<PAGE>

                                                                   EXHIBIT 10.18

<<VerHdr>>

                                           ------------------------
DISTRIBUTOR Name:                          BSQUARE CORPORATION
                                           ------------------------
MS Agreement Number:                       5133790046
                                           ------------------------
Effective Date:                            OCTOBER 1, 2003
                                           ------------------------
Expiration Date:                           SEPTEMBER 30, 2004
                                           ------------------------
Distributor's MS ID Number:                0000051459
                                           ------------------------
Territory:                                 UNITED STATES OF AMERICA
                                           ------------------------

     MICROSOFT OEM DISTRIBUTION AGREEMENT FOR SOFTWARE PRODUCTS FOR EMBEDDED
                                     SYSTEMS

This MICROSOFT OEM DISTRIBUTION AGREEMENT FOR SOFTWARE PRODUCTS FOR EMBEDDED
SYSTEMS ("Agreement") is entered into between Microsoft Licensing, GP ("MS") and
the company identified below ("DISTRIBUTOR") as of the Effective Date.

This Agreement consists of the following:

-        this Signature Page

-        Addresses Schedule

-        General Terms and Conditions

-        Performance Rebate Program Schedule

By signing below, DISTRIBUTOR represents and warrants that the information
DISTRIBUTOR provides below and on each of the attached forms is accurate, and
that DISTRIBUTOR has read and understood, and will act in accordance with, all
of the terms set forth in the attached documents.

<TABLE>
<CAPTION>
MICROSOFT LICENSING, GP                                     BSQUARE CORPORATION
<S>                                                         <C>
A general partnership organized under the laws of:          A company organized under the laws of:
The State of Nevada, U.S.A.                                 WASHINGTON, USA

By:    /S/                                                  By:    /S/
       ------------------------------------------------            -----------------------------------------------------
       (signature)                                                 (signature)

Name:  LYNDIA FREY                                          Name:  BRIAN T. CROWLEY
       ------------------------------------------------            -----------------------------------------------------
       (printed)                                                   (printed)

Title: OEM ACCOUNTING MANAGER                               Title: CEO & PRESIDENT
       ------------------------------------------------            -----------------------------------------------------
       (printed)                                                   (printed)

Date: SEP 16 2003                                           Date:  9-11-03
</TABLE>

                                                    DISTRIBUTOR's seal or "chop"

                                                       Form 2.7.<<Tag: FormRev>>

<PAGE>

                               ADDRESSES SCHEDULE
                       SHIPPING, BILLING, REBATES, SUPPORT

DISTRIBUTOR "SHIP TO" ADDRESS                      DISTRIBUTOR BILLING ADDRESS

**                                                 **
BSQUARE CORPORATION                                BSQUARE CORPORATION
3150 139th Ave SE                                  3150 139th Ave SE
Suite 500                                          Suite 500
Bellevue, WA  98005                                Bellevue, WA  98005
UNITED STATES                                      UNITED STATES

Telephone: **                                      Telephone:  425-519-5900
Fax: **                                            Fax: **
Email: **                                          Email: **

DISTRIBUTOR "MS EMBEDDED ADMINISTRATOR CONTACT"
ADDRESS                                            DISTRIBUTOR TECHNICAL SUPPORT
                                                   NUMBER

**                                                 425-519-5900
BSQUARE CORPORATION
10525 Vista Sorrento Parkway
Suite 100
San Diego, CA  92121
UNITED STATES

Telephone: **
Fax: **
Email: **

                              PAYMENT AND REPORTING

SEND REPORTS TO:                                   SEND PAYMENTS VIA WIRE
                                                   TRANSFER ONLY TO:

Microsoft Licensing, GP                            Microsoft Licensing, GP
OEM Accounting Services                            c/o **
Fax: **
Fax (Alt): **

                                                   DISTRIBUTOR SHALL INCLUDE
                                                   APPLICABLE MS INVOICE NUMBER
                                                   (s) ON ALL PAYMENTS

Or to such other address or account as MS may specify from time to time.

                                        2

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Microsoft OEM Distribution Agreement For Software Products For Embedded Systems
#5133790046-6 dated October 1, 2003 between MS and BSQUARE CORPORATION

                      ** Confidential Treatment Requested

<PAGE>

DISTRIBUTOR "MICROSOFT OEM ONLINE (MOO) CUSTOMER ADMINISTRATOR"

DISTRIBUTOR designates as its MOO Customer Administrator(s) the following
individual(s). If DISTRIBUTOR subsequently changes any information associated
with a MOO Customer Administrator, DISTRIBUTOR must provide MS notice of not
less than forty-eight (48) hours of the change to the MOOHELP@MICROSOFT.COM
email alias.

**                                                 **
BSQUARE CORPORATION                                BSQUARE CORPORATION
10525 Vista Sorrento Parkway                       10525 Vista Sorrento Parkway
Suite 100                                          Suite 100
San Diego, CA 92121                                San Diego, CA 92121
UNITED STATES UNITED STATES

Telephone: **                                      Telephone: **
Fax: **                                            Fax: **
EMAIL: **                                          EMAIL: **

                                     NOTICES

Any written notices related to this Agreement must be addressed to the contact
and locations outlined below, or such other addresses as either party may
hereafter specify in writing.

DISTRIBUTOR INFORMATION                            MS INFORMATION

**                                                 Microsoft Licensing, GP
BSQUARE CORPORATION                                6100 Neil Road
3150 139th Ave SE                                  Reno, NV 89511-1132
Suite 500                                          USA
Bellevue, WA 98005                                 Attention: OEM Contracts
UNITED STATES                                      Phone Number: **
                                                   Fax Number: **
Telephone: 425-519-5900
Fax: **
Email: **

                                        3

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Microsoft OEM Distribution Agreement For Software Products For Embedded Systems
#5133790046-6 dated October 1, 2003 between MS and BSQUARE CORPORATION

                      ** Confidential Treatment Requested


<PAGE>

With a copy to:                             Copies of all DISTRIBUTOR
                                            NOTICES shall be sent to:
Attn: General Counsel
BSQUARE CORPORATION                         Microsoft Corporation
3150 139th Ave SE                           One Microsoft Way
Suite 500                                   Redmond, Washington USA 98052-6399
Bellevue, WA 98005                          Attention: Law and Corporate Affairs
UNITED STATES                               Re: Microsoft Licensing, GP -
                                            OEM Device Solution Sales

Telephone: 425-519-5900                     With an additional copy to:
Fax: **
Email: **                                   Microsoft Corporation
                                            One Microsoft Way
**                                          Redmond, Washington USA 98052
BSQUARE CORPORATION                         Attention: Vice President -
                                            OEM Device Solution Sales
3150 139th Ave SE
Suite 500
Bellevue, WA 98005
UNITED STATES

Telephone: 425-519-5900
Fax: **
Email: **

                                        4

                                  CONFIDENTIAL

Microsoft OEM Distribution Agreement For Software Products For Embedded Systems
#5133790046-6 dated October 1, 2003 between MS and BSQUARE CORPORATION

                      ** Confidential Treatment Requested

<PAGE>

                          GENERAL TERMS AND CONDITIONS

1.   DEFINITIONS.

(a) "Additional Licensing Provisions for MS Distributor" means licensing terms
and conditions for the Licensed Product as set forth by MS in the Royalty Rate
List.

(b) "Additional Licensing Provisions for OEM Customer" means licensing terms and
conditions for the Licensed Product as set forth by MS on the "Additional
Provisions for Licensing" label affixed to the Licensed Product package.
Courtesy copies of the Additional Licensing Provisions for OEM Customer may be
available on the Embedded Systems Web Site; however, in case of conflicting or
inconsistent terms between the Additional Licensing Provisions for OEM Customer
set forth on the Licensed Product packaging and the courtesy text on the
Embedded System Web Site, the former shall control.

(c) "Additional Rights Agreement" means a supplemental agreement that describes
such additional OEM Customer rights as MS may identify from time to time (for
example, use of third party brand names on its Embedded Systems).

(d) "Associated Product Materials" or "APM" means materials as MS shall
designate from time to time that are components of a Licensed Product as
acquired from an AR, such as the COA and any applicable external media.

(e) "Authorized Replicator" or "AR" means an MS-authorized supplier of Licensed
Products. A listing of ARs may be posted at the Embedded Systems Website, and
such listing may be updated by MS from time to time. MS will make commercially
reasonable efforts to provide prior notice to DISTRIBUTOR of the termination of
an AR's authorization to supply Licensed Products.

(f) "Certificate of Authenticity" or "COA" means a non-removable sticker
designated by MS which is specific to the Licensed Product.

(g) "Distributor Minimum Standards" means the minimum operational criteria for
DISTRIBUTOR to meet as an embedded distributor of Licensed Products. Distributor
Minimum Standards shall include criteria based on (i) annual royalties for
Licensed Products distributed by DISTRIBUTOR pursuant to this Agreement, (ii)
the proportion of annual units for particular categories or classifications of
Licensed Products as compared to total annual units for all Licensed Products
distributed by DISTRIBUTOR under this Agreement, and (iii) such other criteria
as communicated by MS to DISTRIBUTOR. For additional information on the
Distributor Minimum Standards, DISTRIBUTOR should contact its MS Account
Manager.

(h) "Embedded Application" means industry- or task-specific software programs
and/or functionality, not generally available to consumers, that (i) provide the
primary functionality of the Embedded System, (ii) are designed to meet the
functionality requirements of the specific industry into which the Embedded
System is being marketed, and (iii) offer significant functionality in addition
to the Licensed Product software.

(i) "Embedded Systems" means an OEM Customer's computer systems or computing
devices which (i) are based on the Licensed Product, (ii) utilize not more than
two (2) central processor units, (iii) are designed for use with an Embedded
Application, (iv) are not marketed as general purpose personal computing
devices, and (v) are not useable as a commercially viable substitute for general
purpose computing devices such as personal computers or multi-function servers.

(j) "Embedded Systems Web Site" means the web site located at ** or such other
URL as MS may designate from time to time. DISTRIBUTOR's user name and initial
password for the Embedded Systems Web Site will be sent to the email address
provided by DISTRIBUTOR in the Notices section of the Addresses Schedule.

(k) "Image" means the software image that includes Licensed Product software, as
installed by an OEM Customer on an Embedded System. An Image may include
Supplemental Code.

(l) "Licensed Product" means the Microsoft product(s) identified as licensed on
the Royalty Rate List and in the form as available from an AR and/or MS to
DISTRIBUTOR. A Licensed Product may include APM, software, related documentation
and/or other items identified by MS as components of the Licensed Product,
including any Supplemental Code.

(m) "Media Packaging Guidelines" means the instructions posted on the Embedded
Systems Website that describe how OEM Customer shall package and label certain
media containing the Licensed Product. DISTRIBUTOR shall refer each OEM Customer
to the Media Packaging Guidelines. MS reserves the right to modify the Media
Packaging Guidelines with sixty (60) days notice.

(n) "MS OEM Online" or "Site" means the Internet site located at ** which may be
accessed and used by DISTRIBUTOR in connection with certain aspects of its
performance under this Agreement.

(o) "MSCORP" means Microsoft Corporation, the parent company or a general
partner of MS, as applicable.

(p) "OEM Customer" means an original equipment manufacturer of one or more
Embedded Systems which (i) has signed a current OEM Customer Agreement provided
by DISTRIBUTOR or for which DISTRIBUTOR has received verification of current OEM
Customer status from MS, and (ii) is located within the Territory.

(q) "OEM Customer Agreement" means the pre-printed, serialized OEM Customer
License Agreement for Embedded Systems as made available by MS from time to
time. For additional information on the OEM Customer Agreement, DISTRIBUTOR
should contact its MS Account Manager.

(r) "Sales-Out and Royalty Reporting Guidelines" means the format and
instructions for electronic submission of royalty and sales out reports to MS
posted on the Embedded Systems Web Site. MS reserves the right to modify the
Sales-Out and Royalty Reporting Guidelines with thirty (30) days notice.

(s) "Royalty Rate List" means the list of Licensed Products, corresponding
royalty rates, Additional Licensing Provisions for MS Distributor and other
information that MS provides as part of the Royalty Rate List.

(t) "Recovery Image" means a copy of the Image originally installed on an
Embedded System, contained on separate media.

(u) "Suppliers" means MSCORP and other licensors or suppliers of Licensed
Products.

(v) "Supplemental Code" means additional or replacement code of any portion of a
Licensed Product as MS may provide to DISTRIBUTOR from time to time. Any
additional license rights or limitations related to the Supplemental Code will
be described in the Additional Licensing Provisions for MS Distributor provided
in the Royalty Rate List or in a Supplemental Code letter from MS.

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#5133790046-6 dated October 1, 2003 between MS and BSQUARE CORPORATION

                      ** Confidential Treatment Requested


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(w) "Territory" means the specific country(s) or region(s) of the world set
forth on the Signature Page into or within which DISTRIBUTOR may distribute the
Licensed Product.

(x) "Update Image" means an Image on media separate from an Embedded System
which contains the same version of the Licensed Product software as originally
shipped on the Embedded System, together with either an updated or originally
shipped version of other software included on the Image. An Update Image may
include Supplemental Code.

2.   LICENSE GRANT AND LIMITATIONS.

(a) Subject to all terms and conditions of this Agreement, MS grants to
DISTRIBUTOR a non-exclusive, limited license to distribute Licensed Product into
or within the Territory only to OEM Customers and other entities that MS may
authorize in writing to DISTRIBUTOR, provided that DISTRIBUTOR shall:

     (i) order and acquire from an AR only Licensed Products listed on the then
current Royalty Rate List;

     (ii) if MS has removed a Licensed Product from the then current Royalty
Rate List, only continue to distribute the Licensed Product until the earlier
of:

          (A) DISTRIBUTOR's inventory of the Licensed Product is exhausted;

          (B) a final shipment date advised by MS; or

          (C) cancellation or expiration of this Agreement (including any
     extensions or successor agreements);

     (iii) distribute the Licensed Product in the unopened form/packaging as
received from the AR and/or MS;

     (iv) not modify or delete the contents or packaging of the Licensed
Product;

     (v) track the COA serial numbers distributed to OEM Customers; and submit
such information to MS upon request;

     (vi) maintain a level of security sufficient to prevent loss or
unauthorized distribution of Licensed Product (including COAs and other APM). In
the event DISTRIBUTOR fails to account for distribution of Licensed Product
delivered to DISTRIBUTOR, DISTRIBUTOR shall pay MS for such missing Licensed
Product in accordance with the terms set forth in Section 4(k) below, less
undistributed Licensed Product which can be shown to the reasonable satisfaction
of MS to have been destroyed by DISTRIBUTOR or lost to fire, flood or
equivalent; and

     (vii) order and acquire from an AR on behalf of OEM Customers, and deliver
to such OEM Customer, Recovery Images and Update Images that are based on
Licensed Products listed on the then current Royalty Rate List.

(b) DISTRIBUTOR shall not provide to OEM Customer any document, information or
contractual provisions that contradict, conflict with or purport to supersede
the terms and conditions of the OEM Customer Agreement or the Additional
Licensing Provisions for OEM Customer.

(c) DISTRIBUTOR shall comply with the Additional Licensing Provisions for MS
Distributor set forth in the Royalty Rate List.

(d) DISTRIBUTOR shall perform the following steps for each potential OEM
Customer as a function of its role in the licensing process. DISTRIBUTOR shall:

     (i) ensure that it uses the most current forms of the OEM Customer
Agreement and any Additional Rights Agreement(s) made available by MS to provide
Additional Rights to the OEM Customer;

     (ii) advise each potential OEM Customer that only an authorized signatory
of the potential OEM Customer may execute the OEM Customer Agreement, or any
Additional Rights Agreement;

     (iii) at the OEM Customer's request, provide the OEM Customer a courtesy
copy of the Additional Licensing Provisions for OEM Customer for the Licensed
Product;

     (iv) provide the location of the Embedded Systems Web Site to an OEM
Customer;

     (v) verify that (A) the information provided by the potential OEM Customer
is complete and correct, (B) no changes or alterations have been made to the OEM
Customer Agreement or any Additional Rights Agreement, and (C) each such
agreement has been properly completed and executed by the potential OEM
Customer;

     (vi) comply with the instructions regarding Additional Rights Agreements on
the Embedded Systems Web Site if the OEM Customer requests Additional Rights
Agreements from DISTRIBUTOR;

     (vii) provide Recovery Images and Update Images to OEM Customers as
received from an AR and in accordance with the Media Packaging Guidelines

     (viii) provide Supplemental Code and any related Additional Licensing
Provisions for OEM Customer only in the manner set forth in the then current
Royalty Rate List and/or a Supplemental Code letter from MS;

     (ix) at the end of each business week, express mail to MS both signed
copies of the OEM Customer Agreement, and any Additional Rights Agreements
executed by each potential OEM Customer;

     (x) upon notice from MS that an OEM Customer Agreement executed by a
potential OEM Customer is unacceptable, immediately discontinue distribution of
Licensed Product to such potential OEM Customer and make reasonably commercial
efforts to retrieve any Licensed Product previously distributed to the potential
OEM Customer;

     (xi) notify MS within ten (10) days of any change regarding the OEM
Customer's information.

(e) MS agrees that between the time DISTRIBUTOR obtains the OEM Customer's
signature on the OEM Customer Agreement and such date as MS countersigns (i)
DISTRIBUTOR may ship Licensed Product to the OEM Customer and (ii) as between MS
and DISTRIBUTOR, the OEM Customer Agreement shall be deemed countersigned by MS.

(f) DISTRIBUTOR shall instruct each OEM Customer that the OEM Customer may only
distribute Licensed Product (including APM):

     (i) with the OEM Customer's Embedded Systems;

     (ii) which OEM Customer obtained directly from an MS- authorized
distributor; and

     (iii) in accordance with the OEM Customer Agreement.

(g) DISTRIBUTOR shall not remove or obscure any copyright, trademark or patent
notices that appear on the Licensed Product as delivered to DISTRIBUTOR.

(h) DISTRIBUTOR shall not use any name or trademark confusingly similar to or
undertake any other action that will interfere with or diminish MS or MSCORP
right, title or interest in, any Licensed Product trademark(s) or trade name(s),
and will comply with reasonable guidelines provided by MSCORP from time to time
for reference to, and use of, such Licensed Product mark(s) or name(s).

(i) (i) DISTRIBUTOR shall not use or display any logo of MS or its Suppliers
(including without limitation any stylized representation of the Microsoft name
used by MS or MSCORP) in

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#5133790046-6 dated October 1, 2003 between MS and BSQUARE CORPORATION

<PAGE>

DISTRIBUTOR's materials or packaging unless authorized in a logo license between
DISTRIBUTOR and MS or its Suppliers.

     (ii) MSCORP may, from time to time, designate one or more logos for use
with the Licensed Product. Use of such logo(s) is optional. This Agreement does
not grant DISTRIBUTOR or an OEM Customer the right to use or display MS or
MSCORP logo(s); to obtain additional information regarding availability of
logo(s) and logo licenses, DISTRIBUTOR should contact its MS Account Manager.

(j) Upon notice from MS, DISTRIBUTOR shall promptly discontinue distribution of
Licensed Product to an OEM Customer. DISTRIBUTOR shall cooperate with MS in
investigating instances of distribution of Licensed Product in violation of this
Section 2.

(k) DISTRIBUTOR shall not reverse engineer, decompile or disassemble any
Licensed Product except as permitted by applicable law which cannot be waived by
this subsection 2(k). Solely in connection with the terms and conditions of
Article 6 of the European Community's Directive for the Legal Protection of
Computer Programs, OJL 122/42 (17 May 1991), and only with respect to
jurisdictions which have adopted the same terms and conditions by legislation
implementing the Directive, DISTRIBUTOR acknowledges that information on
interoperability of the Licensed Product with other products is readily
available.

(l) MS reserves all rights not expressly granted in this Agreement.

(m) DISTRIBUTOR shall make no representation, nor any express or implied
warranty to third parties (including, without limitation, to any OEM Customer or
end users), on behalf of MS. DISTRIBUTOR shall defend, indemnify and hold MS and
its Suppliers harmless against all damages and costs, including reasonable
attorneys' fees, that MS and its Suppliers incur in connection with any warranty
or representation by DISTRIBUTOR.

(n) This Agreement does not give DISTRIBUTOR title to any Licensed Product,
packaging, papers, materials, and/or other property of MS related to a Licensed
Product. In particular:

     (i) MS has and will retain title to all Licensed Product (and related
papers and materials) from the time that the Licensed Product is acquired by
DISTRIBUTOR from ARs until DISTRIBUTOR distributes the Licensed Products in
compliance with the Agreement.

     (ii) As MS owns all Licensed Product in the possession and control of
DISTRIBUTOR, MS may take possession of or destroy all Licensed Product inventory
(and related papers and materials) when this Agreement expires or is canceled,
or after the final shipment date as set forth in Section 2(a)(ii)(B), even if an
intervening bankruptcy or insolvency case is filed by or against DISTRIBUTOR or
a receiver or trustee is appointed to operate or liquidate DISTRIBUTOR.

     (iii) In no circumstances will any receiver or trustee of DISTRIBUTOR be
entitled to sell or distribute any Licensed Product obtained by DISTRIBUTOR
pursuant to the Agreement except in strict compliance with the terms of the
Agreement, and only with the express written consent of MS.

(o) (i) DISTRIBUTOR shall comply with the following Distributor Minimum
Standards:

          (A) DISTRIBUTOR's projected royalties for Licensed Products
distributed during the first twelve (12) months of this Agreement shall be not
less than One Million Dollars (US$1,000,000); AND

          (B) DISTRIBUTOR's total copies of the Licensed Products listed below
("Embedded Licensed Products") projected to be distributed during the first
twelve (12) months of this Agreement shall be at least forty percent (40%) of
DISTRIBUTOR's total copies of all Licensed Products projected to be distributed
during that period under this Agreement.

     (ii) As used in this section, "Embedded Licensed Products" shall mean (a)
the following Licensed Products: Windows CE, Windows NT Embedded, Windows XP
Embedded, Windows 2000 for Web Server Appliances, Windows 2000 for Network
Attached Storage Server Appliances, Windows 2000 Server for Embedded Systems
with the Server Appliance Software, Windows 2000 Advanced Server for Embedded
Systems with the Server Appliance Software, Microsoft(R) Windows(R) 2000 Server
for Telecommunications Systems with the Server Appliance Software, and (b)
successors to such Licensed Products and other Microsoft(R) software products
identified by MS, if and as licensed pursuant to this Agreement.

3.  ROYALTY RATE LIST.

(a) At least fifteen (15) days prior to the first day of each month, MS will
post on the Embedded Systems Web Site, or provide to DISTRIBUTOR by electronic
notice (email) or written notice, the Royalty Rate List for the upcoming month.

(b) MS may modify the Royalty Rate List upon notice to DISTRIBUTOR. Submission
of Licensed Product orders to AR(s) or distribution of Licensed Product after
the effective date of any modifications to the Royalty Rate List shall
constitute DISTRIBUTOR's acceptance of such modifications. New royalty rates
will be effective upon such notice or on the date specified on the Royalty Rate
List.

(c) The royalty rate and Additional Licensing Provisions for MS Distributor for
any Licensed Product removed from the Royalty Rate List shall be as stated on
the last Royalty Rate List that included the Licensed Product.

4.  REPORTS AND PAYMENTS.

(a) DISTRIBUTOR agrees that it will maintain a tracking system for a period of
three (3) years after the expiration or cancellation of this Agreement, which
allows for complete tracking of shipments by

     (i) Licensed Product - including quantity, COA sticker serial number, and
shipment date; and

     (ii) OEM Customer - including contact name, address, and telephone number,
and OEM Customer Agreement number.

(b) DISTRIBUTOR shall ensure that all reports submitted by DISTRIBUTOR to MS
under this Agreement are accurate and complete.

(c) Within fifteen (15) days after the end of each calendar month, and fifteen
(15) days after the termination, cancellation or expiration date of this
Agreement for the final full or partial month, DISTRIBUTOR shall complete and
electronically submit a sales-out and royalty report, in accordance with the
then current Sales-Out and Royalty Reporting Guidelines.

(d) (i)  For each calendar month, DISTRIBUTOR shall remit payment(s) to MS as
specified in the Payment and Reporting section of the Addresses Schedule.
Subject to applicable law, a one percent (1%) monthly charge will be assessed on
all amounts that are past due.

    (ii) If MS is required by any tax authority to collect value added tax or
other transactions tax on royalties, MS will include the tax on its invoice and
DISTRIBUTOR must pay the amount in full.

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     (iii) All payments must be in U.S. dollars and amounts owed will not be
satisfied by a tender or any recovery pursuant to any judgment which is
expressed in or converted by MS to any currency other than the full amount of
U.S. dollars payable under this Agreement.

(e) For each unit of Licensed Product distributed by DISTRIBUTOR, DISTRIBUTOR
agrees to pay MS the royalty rates set forth in the Royalty Rate List in effect
during the month in which Licensed Product is shipped by DISTRIBUTOR.
DISTRIBUTOR shall pay royalties within forty-five (45) days after the end of
each calendar month in which Licensed Product was shipped, and within forty-five
(45) days after the cancellation or expiration date of this Agreement for the
final full or partial month.

(f) After review of DISTRIBUTOR's financial condition, payment history and
overall credit worthiness, MS may require any combination of the following
payment assurances:

     (i) an initial payment amount equal to the estimated Licensed Product
royalties for the first calendar quarter of the Agreement

 -   DISTRIBUTOR may not recoup such initial payment amount against royalties
     due to MS or apply it against payments to any AR.

 -   If DISTRIBUTOR has complied with all material terms of this Agreement when
     it expires, MS will refund the initial payment amount (net of amounts due
     MS) within forty-five (45) days of DISTRIBUTOR's final royalty report and
     payment for Licensed Products distributed during the term of this
     Agreement; or

     (ii) a third party guarantee, performance bond, letter of credit,
     prepayment of royalties, or other security; or

     (iii) periodic updated financial statements; or

     (iv) written assurances of due performance.

Until the payment assurances are received and acceptable to MS, MS may suspend
DISTRIBUTOR's license rights or require ARs to refuse to fill DISTRIBUTOR's
orders.

(g) DISTRIBUTOR's obligations to pay MS royalties and to pay charges from AR are
unconditional. If DISTRIBUTOR does not meet MS payment terms, MS may, without
limiting its remedies, do any of the following:

     (i) require the AR to hold all pending DISTRIBUTOR orders; or

     (ii) cancel this Agreement; or

     (iii) invoice DISTRIBUTOR for all Licensed Product previously acquired
based on reports submitted to MS by the AR(s) and charge DISTRIBUTOR an
additional royalty equal to thirty percent (30%) of the highest royalty for such
Licensed Product(s).

     -    For the first noncompliant payment, DISTRIBUTOR will have an
     additional five (5) days from MS' notice thereof to correct the problem.

     -    After the second noncompliant payment, MS may invoice DISTRIBUTOR
     monthly based on reports submitted to MS by the AR(s).

If MS chooses any of those options, DISTRIBUTOR shall continue to meet all other
terms of this Agreement.

(h) If DISTRIBUTOR discovers an over-reporting error, DISTRIBUTOR shall report
the error to MS in writing within thirty (30) days after the erroneous report
was first submitted to be eligible for an adjustment of the royalty amount owed
to MS.

(i) MS may require ARs to refuse or limit orders placed by DISTRIBUTOR which, in
MS' sole opinion, are in quantities greater than DISTRIBUTOR will be able to
distribute or make timely payment for in compliance with this Agreement.

(j) Royalties are separate from, and in addition to, any charges by the AR for
Licensed Products ordered by DISTRIBUTOR. Royalties also exclude any taxes,
duties, fees, excises or tariffs imposed on any of DISTRIBUTOR's activities in
connection with this Agreement. Such charges, taxes, duties, fees, excises or
tariffs, if any, shall be paid by DISTRIBUTOR.

(k) If DISTRIBUTOR distributes any Licensed Product in violation of this
Agreement or DISTRIBUTOR is unable to account for missing Licensed Product, then
MS, without limiting its remedies, may demand and DISTRIBUTOR agrees to pay MS
the full applicable royalty rate for the Licensed Product(s) plus an additional
royalty equal to thirty percent (30%) of the highest royalty rate for the
Licensed Product(s). In the event the applicable royalty rate has been paid,
DISTRIBUTOR shall pay an additional royalty equal to thirty percent (30%) of the
royalty rate for the applicable Licensed Product(s). DISTRIBUTOR shall pay such
additional royalty within thirty (30) days of receipt of MS' invoice.

(l) If DISTRIBUTOR is required by any non-U.S.A. government to withhold income
taxes on payments to MS, then DISTRIBUTOR may deduct such taxes from the amount
owed MS and shall pay them to the appropriate tax authority, provided that
within sixty (60) days of payment to MS, DISTRIBUTOR delivers to MS an official
receipt for any such taxes withheld or other documents necessary to enable MS to
claim a U.S.A. Foreign Tax Credit. DISTRIBUTOR shall make certain that any taxes
withheld are minimized to the extent permitted by applicable law. DISTRIBUTOR
agrees to pay MS a one percent (1%) monthly charge on tax amounts in receipts or
documents that are not delivered to MS within the sixty (60) days identified
above.

(m) If DISTRIBUTOR conducts business in the U.S.A. and qualifies for a state
resale tax exempt certificate, then DISTRIBUTOR shall provide MS with a copy of
its U.S.A. state resale tax exempt certificate, if applicable, with this
Agreement when it is returned for signature by MS.

(n) Upon request by MS, DISTRIBUTOR shall provide MS with DISTRIBUTOR's current
audited financial statements.

(o) (i) Pursuant to MS' instructions, DISTRIBUTOR shall enter data into the
Embedded Systems tracking tool made available by MS including, "design-win"
and/or "design-in" information as described in the instructions. Prior to
submitting such entries, DISTRIBUTOR shall confirm their accuracy.

(ii) Upon MS request, DISTRIBUTOR shall provide to MS further details on any of
the entries made by DISTRIBUTOR in accordance with subsection 4(o)(i) above.

5. USE OF MS OEM ONLINE. If DISTRIBUTOR has previously entered into an MS OEM
Online Site Agreement, such agreement shall not apply to DISTRIBUTOR's use of
the Site in connection with this Agreement. Rather, DISTRIBUTOR agrees to the
following terms and conditions, and shall cause its MOO Customer
Administrator(s) and Users (as defined below) to use the Site in compliance with
this Section 5 and the terms of use or other conditions or instructions posted
on the Site:

(a) As used in this Section 5, the term "User" means an officer, employee,
consultant or other person or agent of DISTRIBUTOR who has, or who creates the
appearance of having, been duly authorized by DISTRIBUTOR to use the Site on
behalf of DISTRIBUTOR. The term "MOO Customer Administrator(s)" means the
User(s) designated as such by DISTRIBUTOR in the Address Schedule of this
AGREEMENT until such time as MS

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has received not less than forty-eight (48) hours notice from DISTRIBUTOR
through the ** email alias that DISTRIBUTOR has made a change to any authority
previously established by DISTRIBUTOR in connection with such designation. The
term "Tool" means computer programs now or hereafter accessed at or through the
Site, which are intended to facilitate Site services, such as a program for
reporting royalties at or through the Site.

(b) MOO Customer Administrator(s) shall be solely responsible for establishing,
maintaining and terminating all access and authorities for Users, including
(without limitation) creating or arranging for all passwords, private encryption
keys or other identifiers utilized in connection with Site security or
DISTRIBUTOR security (collectively, "DISTRIBUTOR Password Information"), and
shall keep all DISTRIBUTOR Password Information secure from unauthorized access.
On behalf of DISTRIBUTOR, MOO Customer Administrator(s) shall, and shall cause
and instruct Users to: (i) protect DISTRIBUTOR Password Information as
confidential information and not disclose any part of it to any person or entity
outside of DISTRIBUTOR or to any person inside of DISTRIBUTOR without a need to
know; (ii) save their respective DISTRIBUTOR Password Information in an
appropriate, secure manner and place that will prevent unauthorized use; and
(iii) only take actions at the Site that the MOO Customer Administrator or User,
respectively, is authorized by DISTRIBUTOR to take.

(c) MS reserves the right to suspend or terminate authorities, or to suspend or
block access to all or any part of the Site or information, upon electronic
notice (indicating the reason for such action) to the MOO Customer
Administrator(s) email address; provided, however, that no notice shall be
required if MS has determined that there is possible harm or threat of harm to
MS, the Site or others. If prior notice is not provided, MS shall provide
DISTRIBUTOR with subsequent notice within a reasonable time unless the provision
thereof might continue a possible harm or threat of harm, or impede or
compromise any investigation into the same.

(d) The Site uses HTTPS (Secure Hypertext Transfer Protocol) with a **-bit key
size. DISTRIBUTOR agrees that this level of security is commercially reasonable.
Additionally, DISTRIBUTOR agrees that neither MS nor any MS Representative shall
have any liability for failure to provide a level of security greater than that
generally afforded by the use of client side digital certificates at 1024-bit
cipher strength for user workstation authentication.

(e) DISTRIBUTOR EXPRESSLY ACKNOWLEDGES AND AGREES THAT:

(i) THE SITE IS PROVIDED AS IS, AND THAT THE WARRANTY DISCLAIMERS, DAMAGE
EXCLUSIONS AND LIMITATIONS OF REMEDIES IN THIS AGREEMENT APPLY TO THE SITE AND
TO ITS INFORMATION, FUNCTIONALITY, SERVICES AND AVAILABILITY OR LACK THEREOF;
AND

(ii) DISTRIBUTOR WILL NOT RELY ON OR TREAT SITE INFORMATION AS AN EXPRESS OR
IMPLIED WARRANTY OF EITHER THE SITE OR LICENSED PRODUCT(S).

(f) MS reserves the right to change or discontinue all or any portion of the
Site at any time. Users may make a copy of Site information to document
DISTRIBUTOR transactions and/or contracts or to retain information MS is
required to provide. MS agrees to retain not less than two (2) years of
DISTRIBUTOR online transactional record availability through the standard
Microsoft OEM Online user interface, and not less than two (2) years of
retrievable offline transactional record archival (e.g., electronic media)
following expiration of online availability. Except for those records, MS has no
duty to retain or make available records for DISTRIBUTOR's later access.

It is understood that DISTRIBUTOR will not be required to use the Site if (1) MS
suspends or blocks access or otherwise disables all or any part of the Site or
any Tool; or (2) the Site or any Tool are not accessible or are not functioning
correctly, and such problems are not resolved by MS within seventy-two (72)
hours of DISTRIBUTOR providing notice to MS describing such problem. In the
event of the foregoing, MS will provide DISTRIBUTOR with a reasonable
alternative means for reporting transactions, and DISTRIBUTOR shall be deemed in
compliance with the Agreement (and will not be penalized for delays in
reporting) so long as DISTRIBUTOR complies with the alternative reporting
structure in a prompt manner.

(g) The Site is not open to the public and its functionality and all information
on it shall be treated as confidential information under the nondisclosure
provisions of Section 17.

(h) (i) DISTRIBUTOR agrees to access and use the Site for all transactions and
purposes contemplated by the Site until the date that is the earliest of the
date that: (A) MS ceases to provide the Site to similarly situated distributors
of Licensed Products, or (B) the date DISTRIBUTOR has satisfied all of its
rights and obligations under this Agreement.

(ii) Subject to applicable law, all actions taken by the MOO Customer
Administrator(s) or any other User at or in relation to the Site shall be
attributed to and legally bind DISTRIBUTOR if (A) MOO Customer Administrator(s)
or any other User(s) has supplied on the Site or otherwise in relation to a Site
session, DISTRIBUTOR Password Information; or (B) DISTRIBUTOR or Users have
failed to keep DISTRIBUTOR Password Information secure and the failure caused or
contributed to creation of an appearance that actions taken in connection with
the Site were being taken by, or on behalf of DISTRIBUTOR; or (C) DISTRIBUTOR
has otherwise approved, allowed or accepted benefits or use of the Site by a
person purporting to be its agent. Notwithstanding the foregoing, if DISTRIBUTOR
Password Information is used to cause harm or damage to DISTRIBUTOR or MS by a
person who obtained it by means that could not have been precluded by
DISTRIBUTOR after complying with Section 5(b), then acts taken with DISTRIBUTOR
Password Information so obtained will not be attributed to DISTRIBUTOR because
of this Section 5(h)(ii), but may be attributed to MS, DISTRIBUTOR or others
under principles of equity or law pertinent to the act in question.

6.  LICENSED PRODUCT RECALLS, WITHDRAWALS, AND SUSPENSIONS.

(a) DISTRIBUTOR shall immediately stop distributing a Licensed Product if MS or
its Suppliers notify DISTRIBUTOR that the Licensed Product is recalled,
withdrawn or suspended.

(b) DISTRIBUTOR shall accept returns of Licensed Product from OEM Customers if
MS or its Suppliers notify DISTRIBUTOR that the Licensed Product is recalled,
withdrawn or suspended.

     (i) DISTRIBUTOR shall accept returned Licensed Product only in unopened
packages.

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<PAGE>

     (ii) DISTRIBUTOR shall, at MS' option, issue a credit to the OEM Customer's
account or replace the returned Licensed Product.

     (iii) DISTRIBUTOR shall, at MS' option, destroy the returned Licensed
Product or ship the returned Licensed Product to MS or a third party designated
by MS. DISTRIBUTOR shall certify to MS that the returned Licensed Product was
destroyed or shipped to MS or MS' designated third party.

     (iv) If the Licensed Product recall, withdrawal or suspension was caused by
reasons outside of DISTRIBUTOR's control, MS will pay for DISTRIBUTOR's
reasonable shipping and destruction costs.

     (v) DISTRIBUTOR shall promptly arrange for replacement units of Licensed
Product from the AR.

(c) DISTRIBUTOR shall accept returns if

     (i) an OEM Customer refuses to accept Additional Licensing Provisions for
OEM Customer and returns the unopened Licensed Product package within a
reasonable time after receipt; or

     (ii) a Licensed Product is incomplete or defective in Licensed Product
media and/or Licensed Product materials.

(d) DISTRIBUTOR will not pay MS for Licensed Product that DISTRIBUTOR ships to
replace Licensed Product returned because of recalls, withdrawals, suspensions
or defects (Sections 6(b) and 6(c)(ii)).

(e) If DISTRIBUTOR issues a credit to OEM Customers for Licensed Product
returned because of recalls, withdrawals, suspensions or defects or for Licensed
Product returned in an unopened package (Sections 6(b) and 6(c)), DISTRIBUTOR
may claim a royalty offset based on the royalty rate originally reported by
DISTRIBUTOR for the returned Licensed Product.

(f) Except for returns that DISTRIBUTOR is expressly authorized or directed to
make to MS, MS will not accept any returns of Licensed Product.

(g) DISTRIBUTOR shall defend, indemnify, and hold MS and its Suppliers harmless
from and against all damages, costs and expenses, including reasonable
attorneys' fees, incurred due to DISTRIBUTOR's continued distribution of
Licensed Product after MS has notified DISTRIBUTOR to stop distributing the
Licensed Product.

7.  DELIVERY.

Neither MS nor its Suppliers shall have any liability for failure to deliver
Licensed Product by any particular date.

8.  NO WARRANTIES.

LICENSED PRODUCT IS PROVIDED "AS IS" AND WITH ALL FAULTS. THE ENTIRE RISK AS TO
SATISFACTORY QUALITY, PERFORMANCE, ACCURACY, AND EFFORT IS WITH OEM CUSTOMER. MS
AND ITS SUPPLIERS DISCLAIM ALL REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS,
IMPLIED, OR STATUTORY, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF
FITNESS FOR A PARTICULAR PURPOSE AND ANY IMPLIED WARRANTY ARISING FROM COURSE OF
DEALING OR USAGE OF TRADE. MS AND ITS SUPPLIERS ALSO DISCLAIM ANY COMMON-LAW
DUTIES RELATING TO ACCURACY OR LACK OF NEGLIGENCE. THERE IS NO WARRANTY AGAINST
INTERFERENCE WITH DISTRIBUTOR'S OR OEM CUSTOMER'S ENJOYMENT OF THE LICENSED
PRODUCT OR AGAINST INFRINGEMENT.

9.  DAMAGE EXCLUSIONS / LIMITATION OF LIABILITY / EXCLUSIVE REMEDY.

LIMITATION OF AMOUNTS OF LIABILITY; EXCLUSIVE REMEDY. For each Licensed Product,
DISTRIBUTOR agrees that in no event will MS, its Suppliers, and/or their
respective officers, employees, and agents (collectively, "MS Representatives")
be liable to DISTRIBUTOR, whether in contract (including any provision of this
Agreement), tort, or otherwise, in any amount that exceeds one hundred percent
(100%) of the amount paid by DISTRIBUTOR to MS for that Licensed Product during
the term of this Agreement. DISTRIBUTOR's exclusive remedy for any breach of
this Agreement by MS or by MS Representatives will be the recovery of
DISTRIBUTOR's direct damages incurred in reasonable reliance, limited to the
foregoing amount.

(a) EXCLUSION OF CERTAIN DAMAGES AND LIMITATION OF TYPES OF LIABILITY. EXCEPT AS
PROHIBITED BY LAW, IN NO EVENT WILL MS OR ANY MS REPRESENTATIVES BE LIABLE TO
DISTRIBUTOR OR TO ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL,
INDIRECT, OR ECONOMIC DAMAGES, REGARDLESS OF THE THEORY OF LIABILITY (INCLUDING
WITHOUT LIMITATION PRODUCT LIABILITY OR NEGLIGENCE), OR FOR ANY LOST REVENUE,
PROFIT, DATA, PRIVACY OR SECURITY, OR FOR ANY PUNITIVE DAMAGES, ARISING OUT OF
OR RELATED TO THE USE OF OR INABILITY TO USE LICENSED PRODUCT, EVEN IF MS OR MS
REPRESENTATIVES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. This
exclusion and limitation shall apply even if any remedy fails of its essential
purpose.

(b) RELEASE. DISTRIBUTOR releases MS and MS Representatives from all liability
in excess of the limitations set forth above.

10.  PROHIBITED USES OF LICENSED PRODUCT / CONSPICUOUS NOTICE TO OEM CUSTOMERS.

OEM CUSTOMERS ARE EXPRESSLY PROHIBITED FROM MANUFACTURING OR MARKETING EMBEDDED
SYSTEMS THAT ARE DESIGNED TO USE LICENSED PRODUCT IN OPERATION OF NUCLEAR
FACILITIES, IN AIRCRAFT NAVIGATION, IN AIRCRAFT COMMUNICATION, IN AIRCRAFT
FLIGHT CONTROL, IN AIRCRAFT AIR TRAFFIC CONTROL SYSTEMS, OR IN OTHER DEVICES OR
SYSTEMS IN WHICH SERIOUS INJURY OR DEATH TO THE OPERATOR OF THE DEVICE OR
SYSTEM, OR TO OTHERS DUE TO A MALFUNCTION (INCLUDING, WITHOUT LIMITATION,
SOFTWARE RELATED DELAY OR FAILURE) COULD REASONABLY BE FORESEEN. DISTRIBUTOR
SHALL PROVIDE CONSPICUOUS WRITTEN NOTICE TO ALL OEM CUSTOMERS OF THIS LIMITATION
ON PROHIBITED USES OF LICENSED PRODUCT.

11.  INTELLECTUAL PROPERTY INFRINGEMENT.

(a) MS agrees to defend DISTRIBUTOR in a lawsuit or other judicial action, and
pay the amount of any adverse final judgment (or settlement to which MS
consents) from such lawsuit or judicial action, for any third party claim(s)
that the Licensed Product(s) infringe any copyright or trademark rights
enforceable in any Included Jurisdictions (defined in Section 11(e) below)
("Claim").

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With regard to any Claim, MS' obligations are subject to the following
conditions:

     (i) DISTRIBUTOR must promptly notify MS in writing of the Claim;

     (ii) MS shall have sole control over defense and/or settlement of the
Claim; and

     (iii) DISTRIBUTOR shall provide MS with reasonable assistance in the
defense of the Claim and shall not take a position adverse to MS.

(b) In the event that MS is required to defend a lawsuit or other judicial
action pursuant to Section 11(a) above and such lawsuit or other judicial action
includes allegations (other than a Claim) with respect to non-MS products, then
DISTRIBUTOR shall retain, at its sole expense, separate counsel to defend
against such allegations, and agrees to reimburse MS for any and all attorneys'
fees and costs incurred by MS with respect to defending against such
allegations. Moreover, MS and its Suppliers shall have no liability for any
intellectual property infringement claim (including a Claim) based on
DISTRIBUTOR's manufacture, use, sale, offer for sale, importation or other
disposition or promotion of the Licensed Product or trademark after MS' notice
that DISTRIBUTOR should cease manufacture, use, sale, offer for sale,
importation or other disposition or promotion of such Licensed Product or
trademark due to such claim. DISTRIBUTOR shall defend, indemnify and hold MS and
its Suppliers harmless from and against all damages, costs and expenses,
including reasonable attorneys' fees incurred due to DISTRIBUTOR's continued
distribution of the allegedly infringing Licensed Product after MS provides such
notice.

(c) In addition to the obligations set forth in Section 11(a) above, if MS
receives information concerning a Claim, MS may at its expense, but without
obligation to do so, undertake such further actions such as:

     (i) procuring for DISTRIBUTOR such copyright or trademark right(s) or
license(s) as may be necessary to address the Claim; or

     (ii) replacing or modifying the Licensed Product or trademark to make it
non-infringing (in which case DISTRIBUTOR shall immediately cease distribution
of the allegedly infringing Licensed Product or use of the allegedly infringing
trademark).

(d) With regard to any claim (other than a Claim) that the Licensed Product
infringes any third party intellectual property rights, DISTRIBUTOR shall
promptly notify MS in writing of such claim. MS shall have no obligation to
defend DISTRIBUTOR or pay damages arising out of such claim. Notwithstanding the
absence of any such obligation(s), MS reserves the option, in its sole
discretion and at its expense, to assume at any time defense of any such claim.
In the event that MS assumes defense of any such claim,

     (i) MS shall notify DISTRIBUTOR in writing of that election;

     (ii) MS shall have sole control over defense and/or settlement of the
claim;

     (iii) DISTRIBUTOR shall provide MS with reasonable assistance in the
defense of the claim and shall not take a position adverse to MS;

     (iv) MS shall thereafter defend DISTRIBUTOR against that claim; and

     (v) MS shall pay any adverse final judgment (or settlement to which MS
consents) resulting from such claim (or in the case of a claim based on an
allegation of patent infringement, MS shall pay up to an amount not to exceed a
reasonable royalty based on the per copy price paid by DISTRIBUTOR for copies of
the Licensed Products subject to the claim).

(e) Neither MS nor its Suppliers shall have any obligation to DISTRIBUTOR for
any Claims that arise outside the geographical boundaries of the Included
Jurisdictions. "Included Jurisdictions" means Australia, Canada, the European
Union, Japan, Norway, and the United States.

12.  LICENSED PRODUCT SUPPORT.

(a) This Agreement does not include technical support by MS to DISTRIBUTOR, OEM
Customers or end users.

(b) DISTRIBUTOR shall provide commercially reasonable support for the Licensed
Products to OEM Customers and shall advise OEM Customers accordingly.

(c) For the term of this Agreement, DISTRIBUTOR shall either (i) enter into and
maintain a technical support services contract for the Licensed Product(s) with
MSCORP for a minimum of two hundred (200) hours through Microsoft Services for
Embedded Partners or with a third party for an equivalent level of service, or
(ii) MS verifies that DISTRIBUTOR has and maintains a competency and level
equivalent to those services. If the DISTRIBUTOR chooses to acquire support
through MSCORP, DISTRIBUTOR acknowledges that MSCORP may charge applicable
support fees under such contract.

(d) DISTRIBUTOR shall provide MS with ninety (90) days prior written notice of
any substantive change in DISTRIBUTOR's support policy for the Licensed Product.

13. NON-ASSERTION OF PATENTS.

(a) The following definitions apply with regard to this Section 13 only:

     (i) "Affiliates" means persons or entities directly or indirectly (A)
controlling DISTRIBUTOR or MS, (B) controlled by DISTRIBUTOR or MS, or (C) under
common control with DISTRIBUTOR or MS, where control is defined as direct or
indirect majority ownership.

     (ii) "DISTRIBUTOR Patents" means only those patents throughout the world
that (A) are infringed on account of the manufacture, use, sale, offer for sale,
importation or other disposition or promotion of the Covered Product, and (B)
DISTRIBUTOR or its Affiliates (1) now owns or later acquires or controls prior
to the cancellation or expiration of the Agreement, or (2) now has, or hereafter
obtains, prior to the cancellation or expiration of the Agreement, the ability
or right to grant licenses or covenants without the requirement of a bona fide
payment to an unaffiliated third party.

     (iii) "Covered Product" means the Licensed Product deliverable(s) licensed
by MS to DISTRIBUTOR including any Supplemental Code distributed by DISTRIBUTOR.
To the extent that the features and functionality presently contained in the
Covered Product licensed to DISTRIBUTOR under the Agreement are also contained
in future, replacement, or successor product(s) to the Covered Product, such
specific features and functionality in such future, replacement, or successor
product(s) shall also be considered part of the Covered Product only for the
purposes of this Section 13.

     (iv) "MS Licensee" means any third party that is directly or indirectly
licensed by MS or MSCORP to exercise any legal rights with respect to the
Covered Product, including (without limitation) OEM customers, all other
authorized distributors of the Covered Product, and end users of the Covered
Product.

(b) As partial, material consideration for the rights granted to DISTRIBUTOR
under the terms of the Agreement,

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DISTRIBUTOR and its Affiliates covenant not to (A) sue, or (B) bring, prosecute,
assist or participate in any judicial, administrative or other proceedings of
any kind against MS, MS Affiliates, and MS Licensees for infringement of
DISTRIBUTOR Patents on account of the making, use, sale, offer for sale,
importation or other disposition or promotion of the Covered Product.

(c) With respect to infringement claims based on a third party product in
combination with the Covered Product, the covenant in this Section 13 does not
extend to such combinations unless, for any given claim of a DISTRIBUTOR Patent,
the manufacture, use, sale, offer for sale, importation, or other disposition or
promotion of the Covered Product constitutes direct or contributory infringement
of such patent claim.

(d) DISTRIBUTOR's Section 13 covenant as to MS, MS Affiliates, and MS Licensees
shall terminate as to all infringements occurring more than three (3) years
after DISTRIBUTOR stops distributing the Covered Product, except that such
covenant shall survive for end user activities licensed under an applicable end
user license agreement.

(e) If DISTRIBUTOR or its Affiliates are first sued for patent infringement by a
third party on account of DISTRIBUTOR's or its Affiliates' manufacture, use,
sale, offer for sale, importation or other disposition or promotion of the
Covered Product, then this Section 13 covenant may, at DISTRIBUTOR's discretion,
be temporarily suspended as to that third party. Any such temporary suspension
shall only be applicable against such third party and for the sole purpose of
DISTRIBUTOR's defense in such patent infringement action.

(f) If DISTRIBUTOR or its Affiliates assign DISTRIBUTOR Patents or rights to
enforce DISTRIBUTOR Patents, DISTRIBUTOR or its Affiliates, as the case may be,
shall require as a condition of any such assignment that the assignee agree to
be bound by the provisions of this Section 13 as to such DISTRIBUTOR Patents.

14.  ASSIGNMENT.

(a) This Agreement shall not be assigned or sublicensed by DISTRIBUTOR in whole
or in part (by contract, merger, operation of law, or otherwise). A change of
majority ownership or control of DISTRIBUTOR shall constitute an assignment in
violation of this Section. Any assignment or sublicense in violation of this
provision shall be void and of no effect, and shall constitute a material breach
of the terms of this Agreement.

(b) On or after August 1, 2004, the Agreement and any related agreement(s) to
which MS is a party or by which MS is benefited, including all rights and
obligations thereunder, may be assigned by MS to a direct or indirect wholly
owned subsidiary of MSCORP. MS shall provide DISTRIBUTOR with notice of such
assignment, provided, however, that failure to provide notice shall not affect
the effectiveness of any such assignment. From and after such assignment, all
references to "MS" contained in the Agreement or any related documents or items
shall refer to the assignee identified in the applicable assignment notice to
DISTRIBUTOR, and all references to "Suppliers" shall include Microsoft
Licensing, GP.

15.  TERM.

(a) This Agreement runs from the Effective Date through the Expiration Date
specified on the Signature Page of this Agreement. MS may extend the term of
this Agreement upon written or electronic notice to DISTRIBUTOR. DISTRIBUTOR's
acquisition or distribution of Licensed Product during an extension signifies
DISTRIBUTOR's agreement to the terms of the extension. Both parties agree to be
bound by the terms of any extension notification, if accepted by DISTRIBUTOR.

(b) This Agreement will automatically extend for thirty (30) days for the
limited purpose of allowing DISTRIBUTOR to distribute inventory of Licensed
Product ("Limited Purpose Extension") if:

     (i) MS has not canceled this Agreement,

     (ii) MS has not suspended DISTRIBUTOR's distribution rights, and (iii)
DISTRIBUTOR and MS do not enter into a successor agreement to this Agreement.

During the Limited Purpose Extension, DISTRIBUTOR may distribute Licensed
Product, but DISTRIBUTOR may not acquire Licensed Product from an AR.
DISTRIBUTOR must comply with all payment and reporting requirements of the
Agreement for Licensed Product distributed during the Limited Purpose Extension.

(c) (i) This Agreement does not create any express or implied obligation to
renew or extend the Agreement or to continue the parties' relationship on the
same terms. Regardless of the number of renewals, this Agreement will always be
a fixed term agreement and not an indefinite term agreement.

     (ii) Without limiting the foregoing, MS may elect not to enter into a
successor agreement to the Agreement if DISTRIBUTOR has not complied with the
Distributor Minimum Standards during the term of the Agreement. Any exception to
or waiver of any portion of the Distributor Minimum Standards shall not be
effective unless made in writing by MS.

16.  NONCOMPLIANCE AND CANCELLATION.

(a) (i) MS may suspend any rights granted to DISTRIBUTOR under this Agreement,
and/or require ARs to refuse to fulfill or to limit orders placed by
DISTRIBUTOR, and/or cancel this Agreement in its entirety or as to any
individual Licensed Product(s), in MS' sole discretion. Without limiting the
foregoing, MS may cancel this Agreement if DISTRIBUTOR submits "zero dollar"
royalty reports for at least three calendar months.

     (ii) DISTRIBUTOR hereby waives any right it may have under applicable law
or regulation to require MS to seek the approval, order, decision or judgment of
any court or government agency before MS may suspend or cancel this Agreement or
any rights granted to DISTRIBUTOR under this Agreement.

(b) (i)   If, subject to applicable law, DISTRIBUTOR becomes insolvent, enters
bankruptcy, reorganization, composition or other similar proceedings under
applicable laws, whether voluntary or involuntary, or admits in writing its
inability to pay its debts, or makes or attempts to make an assignment for the
benefit of creditors, any cancellation shall be effective upon notice to
DISTRIBUTOR or as soon thereafter as is permitted by applicable law;

     (ii) To the extent allowed by applicable law, DISTRIBUTOR's license rights
herein shall be suspended as of the date DISTRIBUTOR becomes insolvent, enters
reorganization, composition or other similar proceedings under applicable laws,
whether voluntary or involuntary, or admits in writing its inability to pay its
debts, or makes or attempts to make an assignment for the benefit of creditors.

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(c) Upon cancellation or expiration of this Agreement, all DISTRIBUTOR's license
rights shall immediately cease and DISTRIBUTOR shall

     (i) immediately cease distribution of all Licensed Product;

     (ii) immediately stop using all MS and its Suppliers names, trade names,
trademarks, and logos; and

     (iii) return to MS or, at MS's direction, destroy all Licensed Product
inventory and property of MS or its Suppliers that DISTRIBUTOR possesses. MS,
its Suppliers and ARs are not required to refund, credit, or adjust amounts paid
for the Licensed Product(s) returned to MS or destroyed by DISTRIBUTOR. Each
party must assist the other to terminate this Agreement in an orderly manner.

(d) When this Agreement terminates or if MS suspends DISTRIBUTOR's distribution
rights, MS may take any actions that may be advisable to prevent unauthorized
distribution of Licensed Product(s) then in inventory and to ensure timely
return or destruction of such Licensed Product(s).

(e) DISTRIBUTOR expressly agrees that, except as otherwise set forth in this
Agreement, the cancellation or expiration of this Agreement in accordance with
its terms shall not cause MS or any of its Suppliers to pay any indemnification,
severance or termination payment or benefit to DISTRIBUTOR, or any of
DISTRIBUTOR's suppliers. If MS or any of its Suppliers is required by law, court
order or otherwise to pay to DISTRIBUTOR or any of its subsidiaries or
affiliates, or a third party, any compensation, severance pay or benefit other
than as set forth in this Agreement ("Benefits"), DISTRIBUTOR shall indemnify MS
and/or the relevant Supplier from the payment as well as from any reasonable
costs and expenses (including, but not limited to, attorneys' fees and expenses)
incurred by them in connection with their involvement in any judicial or
administrative proceeding in connection thereto in any foreign jurisdiction (the
Benefits, together with any costs and expenses indemnifiable by DISTRIBUTOR
pursuant to this paragraph referred to collectively as the ("Indemnifiable
Payments"). DISTRIBUTOR irrevocably authorizes MS

     (i) to set off against the payment of the obligations of MS under this
     Agreement, the amount of any and all Indemnifiable Payments, and

     (ii) to hold, pending final determination of the amount of the
     Indemnifiable Payments, the payment of the obligations of MS under this
     Agreement as security for the payment of all Indemnifiable Payments by
     DISTRIBUTOR to MS, if MS, in its sole discretion, determines that there are
     reasonable grounds to believe that MS is or shall be required to pay any
     Indemnifiable Payments.

(f) The remedies available to MS under this Agreement for DISTRIBUTOR's breach
are not exclusive. In addition to such remedies, MS may exercise any and all
legal, equitable or other remedies available to it.

(g) Sections 2(m), 5, 8, 9, 11(d), 13, 14, 16(e-f), 17, 18, 19, 20, and 21(b) of
this Agreement shall survive cancellation or expiration of this Agreement.

17.  NONDISCLOSURE.

(a) DISTRIBUTOR shall keep confidential:

     (i) the terms of this Agreement, including, without limitation, the Royalty
Rate List(s),

     (ii) information on the Embedded Systems Web Site, information concerning
current and potential OEM Customers, MS and its Suppliers royalty rate
information, the terms of agreements concerning MS and its Suppliers products,
license negotiations, any information relating to released or unreleased MS and
its Suppliers software products, the marketing or promotion of any MS and its
Suppliers product, and MS and its Suppliers business policies or practices that
MS or its Suppliers disclosed to DISTRIBUTOR and is non-public information, and

     (iii) any other information that, in the circumstances surrounding the
disclosure or in the nature of the information, ought in good faith to be
treated as confidential.

(b) DISTRIBUTOR may disclose the terms of the Agreement in confidence to its
immediate legal and financial consultants as required in the ordinary course of
DISTRIBUTOR's business.

18. AUDITS.

(a) During the term of this Agreement and for three (3) years thereafter,
DISTRIBUTOR shall keep at a single, readily accessible location all accounting,
purchase, inventory, sales and other records relating to the acquisition and
distribution, or destruction of each Licensed Product ("Records").

(b) In order to verify DISTRIBUTOR's compliance with this Agreement, MS may
cause (i) an audit to be made of DISTRIBUTOR's Records and/or (ii) an inspection
to be made of DISTRIBUTOR's facilities and procedures, either with or without
prior notice to DISTRIBUTOR. Audits shall be conducted by an independent
certified public accountant selected by MS (other than on a contingent fee
basis).

(c) DISTRIBUTOR agrees to provide any audit or inspection team designated by MS
access to all relevant DISTRIBUTOR Records and facilities.

(d) MS shall pay the costs of any audit or inspection unless the review
discovers discrepancies that exceed the lesser of Ten Thousand US Dollars
(US$10,000.00) or two percent (2%) of royalties originally reported by
DISTRIBUTOR during the time frame that was audited, or an intentional and
material breach of any DISTRIBUTOR obligations under this Agreement ("Material
Discrepancy"). In the event of a Material Discrepancy, DISTRIBUTOR shall pay MS,
in addition to unpaid amounts due, the costs of the audit, plus an additional
royalty of twenty-five percent (25%) of the applicable product royalty for each
underreported copy of Licensed Product.

19.  NOTICES.

(a) MS, through an authorized MS representative, may give DISTRIBUTOR notices,
authorizations and requests

     (i) by posting them to the Embedded Systems Web Site,

     (ii) by electronic mail (email) at the email address listed in the
Addresses Schedule,

     (iii) by facsimile transmission at the fax number listed in the Addresses
Schedule or

     (iv) in writing at the address(es) indicated in Addresses Schedule.

(b) DISTRIBUTOR may give MS notices, authorizations and requests

     (i) by facsimile transmission at the fax number listed in the Addresses
Schedule or

     (ii) in writing at the address(es) indicated in the Addresses Schedule.

(c) Communications are deemed given:

                                       13

                                  CONFIDENTIAL

Microsoft OEM Distribution Agreement For Software Products For Embedded Systems
#5133790046-6 dated October 1, 2003 between MS and BSQUARE CORPORATION

<PAGE>

     (i) if by posting by MS on the Embedded Systems Web Site, on the first day
of the calendar month following posting of such communication;

     (ii) if by facsimile transmission or email, on the day the facsimile or
email was transmitted; or

    (iii) if in writing, on the day (A) deposited in the U.S.A. mail, postage
prepaid, certified or registered, return receipt requested, or (B) sent by air
express courier, charges prepaid.

(d) DISTRIBUTOR shall keep all information required in the Addresses Schedule
complete and current. Within ten (10) days of any change of any individual,
address or other information required in the Addresses Schedule, DISTRIBUTOR
shall notify MS of such change as set forth in Section 19(b).

(e) DISTRIBUTOR must check the Embedded Systems Web Site for updated information
at least twice each month, on or after 12:01 a.m. Pacific Time zone, U.S.A., on
the 15th (fifteenth) and on the last calendar day of each month.

(f) Information posted on the Embedded Systems Web Site may change without
additional notice until the effective date of such information. MS may correct
errors in information posted on the Embedded Systems Web Site or update posted
documents after the beginning of a month by sending notice to DISTRIBUTOR.

20.  CHOICE OF LAW; JURISDICTION AND VENUE; ATTORNEYS' FEES.

(a) This Agreement shall not be governed by the 1980 United Nations Convention
on Contracts for the International Sale of Goods and its related instruments.
This Agreement and all related matters shall be interpreted under and controlled
by the laws of the State of Washington, and DISTRIBUTOR consents to exclusive
jurisdiction and venue in the state and federal courts sitting in King County in
the State of Washington. Process may be served on either party as authorized by
applicable law or court rule.

(b) If either party employs attorneys to enforce any rights arising out of or
relating to this Agreement, the primarily prevailing party shall be entitled to
recover its reasonable attorneys' fees, costs and other expenses.

21. GOVERNMENT REGULATIONS.

(a) DISTRIBUTOR acknowledges that Licensed Product is subject to U.S. export
jurisdiction. DISTRIBUTOR agrees to comply with all applicable international and
national laws that apply to these Licensed Products, including the U.S. Export
Administration Regulations, as well as end-user, end-use, and destination
restrictions issued by U.S. and other governments. For additional information,
see **.

(b) All Licensed Product provided to the U.S. Government pursuant to
solicitations issued on or after December 1, 1995 is provided with the
commercial license rights and restrictions described elsewhere herein. All
Licensed Product provided to the U.S. Government pursuant to solicitations
issued prior to December 1, 1995 is provided with "Restricted Rights" as
provided in FAR, 48 CFR 52.227-14 (JUNE 1987) or DFAR, 48 CFR 252.227-7013 (OCT
1988), as applicable. The reseller is responsible for ensuring Licensed Product
is marked with the "Restricted Rights Notice" or "Restricted Rights Legend," as
required. All rights not expressly granted are reserved.

22. GENERAL.

(a) This Agreement does not constitute an offer by MS and it shall not be
effective until signed by both DISTRIBUTOR and MS. Upon execution by both
DISTRIBUTOR and MS, this Agreement, together with its schedules, shall
constitute the entire agreement between them and merges all prior and
contemporaneous communications. Except as otherwise expressly provided herein,
this Agreement shall not be modified except by a written agreement signed on
behalf of DISTRIBUTOR and MS by their respective duly authorized
representatives. Any statement appearing as a restrictive endorsement on a check
or other document which purports to modify a right, obligation or liability of
either party shall be of no force and effect.

(b) Neither the existence nor the terms of this Agreement shall be construed as
creating a partnership, joint venture or agency relationship or as granting a
franchise.

(c) If any provision of this Agreement shall be held by a court of competent
jurisdiction to be illegal, invalid or unenforceable, the remaining provisions
and license for remaining Licensed Product(s), as applicable, shall remain in
full force and effect.

(d) No waiver of any breach of any provision of this Agreement shall constitute
a waiver of any prior, concurrent or subsequent, and no waiver shall be
effective unless made in a writing signed by an authorized representative of the
waiving party.

23. TERMINATION OF PRIOR AGREEMENT RIGHTS.

If DISTRIBUTOR is currently licensed to distribute the Licensed Product under a
valid agreement with MS ("Prior Agreement"), then as of the Effective Date of
this Agreement:

(a) DISTRIBUTOR's license to order and distribute the Licensed Product under the
Prior Agreement shall cease; and

(b) DISTRIBUTOR shall report and pay for the Licensed Product under the terms
and conditions of this Agreement.

                                       14

                                  CONFIDENTIAL

Microsoft OEM Distribution Agreement For Software Products For Embedded Systems
#5133790046-6 dated October 1, 2003 between MS and BSQUARE CORPORATION

                      ** Confidential Treatment Requested
<PAGE>

                       PERFORMANCE REBATE PROGRAM SCHEDULE

MS may offer a performance rebate program ("Rebate Program") to encourage its
distributors to promote and expand sales of Licensed Product(s). To accomplish
this objective, MS may periodically offer DISTRIBUTOR the opportunity to earn
rebates by successfully achieving certain objectives described below.

1. ADDITIONAL DEFINITIONS

(a)  "Eligible Licensed Products" means those Licensed Products designated by MS
     in the RPA for a Period.

(b)  "Period" means a calendar quarter, or such other duration as MS may provide
     in the RPA.

(c)  "RPA" means a Rebate Program Attachment applicable to a Period as may be
     revised from time to time by MS. A sample RPA is attached to this Schedule.

All other terms shall have the meanings set forth in the Agreement.

2. OBJECTIVES

(a)  In one or more Periods, MS may offer DISTRIBUTOR the opportunity to earn
     rebate amounts by successfully achieving certain objectives ("Objectives")
     described in this Schedule. MS is not obligated to offer a rebate in any
     Period during the term of the Agreement.

(b)  MS may select Objectives like the ones listed below. Objectives will be for
     one (1) Period and will be determined based upon MS business considerations
     and communicated via an RPA.

          -    Licensed Product sales support

          -    Field Application Engineer/ System Engineer support

          -    Provision of additional sales-out data (e.g., optional fields,
               previous periods)

          -    Increase in the unit sales of Eligible Licensed Product(s)

          -    Training and certification activities

3. REBATE AMOUNT

     MS will designate in the applicable RPA a rebate amount ("Rebate Amount")
     for applicable Objectives selected for a Period in which a rebate is
     offered.

4. COMMUNICATION OF OBJECTIVES AND REBATE AMOUNTS

     Objectives and Rebate Amounts for a Period, if any, will be communicated by
     MS via e-mail or the Embedded Systems Web Site by the first business day
     following the fifteenth (15th) day of the first calendar month of the
     applicable Period. Objectives and Rebate Amounts shall be communicated in
     an RPA as attached to this Schedule, which may be revised from time to time
     by MS. An RPA will be communicated only for Periods in which a rebate is
     offered.

5. QUALIFICATION FOR REBATE AMOUNT

(a)  Subject to the eligibility requirements described below, MS shall pay the
     Rebate Amount to DISTRIBUTOR for successful achievement of the Objectives
     for the applicable Period. Rebate attainment shall be based on information
     from DISTRIBUTOR's monthly royalty report and/or sales-out reports or other
     proof of compliance as specified by MS. MS shall make the final binding
     determination whether DISTRIBUTOR has satisfactorily accomplished the
     Objectives for the applicable Period after receipt of all compliant
     reporting. MS shall give notice to DISTRIBUTOR of the Rebate Amount earned
     in the applicable Period, if any, not later than sixty (60) days after the
     end of the Period.

(b)  DISTRIBUTOR shall be eligible to receive the Rebate Amounts only if (i)
     DISTRIBUTOR is in strict compliance with the Agreement during the
     applicable Period, including without limitation timely reporting and
     payment of royalties and timely and compliant reporting of sales-out
     data,(ii) DISTRIBUTOR has an Agreement in effect for the entire Period, and
     (iii) DISTRIBUTOR meets the rebate pre-requisites, if any, set forth in the
     applicable RPA.

(c)  Reporting compliance is based on either the Sales-Out and Royalty Reporting
     Guidelines and template in the Sales Out and Royalty Reporting Guidelines
     and/or other guidelines as specified by MS.

     All criteria must be met each reporting Period for reporting to be
     considered compliant. If all reports meet all current compliance
     requirements as defined above, DISTRIBUTOR will receive payment of the
     Rebate Amount earned. If DISTRIBUTOR has complied during a portion of the
     reporting Period, a payment ratio may be applied to the Rebate Amount as
     described in the RPA. However, if DISTRIBUTOR is partially compliant in any
     given month, that month will be treated as non-compliant.

                                       15

                              CONFIDENTIAL<<VERFT>>

Microsoft OEM <<Agr Type>> dated <<Agr Eff Date>> between Microsoft Licensing,
Inc. and <<COMPANY NAME>>.

                                        07/28/00 Form 2.5.<<CurrentTemplateRev>>

<PAGE>

6. PAYMENT OF REBATE AMOUNT(s)

(a)  The Rebate Amount(s) earned by DISTRIBUTOR shall be awarded at MS' option
     as (i) credits that may be used to offset then-current or future royalties
     which accrue pursuant to the Agreement (or a successor agreement to the
     Agreement) or (ii) in the form of a check sent to DISTRIBUTOR in care of
     the MS Embedded Administrator Contact name and address indicated on the
     Addresses Schedule to the Agreement. Such amounts shall be awarded not
     later than sixty (60) days after the end of the Period in which the Rebate
     Amount was earned. If the Agreement is terminated or expires after
     completion of a full Period in which a rebate was offered, and no successor
     agreement is entered into between DISTRIBUTOR and MS, then MS shall refund
     to DISTRIBUTOR the Rebate Amount earned, less deductions for any
     outstanding amounts or obligations due to MS under the Agreement.

(b)  DISTRIBUTOR shall be solely responsible for payment of taxes, duties, fees,
     excises or tariffs imposed on any discounts, credits or payments made by MS
     to DISTRIBUTOR pursuant to this Rebate Program, provided however, MS may
     withhold and pay to tax authorities such amounts as may be required under
     applicable state or federal law on discounts, credits or payments made by
     MS to DISTRIBUTOR.

                                       16

                              CONFIDENTIAL<<VERFT>>

Microsoft OEM <<Agr Type>> dated <<Agr Eff Date>> between Microsoft Licensing,
Inc. and <<COMPANY NAME>>.

                                        07/28/00 Form 2.5.<<CurrentTemplateRev>>

<PAGE>

                                    [SAMPLE]

              ATTACHMENT TO THE PERFORMANCE REBATE PROGRAM SCHEDULE
         FOR (FILL IN NUMBER BY CALENDAR YEAR AND QUARTER: e.g. 2003 Q1)
                           PERFORMANCE REBATE PROGRAM

DISTRIBUTOR:
AGREEMENT NUMBER: 5133790046-6
PERIOD:

MS will pay Rebate Amounts based on the percentages below per the Performance
Rebate Program Schedule for DISTRIBUTOR's attainment of the following
Objective(s). All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.

OBJECTIVE 1: Provide compliant reporting of required sales-out data (as
identified in the Sales-Out and Royalty Reporting Guidelines) for the Period
(i.e., on-time, accurate, and in accordance with the Sales-Out and Royalty
Reporting Guidelines).

         Rebate Amount: up to _____ of the total amount of royalties paid by
         DISTRIBUTOR to MS for all Licensed Products distributed under the
         Agreement during the Period.

OBJECTIVE 2: During the Period, hold ______ seminars for OEM Customers designed
to provide technical education regarding, and/or create demand for, Licensed
Products.

         Rebate Amount: up to _____ of the total amount of royalties paid by
         DISTRIBUTOR to MS for (i) runtimes and toolkits collectively, "Embedded
         Licensed Products" distributed under the Agreement during the Period.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Number of Qualifying Awareness Seminars Held by
                 DISTRIBUTOR                                  Rebate if achieved
--------------------------------------------------------------------------------
<S>                                                           <C>
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
</TABLE>

OBJECTIVE 3: During the Period, hold ______ technical, hands-on product training
sessions for Licensed Products.

         Rebate Amount: up to _________ of the total amount of royalties paid by
         DISTRIBUTOR to MS for (i) runtimes and toolkits collectively, "Embedded
         Licensed Products" distributed under the Agreement during the Period.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Number of Qualifying Awareness Seminars Held by
                 DISTRIBUTOR                                  Rebate if achieved
--------------------------------------------------------------------------------
<S>                                                           <C>
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
</TABLE>

OBJECTIVE 4: Provide compliant reporting (i.e., on-time, accurate, and in
accordance with the Sales-Out and Royalty Reporting Guidelines) for all three
(3) optional sales-out data fields (i.e., Project Type, Status and Processor)
for all Embedded Licensed Products runtimes distributed during the Period.

         Rebate Amount: up to ____ of the total amount of royalties paid by
         DISTRIBUTOR to MS for Embedded Licensed Products distributed under the
         Agreement during the Period.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Percentage of Embedded Licensed Products runtimes for which       Rebate if achieved
DISTRIBUTOR provided compliant reporting for all three (3)
            optional sales-out data fields
------------------------------------------------------------------------------------
<S>                                                               <C>
------------------------------------------------------------------------------------

------------------------------------------------------------------------------------
</TABLE>

                                       17

                              CONFIDENTIAL<<VERFT>>

Microsoft OEM <<Agr Type>> dated <<Agr Eff Date>> between Microsoft Licensing,
Inc. and <<COMPANY NAME>>.

                                        07/28/00 Form 2.5.<<CurrentTemplateRev>>