided for in the applicable Product Attachment(s).

SECTION 5. ORDERING

5.1      Distributor and any Subsidiary authorized by IBM may order Products and
         related  services by sending  IBM a written  purchase  order.  IBM will
         confirm receipt of orders.  All accepted orders will incorporate and be
         fulfilled  under the  terms of this MDA.  Minimum  and  multiple  order
         quantities may apply.

5.2      For  non-U.S.  sales  (sales  for which IBM  ships to  Distributor  and
         Distributor  takes title outside of the U.S.), the contract of sale for
         Products  purchased under this MDA will be between  Distributor and the
         IBM legal  entity that will supply the  Products to  Distributor  ("the
         Plant").  It is agreed that all such orders will  incorporate the terms
         of this MDA  whether  expressly  referenced  or not,  and will  only be
         accepted  on this  basis.  Orders will be accepted by the Plant when it
         issues an acceptance document thereby creating the contract of sale for
         the Products.  IBM reserves the right to enforce the provisions of this
         MDA on behalf of the Plant.

5.3      For  U.S.  sales  (sales  for  which  IBM  ships  to  Distributor   and
         Distributor  takes  title  within the U.S.),  the  contract of sale for
         Products purchased under this MDA will be between IBM and Distributor.

5.4      Distributor's  Right to  Change  or  Cancel  - Prior to the ship  date,
         Distributor  may cancel or reschedule an order for Products and IBM may
         charge a  cancellation  feeas set forth in the  Product  Attachment(s).
         However,  if not stated in the Product  Attachemnt(s),  such orders are
         cancelled within (10) days prior to shipment and a fee may be assessed.

5.5      Supply  Constraint  - IBM shall not be liable or in default  under this
         MDA if IBM's  supply of  Products or  Services  ordered  under this MDA
         becomes  constrained  for any  reason,  including  but not  limited to,
         inventory  shortages,  work  slowdowns or stoppages and IBM may, in its
         sole  discretion,  reduce  quantities or delay shipments of Products to
         Distributor.

5.6      Changes - IBM  retains  the right to change  the  specification  of any
         Product and shall use reasonable efforts to notify the Distributor.

5.7      Subsidiaries - Upon IBM's written approval, a Distributor's  Subsidiary
         may be authorized to order  Products  under the terms and conditions of
         this MDA.  Furthermore,  Distributor agrees that it shall guarantee its
         Subsidiary's  compliance  with the terms and conditions of this MDA and
         the Subsidiary's performance hereunder.

                                       10

<PAGE>

5.8      Special Programs - IBM may offer Products to Distributor  under various
         special programs such as qualification units or sales rebates. IBM will
         notify   Distributor  of  these   offerings  and  such  programs  shall
         incorporate  the terms and  conditions  of this MDA.  In the event of a
         conflict  between  such special  program  offerings  and the MDA,  such
         special program offerings will take precedence.

SECTION 6. PRICING

6.1      The  prices  to be paid by the  Distributor  for the  Products  ordered
         hereunder  shall be those set forth in the Price List or Price Catalog,
         as amended from time to time by IBM, depending on the Product.

6.2      Price  Changes  - IBM may  change  Product  prices at any time and will
         provide written notice to Distributor. IBM will provide at least thirty
         (30)  days  notice  of  a  price  increase.  If  IBM  increases  prices
         Distributor  may reduce the  number of units  ordered or cancel  orders
         without charge for affected Products not yet shipped by IBM. If IBM has
         accepted an order for Products and subsequently sends notice of a price
         increase for such Products prior to shipment, the price on the document
         confirming  the order  shall  apply to the sale.  Otherwise,  the price
         increase  will  apply  to all such  Products  shipped  on or after  the
         effective date of the increase.  If IBM decreases prices, the decreased
         price will apply to all  Products  not yet shipped by IBM and the other
         terms and  conditions,  if any, will be set forth in a special  program
         offering letter.

SECTION 7. TRANSFER OF TITLE AND RISK OF LOSS OR DAMAGE

Transfer  of title  and risk of loss or  damage  for the  Products  will pass to
Distributor  upon  tender  by IBM  to the  carrier  located  at the  "ship-from"
location which shall be specified in the order  confirmation.  IBM will ship the
Product(s)  via any carrier  agreed to by the parties and that carrier  shall be
identified in the order confirmation. If Distributor does not request a carrier,
IBM shall choose the carrier and identify the carrier in the order  confirmation
which shall then be deemed to be agreed to by both parties.  Distributor will be
responsible  for shipment costs from the "ship-from  location" to  Distributor's
location.  Products shall be deemed  accepted by the  Distributor  upon delivery
unless  Distributor  notifies IBM  otherwise in writing  within ten (10) days of
delivery  that  the  Products  are  defective  the  terms  of this  MDA or IBM's
confirmation of Distributor's order.

SECTION 8. WARRANTY

Except as may  otherwise be provided in a Product  Attachment(s),  the following
warranty shall apply:

8.1      IBM  warrants  each  Product to be free from  defects in  material  and
         workmanship  for the  applicable  warranty  period  and  subject to any
         additional terms and conditions set forth in the Product Attachment(s).

8.2      IBM's  sole  liability  and  Distributor's  sole  remedy  for breach of
         warranty shall be limited as stated in this Section 8.

8.3      If Distributor claims that the Products are nonconforming,  Distributor
         shall  (1)  promptly  notify  IBM in  writing  of  the  basis  of  such
         nonconformity; (2) follow IBM's instructions for return of the Products
         as set  forth  below;  and (3) at IBM's  request,  return  the  Product
         freight prepaid by Distributor to the IBM designated location.  IBM has
         the sole  discretion to apply  minimum  return  quantities.  The return
         Product procedure for warranty claims is identified in Sections 8.3 a -
         e.

         a.       In the event  that a  potential  defect  becomes  apparent  to
                  Distributor,  Distributor  shall  request  a Return  Materials
                  Authorization  (RMA) from IBM. As a condition of receiving its
                  remedies  under  IBM's  warranty,   Distributor  must  provide
                  details regarding the alleged defect such as:

                  (i)      the date the claimed defect became apparent;

                                       11

<PAGE>

                  (ii)     the identity of the Unit(s)  involved  specifying all
                           affected serial numbers or lot numbers  including any
                           associated IBM part numbers; and

                  (iii)    the quantity of  Product(s)  involved  including  the
                           conditions under which the defect became apparent.

         b.       Return Materials Authorization - Distributor shall not receive
                  a  replacement  unit or a credit  from IBM unless and until it
                  first receives a RMA from IBM.

         c.       Return of Units - Distributor  must return the Products to IBM
                  at a location  which shall be designated  by IBM.  Distributor
                  must  ship  the   Products  via   transportation   prepaid  by
                  Distributor.  Minimum  return  quantities  and  multiples  may
                  apply.

         d.       Replacement  Unit - In the event  that IBM  elects to  provide
                  replacement  unit(s) under the warranty terms, IBM shall issue
                  a RMA and  ship the  replacement  unit(s)  to the  appropriate
                  Authorized Location.

         e.       Credits - In the  event  that IBM  issues a RMA and  elects to
                  provide a credit to  Distributor  such  credits will be at the
                  price in effect as of the date the RMA is issued.  Distributor
                  shall not have any set-off rights or the right to decrease the
                  payments owed to IBM pursuant to this MDA.

8.4      If IBM  determines  such Product does not conform to its warranty,  IBM
         will, at IBM's option,  repair or replace the Product or issue a credit
         at the price in effect as of the date of the  credit.  If IBM  replaces
         the Product, the returned Product becomes IBM's property. This warranty
         does not cover a Product that fails to conform to its warranty  because
         of: (a) accident, abuse, misuse, negligence,  modification, or improper
         maintenance; (b) a failure caused by any item which IBM did not provide
         or for which IBM is not  responsible;  or (c) use or  storage  in other
         than IBM's  specified  operating  environment.  The warranty is void if
         labels have been removed or altered by Distributor or a third party.

8.5      This  warranty  is  not  transferable.   IBM  does  not  warrant:   (a)
         uninterrupted or error free operation of the Products,  or (b) that IBM
         will correct all defects. No course of dealing,  course of performance,
         usage of trade,  or description of Products or services shall be deemed
         to establish a warranty, express or implied.

8.6      UNLESS  OTHERWISE   PROVIDED  BY  WRITTEN   AGREEMENT,   ALL  SERVICES,
         PROTOTYPES  AND  QUALIFICATION  UNITS  ARE  PROVIDED  "AS  IS"  WITHOUT
         WARRANTY OR INDEMNIFICATION OF ANY KIND BY IBM.

8.7      THE  FOREGOING  WARRANTIES  ARE IBM'S  EXCLUSIVE  WARRANTIES  REGARDING
         PRODUCTS AND REPLACE ALL OTHER WARRANTIES OR TERMS, EXPRESS OR IMPLIED,
         INCLUDING THE WARRANTY OF  NON-INFRINGEMENT  AND THE IMPLIED WARRANTIES
         OR TERMS OF  MERCHANTABILITY,  FITNESS OR USE FOR A PARTICULAR PURPOSE,
         AND SATISFACTORY QUALITY.

SECTION 9. DISTRIBUTOR'S WARRANTIES TO CUSTOMERS

Nothing  contained in this MDA shall prohibit  Distributor from offering its own
warranty  directly to any of its Customers  PROVIDED  HOWEVER,  that Distributor
shall not and is not authorized to: (a) make any  representations  or warranties
about  IBM or IBM's  warranty  to  Distributor  for the  Products;  (b) make any
representations or warranties on behalf of IBM; or (c) enter into any commitment
on behalf of IBM.

SECTION 10. SOFTWARE AND MANUALS

                                       12

<PAGE>

If IBM provides  Distributor with software or other code ("Software") under this
MDA, the Software will be subject to all U.S.  patent and copyright  laws,  this
MDA,  and the license  agreement  provided  with the  Software.  If  Distributor
objects to the license  agreement,  Distributor  shall notify IBM in writing and
return all copies of the Software within ten (10) days of receipt.

Distributor  may  reproduce  or  modify  manuals  IBM  provides  under  this MDA
("Manuals")  as needed to support  Distributor's  use of  Products.  Distributed
Manuals must not include anything that suggests IBM is the source of the Manuals
or Products.  Distributor may reproduce and distribute Manuals only for use with
Products  and only under terms  acceptable  to IBM.  Distributor  must include a
copyright  notice  and an U.S.  Government  user  restricted  rights  notice  in
reproduced  Manuals.  The copyright  notice must comply with  copyright laws and
identify the owner as  Distributor  "and  others." IBM shall retain title to all
Manuals and any modifications.

SECTION 11. PRODUCT WITHDRAWAL

IBM  reserves the right to cancel or withdraw any Product or program at any time
and without  liability as set forth in the Product  Attachment(s)  and if not so
specified, upon ninety (90) days written notice to the Distributor.

SECTION 12. TAXES

The Distributor shall pay all taxes arising out of transactions  under this MDA,
including all sales, use and property taxes, but excluding taxes levied upon the
net income of IBM.  Distributor shall reimburse IBM for any such taxes for which
the Distributor is liable hereunder which are imposed on IBM including,  but not
limited to sales,  use, and personal  property taxes. The Distributor may supply
IBM with a tax exemption  certificate  or resale number in a form  acceptable to
IBM,  shall notify IBM promptly of any  revocation  of or  modification  to such
documentation,  and shall hold IBM harmless  from any and all taxes and expenses
incurred because or arising out of the use of such certificate or resale number.

SECTION 13. PATENT INDEMNITY

13.1     IBM agrees to indemnify  and defend  Distributor  against money damages
         and court costs  assessed  against  Distributor  resulting from a final
         judgment of a court of competent  jurisdiction that any Product sold or
         service provided by IBM to Distributor  hereunder infringes a patent or
         copyright  of a third  party in any  country  in which  Distributor  is
         authorized to sell and which IBM sells or provides  similar products or
         services.  IBM  has no  obligation  hereunder  unless  Distributor  (1)
         promptly notifies IBM, in writing,  of the charge of infringement;  (2)
         allows IBM to control  and  cooperates  with IBM in the defense and any
         related settlement activities;  and (3) upon the written request of IBM
         either: (a) allows IBM to modify or replace the Product, or (b) returns
         the  Product to IBM for a credit  equal to the  purchase  price paid by
         Distributor to IBM for the Product.  If such a claim is made or appears
         likely  to  be  made  about  a  Product  in  Distributor's   inventory,
         Distributor  agrees that IBM may, in IBM's sole discretion:  (1) permit
         Distributor to continue to market the Product;  (2) modify the Product;
         (3) replace  the  Product;  or (4) require  return of the Product for a
         credit equal to the purchase  price paid by  Distributor to IBM for the
         Product.  IBM has no obligation  regarding any claim of infringement to
         the  extent  such  claim  is  based  on  any  of  the  following:   (1)
         Distributor's   modification   of  a  Product  or   service;   (2)  the
         combination,  operation or use of a Product  with any product,  data or
         apparatus; (3) anything Distributor provides which is incorporated into
         a  Product;  (4) IBM's  manufacture  or  modification  of a Product  in
         compliance with Distributor's requirements; (5) the use of a Product in
         other  than  its  specified  operating  environment;  (6)  the  use  or
         distribution of a Product in a country in violation of U.S. export laws
         or this MDA; or (7) infringement by a non-IBM product alone, as opposed
         to its  combination  with  Products  IBM provides to  Distributor  as a
         system.  For such claims for which IBM has no  obligation  to indemnify
         Distributor  hereunder,  Distributor agrees to indemnify and defend IBM
         against all money damages and costs  resulting  from any claim that any
         Product or service  infringes a patent or  copyright  of a third party.
         The  foregoing  states  IBM's  entire   obligation  and

                                       13

<PAGE>

         Distributor's  exclusive  remedy of IBM and  Distributor  regarding any
         claim of patent or copyright  infringement relating to any Product sold
         or service provided.

13.2     Except for the copyright  license provided in paragraph 2 of Section 10
         of the MDA,  no license,  immunity or other right is granted  herein by
         either party to the other party,  whether  directly or by  implication,
         estoppel,  or  otherwise,   with  respect  to  any  patent,  trademark,
         copyright,  mask work,  trade secret,  or other  intellectual  property
         rights.

13.3     Nothing  in this MDA  grants  either  party any rights to use the other
         party's  trademarks  or  trade  names,   directly  or  indirectly,   in
         connection  with  any  product,  service,  promotion,   publication  or
         publicity  without  prior  written  approval  of  the  other  party  or
         trademark or trade name owner.

SECTION 14. LIMITATION OF LIABILITY

14.1     For  matters not covered by Section 8 of the MDA , IBM's sole and total
         liability  and  Distributor's  sole  remedy  for any and all  causes of
         action  shall be limited to actual  direct  damages not  exceeding  the
         greater of ten thousand U.S.  Dollars  ($10,000.00)  or the  applicable
         price paid to IBM by the Distributor for the specific units of Products
         or services that caused the damages and that are the subject matter of,
         and directly related to, the cause of action.  This limitation will not
         apply to claims by Distributor for bodily injury  (including  death) or
         damage to real or tangible  personal property caused by the Products or
         services and for which IBM is legally liable.

14.2     IBM  shall not be  liable  for any  special,  indirect,  incidental  or
         consequential  damages,  including lost profits or savings, even if IBM
         has been informed of their  possibility,  including  those arising from
         infringement  or  alleged   infringement  of  any  patent,   trademark,
         copyright,  mask work, or other  intellectual  property rights,  or for
         punitive,  specific or exemplary damages. In addition,  IBM will not be
         liable for any loss or damage to any records or data,  or for any claim
         based on any third party  claim,  except  those  described  in the last
         sentence in Section 14.1 above.

SECTION 15. TERMINATION

15.1     Without Cause

         Either  party  may  terminate  a  Product  Attachment(s)  or  the  Base
         Agreement  for  convenience  upon ninety (90) days written  notice.  If
         Distributor  terminates the Base Agreement or a Product  Attachment(s),
         IBM may,  at IBM's  option,  treat any or all  applicable  orders as if
         cancelled by Distributor.

15.2     For Cause

         Notwithstanding  the  foregoing,  either  party shall have the right to
         terminate this MDA immediately if the other party:

         a.       becomes insolvent;

         b.       becomes  the  subject  of  any  proceeding   seeking   relief,
                  reorganization,  receivership or rearrangement  under any laws
                  relating to insolvency;

         c.       makes an assignment for the benefit of creditors;

         d.       begins  the  liquidation,  dissolution  or  winding  up of its
                  business; or

         e.       undergoes  a change of control  with  another  entity,  either
                  through an event such as acquisition,  merger,  consolidation,
                  or  purchase  of all  or  substantially  all  of the  acquired
                  party's assets; or

                                       14

<PAGE>

         f.       commits a material  breach of its  obligations  under this MDA
                  including misappropriation of intellectual property of IBM.

15.3     Termination  of a  Product  Attachment(s)  or  failure  by IBM to renew
         Distributor's  authorization  to sell  Products  under  any  particular
         Product  Attachment(s)  shall not be  considered to be  termination  of
         other Product Attachment(s) or this MDA.

15.4     In the  event of  termination  of a Product  Attachment(s)  or the Base
         Agreement as set forth in Sections 15.1 and 15.2 above, IBM may, at its
         option,  repurchase  any or  all of  Distributor's  stock  of  affected
         Products  as  set  forth  in  the  Product  Attachment(s)  or if not so
         specified,  which are in the original unopened  packaging at IBM's then
         current  Price  Catalog/Price  List price less  fifteen (15) percent to
         cover administrative costs.

SECTION 16. TRADEMARKS AND TRADE NAMES

16.1     Unless the  Distributor  receives IBM's prior written  permission,  the
         Distributor   shall  not  use  in   advertising,   publicity  or  other
         activities,   any  name,  trade  name,  trademark,   acronym  or  other
         designation  of IBM or a company  of IBM,  including  any  contraction,
         abbreviation, or simulation of any of the foregoing.

16.2     Distributor  shall not have the right to use the IBM  Business  Partner
         Emblem unless specifically provided for in the Product Attachment(s).

SECTION 17. EXPORT

17.1     Regardless of any disclosure  made by Distributor to IBM of an ultimate
         destination of Products, Distributor will not export either directly or
         indirectly  any  Product,  or any system  incorporating  said  Product,
         without  first  obtaining  all  required  licenses and permits from all
         relevant government agencies and departments. Distributor must disclose
         to IBM in writing any  intention  to export any  Products  and ultimate
         destination or as soon  thereafter as is reasonably  practical,  but in
         all cases prior to shipment.

17.2     FAILURE TO COMPLY WITH SECTION 17.1 ABOVE SHALL VOID ALL  WARRANTIES ON
         AFFECTED PRODUCT(S)) PROVIDED BY IBM HEREIN.

SECTION 18. MISCELLANEOUS PROVISIONS

18.1     Independent  Parties - The parties  recognize  that the purpose of this
         MDA is to establish a master distribution arrangement and to define the
         respective   rights  and   obligations   of  the  parties  within  that
         arrangement.  The parties  further  recognize that they are independent
         contractors  and that  this MDA  (whether  construed  by  itself  or in
         combination with separate but related agreements) does not establish or
         create and shall not be interpreted as establishing or creating a joint
         venture,  partnership,  franchise or other formal or informal  business
         organization  of any kind.  This MDA has been negotiated by the parties
         and  their  respective  counsel  and  will  be  interpreted  fairly  in
         accordance with its terms and without any strict  construction in favor
         of or against  either  party.  Each party is free to enter into similar
         agreements with others, to market competitive  products,  and generally
         to conduct its business in whatever way it chooses,  provided  there is
         no conflict with this MDA.  Likewise,  IBM may increase or decrease the
         number of its  distributors,  the  types of  distribution  channels  it
         employs, and the number of participants in such channels.

18.2     Assignment  -  Distributor  may not assign its rights or  delegate  its
         obligations under this MDA without the prior written consent of IBM.

18.3     Choice of Law - The validity, construction and performance of this MDA,
         and any claim related to the transactions  arising out of this MDA,will
         be governed by the  substantive  laws of the State of New York,  United
         States as though this MDA were executed in and fully  performed  within
         the  State of New York  and  without  regard  to any  conflict  of laws
         provisions.   The  United  Nations  Convention  on  Contracts  for  the
         International  Sale of Goods shall not apply to this MDA. Neither party
         will  bring a legal  action  against  the

                                       15

<PAGE>

         other  more than one (1) year after the cause of action  arose,  except
         for actions for nonpayment or to enforce intellectual  property rights.
         Both parties waive the right to a jury trial in any dispute arising out
         of this MDA.  Both  parties  agree that any action or claim  related to
         this MDA or the  transactions  arising out of this MDA shall be brought
         in a court  of  competent  jurisdiction  in the  State  of New York and
         hereby submit to the exclusive personal jurisdiction of any such court.
         Distributor  shall  appoint  and  maintain a  registered  agent for the
         purpose of service of process in the State of New York.

18.4     Confidentiality - Confidentiality of information  exchanged between the
         parties  shall  be  governed  by the  terms  of a  separate  and  valid
         confidential disclosure agreement duly executed by the parties. Neither
         party shall  disclose  the terms of this MDA unless  required by law or
         both parties agree to do so. This includes,  but is not limited to, the
         issuance of press releases.

18.5     Entire Agreement - This Base Agreement,  any Product  Attachment(s) and
         any other written  documents  signed by both parties that make specific
         reference to amending this MDA, constitute the entire agreement between
         the  parties  with  respect  to the  subject  matter of this  MDA,  and
         supersede  all prior  discussions  and  agreements  between the parties
         relating to the subject matter hereof. Except for Product part numbers,
         part number descriptions,  prices and quantities,  purchase orders will
         be used to convey  information  only and any  additional  or  different
         terms in any purchase order or written  communication  from Distributor
         are void.  IBM may change  the terms of this MDA by giving  Distributor
         ninety (90) days written notice. Such changes shall be effective on the
         date specified by IBM in the notice and for orders received on or after
         such  date.  If IBM  elects  to  change  the  terms  of  this  MDA  and
         Distributor  objects to the proposed  changes,  Distributor must send a
         written  objection within the (10) days after receiving the notice from
         IBM. The parties will engage in good faith  discussions  up to a period
         of 30  days in  order  to come to a  resolution.  In the  event  that a
         resolution  can not be agreed  upon,  IBM may  terminate  this MDA upon
         providing Distributor ninety (90) days notice.

18.6     Force Majeure - Except for  Distributor's  obligation  to pay,  neither
         party will be  responsible  for  failing to perform  under this MDA for
         acts of God,  natural  disasters,  or other  similar  causes beyond its
         reasonable control.

18.7     Indemnification  - The Distributor shall save and hold IBM harmless and
         indemnify  IBM from and  against all claims,  losses,  liabilities  and
         expenses,  direct or  indirect,  by  Distributor  or any  third  party,
         including  legal  expenses,  arising out of,  related to, or in any way
         connected with the performance of this MDA or its breach, Distributor's
         relationship  with a  third  party,  or  any  act  or  omission  by the
         Distributor or anyone employed by or associated with the Distributor.

18.8     Engineering   Changes  -  Distributor   agrees  to  install   mandatory
         engineering  changes (such as those  required for safety) on a Product.
         Any parts removed become IBM's property. Distributor represents that it
         will obtain  permission  from the owner and any lien  holders  prior to
         transferring ownership and possession of removed parts to IBM. IBM will
         use  reasonable   efforts  to  provide   direction  to  Distributor  in
         performing such changes.

18.9     English  Language - This MDA is in the  English  language  only,  which
         shall be  controlling in all respects,  and all versions  hereof in any
         other language shall be for accommodation only and shall not be binding
         upon the parties hereto.  All  communications and notices to be made or
         given pursuant to this MDA shall be in the English language.

18.10    Compliance  with Laws - Each party shall  comply,  at its own  expense,
         with all applicable United States (local, state and federal),  European
         Economic  Commission,  and other  country  or  country  group  laws and
         regulations,  and shall procure all licenses and pay all fees and other
         charges required thereby.

18.11    No Waiver - No delay or failure by either  party to act in the event of
         a breach or default hereunder shall be construed as a waiver of that or
         any subsequent breach or default of any provision of this MDA.

                                       16

<PAGE>

18.12    Severability  - If any part,  term or provision of this MDA is declared
         unlawful or  unenforceable  by a court of competent  jurisdiction,  the
         remainder of this MDA shall remain in full force and effect.

18.13    Reproductions  - Once signed by both parties,  any  reproduction of the
         MDA made by reliable means (e.g., photocopy or facsimile) is considered
         an original.

18.14    Notices  - All  notices  shall be in  writing,  sent in a  manner  that
         generates a reliable written receipt, and is addressed to the attention
         of the individual  signatories of this Master Distribution Agreement on
         behalf of the parties,  unless  either party  specifies  otherwise in a
         Product  Attachment(s) that notices for a specific Product(s) should be
         sent to the attention of a different addressee.

18.15    Headings  - The  headings  contained  in this  MDA  are  for  reference
         purposes  only  and  shall  not  affect  in  any  way  the  meaning  or
         interpretation of this MDA.

18.16    Survival - Any terms of this MDA which by their  nature  extend  beyond
         expiration or  termination  shall remain in effect until  fulfilled and
         shall bind the  parties and their  legal  representatives,  successors,
         heirs and assigns.

18.17    Third Party  Beneficiaries  - This MDA is not  intended to and does not
         benefit  any  party  except  IBM and  Distributor.  It is the  parties'
         express intent that this MDA is not a third party beneficiary contract.

18.18    Mediation - In the event of a dispute,  the parties may mutually  agree
         to mediation.

                                       17

<PAGE>






                                       18