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                                                                   EXHIBIT 10.25

                          DISTRIBUTION AND FULFILLMENT
                               SERVICES AGREEMMNT

     This agreement is made and entered into as of this 5th day of February,
1999 (the "Effective Date") by and between Macmillan Distribution, Macmillan
Digital Publishing USA, a division of Pearson p1c., with offices at 201 West
103rd Street, Indianapolis, IN 46290 ("MD") and Sound Source Interactive, a
Delaware corporation with offices at 26115 Mureau Road, Suite B. Calabasas, CA
91302 ("Company").

     WHEREAS, MD is in the business of. among other things, distributing
     software products;

     WHEREAS, Company is in the business of developing and publishing software
products for interactive media and Company desires to grant to MD the right to
distribute its products;

     WHEREAS, MD desires to distribute for Company its Licensed Products.

     NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the receipt and sufficiency of which
          -----
is hereby acknowledged, MD and Company agree as follows:

1.  Certain Definitions.

    1.1  "Licensed Products" means those SKU's of software products described in
         Schedule A
         (as such Schedule A shall be updated from time to time as set forth in
         Paragraph 7 hereof), including related end-user documentation and
         manuals, and such other artwork.. promotional and other materials
         prepared by Company and included in such software products, and
         provided to MD hereunder.

    1.2  "SKU" means a version of a Licensed Product designed for DOS, WINDOWS,
         Macintosh and am, other software or electronic versions (limited to CD-
         ROM, not withstanding MD shall have right of first refusal for DVD ROM)
                                             -----
         of such Licensed Products. including without limitation versions
         designed for set-top boxes and downloadable upgrades.

    1.3  "Gross Revenue" means the actual amount billed by MD when converted
         into U.S. dollars for Licensed Products shipped by MD (exclusive of
         freight, insurance and taxes).

    1.4  "Territory" means North America (including its territories and
         possessions). "Additional Territory" means the world, excluding the
         Territory.

    1.5  "Returns Credit"means the amount credited or refunded by MD when
         converted into U.S. dollars for actual returns of Licensed Product.

   1.6  "Launch" means the sales process and effort associated with the
         distribution of an SKU, within sixty (60) days of a pre-determined
         release date for such SKU.

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    1.7  "All Markets" means the following accounts; Office Superstores,
         Computer Superstores, Mall Electronic Stores, (such as Electronic
         Boutique and Babbages) Bookstores, Electronic Retail Outlets, General
         Merchandise Discounters (such as Wal*Mart, Target etc.) with the
         exception of TJ Max, Ross, Avon and Marshalls, Wholesaler Clubs, (such
         as Costco and Sams Club) Toy Stores, Wholesalers Books, (Such as Inc-
                                                                          ----
         Tam and Baker and Taylor) ) Wholesale Software, (Such as Navarre and
         ---
         Merisel) On-line retailers, (Such as Amazon.com and Shopping.com)
         Software Clubs, (excluding Family Software and Software of the Month
         Club) Book Clubs, Video Clubs and Military Retail Stores

    1.8  "Non-Exclusive Channels" includes the following but is not limited to;
         The direct-to-consumer programs such as direct mail, telemarketing
                                --------
         (such as 800 number sales), in-box coupon fulfillment and infomercials,
         OEM sales, "soft bundles" of the Licensed Products -with non-software
         products designed to generate a secondary market for the Licensed
         Products, and non-traditional channels such as grocery stores.
                                                        -------

    1.9  "Studio Licensor" shall mean a movie studio or other entertainment
         company that has licensed to Company the primary content on which
         certain Licensed Products may be substantially based and, in addition,
         may have granted to Company and its designee the right to use its name.
         logo and trademark in connection with such Licensed Product.

2.  Grant of Rights/Services.

    2.1  Distribution. Company hereby grants to MD the exclusive right to sell,
         -------------                                           -----
         distribute and provide inventory. warehousing and fulfillment sen,1ces
         for Company's Licensed Products, in All Markets in the Territory except
         the Non-Exclusive Channels. The parties acknowledge and agree that the
         Company may from time to time throughout the Term grant to MD: (a) the
         non-exclusive right to distribute and provide inventory, warehousing
         and fulfillment services for any or all of the Licensed Products in the
         Non-Exclusive Channels in the Territory- and (b) the exclusive or non-
         exclusive right to distribute and provide inventory, Warehousing and
                   ------
         fulfillment services for any or all of the Licensed Products, in all or
         certain markets, in the Additional Territory. In addition, the parties
         agree to consult with each other with respect to their solicitation of
         sales in the Non-Exclusive Channels.

    2.2  Trademark License.

         a)   Subject to the terms of this Agreement, Company hereby grants to
              MD the non-exclusive Tight to use the name and logo of Company and
              the applicable trademarks of Company alone or in conjunction with
              MD's name, logo and marks in connection with the distribution of
                         ----
              the Licensed Products. Company shall have prior approval of
              materials incorporating the name, logo or trademark of Company,
              such approval not to be unreasonably withbeld or delayed. A
              failure by Company to respond to MID in writing within five (5)
              business days of Company's receipt of

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              material incorporating its name.. logo or trademark shall
              constitute Company's approval of such material (as pertains to the
              Company only and notwithstanding the applicability of subparagraph
              (b) below) submitted to by MD.

         b)   The parties understand that, in some instances, Company may have
              the right to include in certain marketing, packaging, promotion,
                                              ----------
              advertising, sales and distribution materials the name, logos and
              trademarks of Company's Studio Licensors. In connection therewith.
              Company hereby grants to MD the non-exclusive right to use the
              name and lo2o of such Studio Licensors alone or in conjunction
              with MD's and/or Company's 3-larrie, logo and marks in connection
              with the distribution of Licensed Products. Company shall inform
              MD of its rights With respect to the name, logo and trademarks of
              its Studio Licensors and any requirements pertaining to Studio
              Licensor approval of such materials. In all cases in which MID
              submits such materials to Company for approval, Company will
              inform MD that it has received such materials within twenty-four
              (24) hours of receipt and AU use best efforts to expedite and gain
              such Studio Licensor approval within ten (10) business days of
              company's receipt of materials incorporating licensors name, logo
              or trademark. At a minimum, Company shall respond to MD in writing
              within ten (10) business days of Company's receipt of material
              incorporating third-party names, 1020S or trademarks to advise MID
              of the status of such Studio Licensor approval.


3.   Obligations of MD.

     3.1  Marketing and Promotion. IMD shall use commerically reasonable efforts
          -------------------------
          to actively promote and sell the Licensed Products. MID shall consult
          'With COMPANY on a periodic basis regarding sales and marketing
          opportunities for the Licensed Products, provided that final decisions
          regarding such advertising and promotion practices shall remain at
          MD's discretion. Subject to the prior consent of COMPANY. which shall
          not be unreasonably withheld or delayed, y NO shall in its discretion
          include Licensed Products in NO sales and marketing literature at MD's
          expense.

     3.2  Further, subject to the prior consent of COMPANY, which shall not be
          unreasonably, withheld or delayed, MD shall in its discretion include
          Licensed Products in direct mail materials, retail and consumer
          promotion materials, advertising materials. public relations efforts.
          telemarketing programs and trade shows as MD deems appropriate to
          effectively carry out the terms of this Agreement, and all the costs
          of including Licensed Products in such materials, efforts. programs
          and trade shows shall be borne by COMPANY.

    3.3   Books and Records: Audit Rights. MD shall maintain and retain complete
          and accurate books and records relating to any obligation assumed by
          MD under this Agreement, for a period of not less than two (2) years
          following expiration or termination of this agreement. Company. or its
          designee through the use of a certified public accountant, upon two
          (2) weeks prior notice and during business hours, shall have the right
                                                                           -----
          once a year during the Term of this Agreement and for one (1) year
          following the expiration or termination of this Agreement to inspect
          and examine and make copies of such books, records, and
          correspondence, as Company may deem appropriate to determine the
          accuracy of accountings and reports made pursuant to this Agreement.
          All accountings and reports rendered by NO under this A2reement shall
          be deemed binding on Company unless objected to in writing by
          Company:, within one (1) year of the statement's being rendered.

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     3.4  Solicitation and Shipment of Orders. With respect to MD's distribution
          rights hereunder. NO shall have the sole Tight and obligation to
          solicit orders.. prepare shipping documents, manage transportation of
          the Licensed Products, including shipping copies thereof., receive and
                                           --------
          process returns of the Licensed Products, bill all orders at discounts
          and on such terms as are in accordance with standard MID terms and
          conditions and practice, and collect all invoices.

     3.5  Delivery of Licensed Products. Subject to Section 4.7, Company shall
          -------------------------------
          deliver from time to time copies of the Licensed Products f.o.b. MD's
          warehouse in quantities and on dates mutually agreeable to the parties
          and as necessary for MD to perform properly hereunder. Company shall
          assume all risk of loss or damage to such Licensed Products until
          delivered to and accepted by MD. The freight for shipping copies of
          such Licensed copies to MD's warehouse facility or other designated
          warehouse facilities shall be the responsibility of Company. All
          freight costs associated with the fulfillment of all Licensed Products
          -------
          to retailers and distributors shall be borne by Company. MD shall not
          make any changes or alterations to the Licensed Products delivered to
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          it by Company.

4.   Obligations of Company.

     Company represents to MD that it is or intends to be the developer or
publisher of the Licensed Products. Company acknowledges that MD is assuming no
                                                                    --------
responsibilities for any obligations With respect to the Licensed Products
except such as are expressly set forth in this Agreement. Company, farther
represents. covenants and agrees as follows:

     4.1  Packaging. Company shall be responsible for manufacturing of all
          packaging and associated materials for the Licensed Products.

     4.2  Product and Packaging Design. All Licensed Products will be legibly
          ------------------------------
          marked on the outside as to machine, medium and other operating
          requirements such as memory, and AU be marked clearly either on the
          outside or within the packaging to indicate that Company is solely
          responsible for customer support and for any warranties with respect
          to such Licensed Products. Company shall place on all packaging
          information for the Licensed Products delivered to MD hereunder such
          bar code information, I.S.B.-INT. numbers or other data as MI) has
          requested as desirable to customers of the Licensed Products. In
          addition, Company shall place the following designation on all
          Licensed Products distributed hereunder beginning with The Land Before
          Time Preschool Adventure, that have not been previously distributed
          and on all reprints of existing Licensed Products, in a typeface
                                 --------
          consistent with the other packaging descriptive copy and in no event
          smaller than I 0-point typeface: "Distributed by Macmillan
          Distribution".

     4.3  Product Maintenance. Company will inform MD Promptly of any known
          --------------------
          defects or operational errors in the Licensed Products. If such
          material defects or operational errors result in a substantial
          reworking of MD's existing inventory, Company shall bear the
          reasonable labor and material costs for such handling at a cost to be
          mutually agreed upon by the parties.

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     4.4  Product Changes. Company shall use it best efforts to give MD a
          -----------------
          minimum of forty five (45) days prior written notice of any changes in
          the Licensed Products, including, without limitation, any decision to
          discontinue or materially enhance any Licensed Product.

     4.5  Technical Support . Company shall be solely responsible for 0 customer
          ------------------
          and technical support in connection with the Licensed Products
          ("Technical Support Services"). Company shall provide Technical
          Support Services at least as comprehensive as that which Company
          customarily provides for other software products made by it. Such
          Technical Support Services provided by Company shall include. at a
          minimum. making available a representative of Company or of the
          Licensed Product's developer to answer questions regarding the
                                                           ----------
          Licensed Product during normal business hours.

    4.6   Marketing Support. Company hereby agrees to all standard CO-OP
          ------------------
          Practices of accounts covered by this agreement as outlined in
          Schedule E. Company will also provide MD with reasonable cooperation
          and support in MD's efforts hereunder, including without limitation
          setting up an adequate pool of funds to ensure that it can accommodate
          --------
          cooperative advertising and other promotional expenses to support the
          Licensed Products. 'N[D agrees to discuss and obtain approval of all
          marketing co-op initiatives above and beyond Schedule with the Vice
          President of Sales of Company, or any other individual designated by
          the Chief Executive Officer of Company.

    4.7   Purchase Orders. Company shall be solely responsible for maintaining
          ----------------
          inventory levels and shall use reasonable best efforts to maintain
          inventory levels of the Licensed Products at the MD warehouse (or that
          of its designee) sufficient to process Company's purchase orders for
          the Licensed Products within three (3) working days of receipt of the
          order.

    4.8   Insurance. During the Term of this Agreement, each party shall at all
          ----------
          times maintain at its own cost the following minimum insurance
          coverage in a form reasonably acceptable to the other and, upon the
          request of the other, shall furnish certificates evidencing such
          insurance: (i) comprehensive general liability insurance with a
          combined single limit of at least One-Half Million Dollars (S500,000):
          and (Iii) any other insurance coverage which the parties consider
          necessary, or appropriate under the circumstances in the event there
          are claims against any existing insurance policy with respect to the
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          Licensed Products.

    4.9   Distribution Outside of this Agreement. Company shall have full
          ---------------------------------------
          responsibility for all aspects of its products distributed by anyone
          other than MD (whether prior to or as expressly permitted by this
          Agreement). Such responsibility shall include, without limitation, the
          financial and administrative burden of distribution and return of such
          product. 'Without limiting the foregoing, Company agrees that, upon
          execution of this Agreement it will provide MD with a best-estimate of
          the inventory of the Licensed Products in wholesale and retail
          accounts or otherwise f manufactured but not sold. In addition,
          Company shall notify all resellers that NO shall be its authorized
          distributor

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<PAGE>

          as set forth in this Agreement, and shall designate itself or another
          entity responsible for all product distributed prior to the Effective
          Date of this Agreement or outside of this Agreement and make all other
          reasonable efforts necessary to ensure that distribution/ return of
          such products does not impair or conflict in any way with the rights
          granted to MD hereunder.

5.   Damaged Products; Returns; Inventory.

     5.1  Damaged Products. Copies of the Licensed Products in MD's inventory
          -----------------
          which are not in salable condition (as determined by MD in accordance
          with its standard terms and conditions and practice) shall.. at
          Company's election to be exercised within thirty (30) days of MD's
          request thereof, be returned to Company at Company's cost and expense
          (and pursuant to its shipping instructions), sold as damaged
          merchandise by Company7 . or destroyed at Company's sole cost and
          expense. Company shall be entitled to physically inspect the Licensed
          Products within the thirty (30) day period prior to making such
          election. Upon the failure of Company to provide instructions to MD
          within thirty (30) days following receipt of MD's notIce,N4D shall
          return such inventory to Company at Company's sole cost and expense.
          NO shall follow the same policies and practices regarding returned
          and/or dama2ed Licensed Products as it does for its own products
          and/or its other distributed lines. The distribution fees payable by
          Company to NO on any sale of the Licensed Products as damaged
          merchandise hereunder shall be based upon the mutual agreement of the
          parties, and any proceeds of such sale shall be paid to Company in
          accordance with the terms hereof.

     5.2  Returns. MD shall send a \written notification (email, fax) to the
          --------
          designated Company representative of MD's acceptance of any one single
          return in excess of two hundred and fifty, (250) units of Licensed
          product. This notification shall be sent to NO within three (3)
          business days of acceptance of an RA from one of MD's customers.
          Company \),ill make its best effort to respond to that request (email
          fax) within three (3) business days. MD reserves the right to
                                                               ------
          process a return in the event that the Company does not respond within
          the period of time set forth in this agreement [three (3) business
          days). Company shall pay the cost of freight on all returns of
          Licensed Products if freight would not otherwise be paid by the party
          returning such Licensed Products. Company shall be solely responsible
          for all deductions for returns taken by customers of the Licensed
          Products and for resolving any disputes regarding such returns. MD
          shall not be responsible for resolving any disputes regarding any
          returns taken by customers.

     5.3  Inventory  The inventory of Licensed Products and materials supplied
          ---------
          by Company shall belong exclusively to Company. Company may remove
          such inventory of Licensed Products from MD's warehouse at its 0,Am
          expense and as it sees fit, subject to Company's obligations under
          this Agreement. Except for copies of the Licensed Products received by
          NO in damaged or otherwise non salable condition, MD shall assume all
          risk of loss or damage, up to the per unit manufacturing cost, for all
                          -------
          copies of the Licensed Products in its custody and

                                       6
<PAGE>

          control, provided that MD shall not be responsible for (i) any
          Licensed Products returned in a hurt condition, or (ii) inventory
          shrinkage that does not exceed 1.5% of the units inventoried
          (including returns in inventory), it being understood that MD shall
                                               -----
          perform a physical inventor), of the Licensed Products in its
          %warehouse at the end of the initial Term of this Agreement and
          annually thereafter for so long as this Agreement remains in effect in
          order to determine the level of inventory shrinkage.

6.   Payment.

     6.1  Compensation- In consideration for the performance of the
          -------------
          distribution, services performed by MD hereunder. ' D shall be
          ~A7ajehousina and fulfillment s . MD entitled monthly to a
          Distribution Fee (as defined in Schedule C hereto) and to a
          warehousing fee ("Warehousing- Fee"), which Warehousing Fee shall be
          equal to the sum of twenty-five cents ($.25) per unit of Licensed
                                                ------
          Product shipped by MD or its agents during such month plus forty cents
                                       ------
          ($.40) per unit of Licensed Product returned during such month. At the
          time specified in Paragraph 6.2 below, MD shall pay Company a Monthly
          Payment, which shall be an amount equal to Gross Revenue less: (i) the
          Distribution Fee, (ii) the Warehousing Fee, and (iii) the Authorized
          Deductions (as defined in Schedule C hereto). Cancellations of orders
          are not subject to Distribution or Warehousing Fee's. Drop Shipments
          direct to MD customers that do not enter MD's warehouse are not
          subject to Warehousing Fees.

     6.2  Payment/Statements. 'Within seven (7) business days of the end of each
          ------------------
          month. shall issue to Company a report of Gross Revenue for the
          Licensed Products. In addition. within fifteen (15) business days of
          the end of each month, MD shall issue to Company a statement of Gross
          Revenues for the Licensed Products for such month, as -well as an),
          other charges or payments due under this Agreement, substantially in
          the form of Schedule B hereto. The statement shall include the number
          of copies of each of the Licensed Products shipped during the month,
          the number of actual returns during the month, the amount of the
          reserve for returns, the manner in which past reserves have been
          applied, and an itemized listing of any other charges and fees charged
          to Company pursuant to the terms hereof in connection with such
          shipments.

          Within sixty (60) business days after it renders such statement, MD
          shall pay to Company the amounts set forth in Paragraph 6.1 above by
          issuing a check to Company or, to the extent commercially feasible, by
          directly depositing such amount in Company's bank account, as
          specified by Company in writing in advance. In the event that the
          Distribution Fee, the Warehousing Fee and/or the Authorized Deductions
          in any given month exceed the Monthly Payment for such month, MD shall
          issue an invoice to Company-for the-amount of such excess within
          fifteen (15) business days of the end of such month, which invoice
          shall be payable within sixty (60) days of receipt of such invoice by
          Company and shall be payable by issuing a check to MD or, to the
          extent commercially feasible, by directly depositing such amount in
          MD's bank account, as specified by MD in writing in advance.

                                       7
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     6.3  Return Reserve. MD shall maintain a reserve against customer returns
          ---------------
          ("Return Reserve") equal to the amount set forth on Schedule C. MD
          shall perform periodic return reserve reconciliation reports in order
          to maintain the proper reserve balance, as determined in consultation
          with Company. MD shall refund any return reserve overages in a timely
          and appropriate manner, as is mutually agreed by the parties. In
          addition, three (3) months after expiration or termination of this
          Agreement (except as otherwise provided in Paragraph 9.3), MD shall
          refund any balance remaining in this reserve unless MD is made aware
          of upcoming returns that would be in excess of the return reserve
          balance, in which case MI) w0tld retain the reserve in order to cover
          the cost of such returns. MD reserves the right upon approval from
          Company (which will not be unreasonably withheld or delayed) to retain
          a return reserve greater than the amount set forth on Schedule C in
                           --------
          such case that MD is made aware of upcoming returns that would be in
          excess of the return reserve balance.

     6.4  Demonstration./Promotional Copies.  No payments shall be owing to
          ----------------------------------
          Company, nor shall MD be entitled to a Distribution Fee, in connection
          with Products furnished on a so-called "no charge" basis (not to
          exceed 500 units per sku without written consent of Company) to
          distributors, sub-distributors, dealers and others for demonstration
          and promotion purposes. Any Licensed Products furnished for
          demonstration and promotion purposes shall be done so in a reasonable
          and customary manner and only to promote Company products.

     6.5  Price Protection/Stock Balancing. If MD decides to issue price
          ---------------------------------
          protection credits (all price protection/stock-balancing actions must
          meet with prior COMPANY approval which shall not be unreasonably
          withheld or delayed), the credits to be reimbursed shall be based on-
          the difference-between the new price and the former price for the
          portion of units distributed by MD which remain as unsold inventory of
          MD's customers on the effective date of the price protection/stock
          balancing action.

          In connection with granting such price protection credits to its
          customers, MD shall (i) give a good faith estimate of the inventory of
          its customers (based upon documentation supplied by such customers)
          and base its refund or credit on such estimate, and (~) update such
          estimate on a periodic basis as it receives information from its
          customers and (iii) process claims for price protection at any time
          subsequent to a price protection/stock balancing action. MD shall make
          reasonable efforts minimize the impact of such price protection
          credits.

7.   Future Licensed Products.

     Company shall grant to MD, as set forth in Paragraph 2.1 hereof, the right
to distribute any and all other SKU products that Company develops. publishes or
for which Company gains distribution Tights (whether due to expiration of a
                                     ------
previous grant of distribution rights or otherwise) throughout the Term of this
         -----
Agreement unless either (1) its contractual obligations as of the Effective Date
do not so permit, (ii) such product is developed jointly with or under license
to or with a Studio Licensor or another party that provides distribution
services itself (which in no event shall be more than four (4) products per
year), Or (iii) the parties otherwise agree in writing not to include such
product as a Licensed Product hereunder. Schedule A shall be amended to include
all such additional products as Licensed Products hereunder, and MD's
distribution of such new Licensed Products shall be governed by the terms of
this Agreement. In

                                       8
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addition, Company shall inform '.MD of those products that fall within the
exceptions (i) - (iii) above and which, according]y, shall not be Licensed
Products hereunder.

8.   Product Returns.

     8.1  Defective Product. Company will inform MD and MD will inform Company
          -------------------
          promptly of any known defects or errors in the Licensed Products.
          Company. at its option, will repair or replace, at no charge to MD,
                                                                ------
          all Licensed Products that are considered to be materially defective
          or to contain material errors in the reasonable discretion of Company,
          MD and MD's distributors and dealers. For purposes of this Agreement
          material software defects and errors shall include, but not be limited
          to: Licensed Products, when properly used in accordance with Company's
          documentation, that do not operate in substantial conformity with the
          description of the Licensed Products set forth in the documentation
          accompanying the Licensed Products; Licensed Products, packaging or
          accompanying documentation destroyed during shipment and defective
          stickering during retail. Company will pay any and all out-of-pocket
          expenses associated with correcting the material defects or error,
          including the cost of delivering modified product, plus a reasonable
          handling fee for such labor as may be necessary to process and handle
          such defects; provided, however, that respect to Licensed Product,
          packaging or documentation destroyed during shipment, Company's
          ---------
          payment obligations as set forth in this Paragraph 8.1 shall be offset
          by the amount of payment or other compensation received by MD, if any,
          from any shippers or their insurers with respect to such damaged
          Licensed Products.

          If Company refuses to make necessary corrections, then, without
          limiting and remedies of MD or obligations of Company hereunder, MD
          shall have the right to withdraw the specific Licensed Products from
          sale and Company shall reimburse MD for any actual and direct costs
          associated with such withdrawal.

9.   Term and Termination.

     9.1  Term. The term (the "Term") of this Agreement shall commence on the
          -----
          Effective Date and shall continue until January 31, 2001. Thereafter,
          this Agreement shall be renewable only upon mutual --A7irten consent
          of both parties.

     9.2  Termination.
          ------------

          (a)  Termination Without Cause. Either part), may terminate this
               --------------------------
               Agreement without cause upon ninety (90) days prior written
               notice to the other party.

          (b)  Termination With Cause. Upon breach of a material obligation
               hereunder by either party, the other part), may make written
               notice of such material breach. If, after fifteen (15) days from
               notice of such breach, the party in breach has failed to cure
               such breach, the party having given notice may terminate the
               Agreement.

          (c)  In addition, either part), may, at its option, immediately
               terminate this Agreement without liability -upon occurrence of
               any of the following events: if the other party has a receiver
               appointed for it or its property: becomes insolvent

                                       9
<PAGE>

               or unable to pay its debts as they mature, or makes an assignment
               for the benefit of its creditors; seeks relief or if proceedings
               are commenced against MD or on its behalf under an), bankruptcy,
               insolvency or debtor's relief law, and such proceedings have not
               been vacated or set aside within sixty (60) days from the date of
               commencement thereof, or is liquidated or dissolved.

     9.3  Effect of Termination. The following provisions shall be in effect
          ----------------------
          upon the effective date of the termination of expiration of this
          Agreement:

          (a)  MD shall discontinue distribution of the Licensed Products.

          (b)  As soon as feasible after the effective date of termination or
               expiration of this Agreement. MD will cease the use of any forms.
               Promotional materials, or advertising referring to any titles of
               the Licensed Products or to Company or any of its trademarks and
               service marks.

          (c)  MD shall immediately f6m,ard to Company any and all unfilled
               orders for the Licensed Products then in hand.

          (d)  Company shall be free to sell the Licensed Products to customers
               by any means and by its own personnel or through any other
               distributor.

          (e)  Each party's obligation to pay the other party for any amounts
               which have become due shall continue.

          (f)  For a period of two (2) months after expiration or termination of
               this Agreement (the "Returns Processing, Grace Period"), MD shall
               continue to receive and process returns, to render receiving
               reports and credits in accordance with its usual practices and to
               render required statements and reports. After the end of the
               Returns Processing Grace Period, MD shall have no responsibility
               for processing returns. At that time Company shall be responsible
               for processing all returns and shall reimburse customers of the
               Licensed Products for all such returns.

          (g)  Upon expiration of this Agreement. MD may withhold amounts
               otherwise due under this Agreement until the final accounting
               settlement, ,which shall be rendered one (1) month after the end
               of the Returns Processing Grace Period: provided, however, that
               MD shall continue 10 Tender Its month.]y statements to Company
               during, the period from expiration through the end of returns
               processing.

          (h)  In the event of termination of this Agreement by MD due to
               material breach by Company, MD will withhold amounts otherwise
               due under this Agreement upon notice of termination until the
               final accounting settlement, which shall be issued three (3)
               months after the end of the Returns Processing Grace Period.

          (i)  In the event of termination by Company due to material breach by
               MD, MD shall not be entitled to withhold amounts otherwise due
               hereunder and shall continue to render statements and
               accountings, along with payments to Company. for all sales and
               support activity through the month of termination, with the final
               accounting settlement to be issued one (1) month after the end of
               the Returns Processing Grace Period.

                                       10
<PAGE>

          (j)  If Company contracts with a new distributor who will begin
               accepting returns immediately after the effective date of
               expiration or termination, MD shall not withhold monies under
               subparagraphs (g) and (h) above. In such event, MD shall continue
               to issue accountings and payments due in accordance with the
               terms of this Agreement for all sales and support activity
               through the month of expiration or termination, with a final
               accounting- to be issued three (3) months after the end of the
               Returns Processing Grace Period.

          (k)  During the last month of the term of this Agreement, Company
               shall instruct MD in writing as to the disposition of inventory
               (including inventory received during the Returns Processing Grace
               Period), and shall pay any crating or shipping expenses attendant
               thereto at MD's cost. MD shall receive full credit in accordance
               with Company's written instructions. Upon the failure of Company
               to provide such instructions, MD shall return such inventory to
               Company at Company's sole cost and expense. In the event Company
               fails to accept such returns or to pay for such returns and/or
               the inventory is returned to MD, MD may destroy such inventory
               without liability. provided that no such destruction shall take
               place sooner than thirty (30) days following the mailing of a
               request, by certified or other receipted form of mail delivery,
               advising Company of MD's intention to destroy a stated number of
               copies absent written instructions from Company to the contrary.

10.  Warranties and Indemnification.

     10.1 Company Warranties. Company represents and warrants that:

          (a)  it has all necessary rights and authority to execute and deliver
               this Agreement and perform its obligations hereunder. and to
               grant to MD all rights purported to be granted herein and nothing
               contained in this Agreement or in the performance of this
               Agreement will place Company, in breach of any other contract or
               obligation;

          (b)  the Licensed Products and all other materials delivered to MD
               hereunder are and will be original to Company, except for (i)
               material in the public domain or (ii) material as in which
               permission has been obtained from the proprietary Tights owner
               for Company to grant rights to MD hereunder and for MD to perform
               to the full extent contemplated by this Agreement;

          (c)  it has not granted and will not grant any Tight in the Licensed
               Products to any third party which are inconsistent with the
               rights granted to MD in this Agreement.

          (d)  the Licensed Products and all other materials delivered to MD
               hereunder, the audiovisual aspects of the Licensed Products and
               any Company trademarks licensed to MD hereunder do not (i) invade
               the right of privacy of any third person; (ii) contain any
               libelous, obscene or otherwise unlawful material: (iii) infringe
               an), patent, (iv) infringe any statutory or common law copyright
               or (v) otherwise contravene any rights of any third

                                       11
<PAGE>

               person the Licensed Products do not contain ' any virus, Trojan
               horse, worm or other software routine or hardware component
               designed to permit unauthorized access, to disable, erase or
               otherwise harm software, hardware or data, or to perform any
               other such actions; and

          (e)  the Licensed Products shall be Year 2000 Compliant. "Year 2000
               Compliant" shall mean that the Licensed Products shall not
               experience any abnormality. malfunction or degradation in their
               operation simply as a result of changing date values in
                                               --------
               connection With moving from the 20th to the 21st Century.

     10.2  MD Warranties. MD represents and warrants that:
           --------------

           (a)  it has all necessary rights and authority to execute and deliver
                thisAgreement and perform its obligations hereunder;

           (b)  it shall not reverse engineer, reverse compile, or other-wise
                disassemble the software relating to the Licensed Products; and

           (c)  it shall not sell, use, reveal, disclose or distribute the
                Licensed Products: or any component thereof, to any person.
                company or institution other than for the purposes set forth in
                this Agreement.

     10.3  Company Indemnification. Company shall indemnify and hold MD and any
           -------------------------
           purchaser of the Licensed Products from MD harmless against any loss,
                                                               -------
           liability, damage. cost or expense (including without limitation fees
                      -------
           and disbursements of counsel incurred by MD in any action or
           proceeding between Company and MID or between 'MD and any third
           party), judgments and other expenses arising out of any breach Or
           alleged breach by Company of this Agreement or an), covenant,
           representation or warrant), made by it herein, or otherwise arising
           out of the content of an), materials provided or prepared by Company
           with respect to the Licensed Products. MD shall be entitled to assume
           and control the defense and settlement of any such claim, and Company
           shall Provide reasonable cooperation and assistance in defending
           against any such claim. In addition to, and not in limitation of any
           other rights of MD. Company shall bear all costs and expenses
           incurred by MD as a result of the recall of an), Licensed Product
           necessitated by any breach or alleged breach of this Agreement or any
           covenant, representation or Warranty made by Company herein. Company
           shall consult in good faith with MD regarding the necessity for
           recalling any Licensed Product or providing substitute or
           supplemental materials prior to instituting such a recall,
           substitution or supplementation. MD shall have the right, in its sole
           discretion, to demand immediate reimbursement of all costs and
           expenses of any such actions or to charge them against Company's
           account.

     10.4  MD Indemnification. MD agrees to indemnify, hold harmless and defend
           --------------------
           Company against any loss, liability, damage, cost or expense
           (including without limitation fees and disbursements of counsel
           incurred by Company in any action or proceeding between Company and
           MD or between Company and any third party), judgments and other
           expenses relating to or arising out of any breach or alleged breach
                                                                -------
           by MD of this Agreement or any covenant, representation or warranty
           made by it herein. MD shall be entitled to assume and control the
           defense and settlement of any such claim. MD's obligation to
           indemnify is conditioned on Company notifying MD promptly of any
           claim as to

                                       12
<PAGE>

           which indemnification will be sought. The par-ties agree to provide
           each other with reasonable cooperation in the defense and settlement
           of any such claim.

11.  Confidentiality.

     Each party agrees to treat the terms and conditions of this Agreement as
confidential information. In addition, each party ("Recipient") acknowledges
that, pursuant to the terms of this Agreement, it will come into possession of
certain financial information and records relating to the business of the other
party ("Disclosure"). Recipient agrees that any such information shall be
                                -------
treated as the confidential property of Discloser. Recipient agrees that it
shall take every reasonable precaution to safeguard the confidentiality of such
information with the same degree of care that it so exercises to protect the
confidentiality of its own proprietary information. Except as necessary to carry
out or enforce the terms of this Agreement, such confidential information shall
not be disclosed to others. Financial information provided or approved by
Discloser for distribution without restriction to third parties, information
already in Recipient's possession or in the public domain, or information
received by Recipient from third parties whether authorized or not to divulge
same, shall not be subject to this prohibition. Further. to the extent Recipient
is lawfully required to disclose such confidential information in the context of
any administrative or judicial proceeding, Recipient shall provide to Discloser
prior written notice of such required disclosure and an opportunity to oppose or
limit such disclosure.

12.  Use of Trademarks; Tradenames; and Copyrights

     12.1  Use by MD. MD hereby recognizes and concedes for all purposes that
           ----------
           any copyrights, trademarks, trade names, or identifying slogans
           affixed to, relating to, or contained in the Licensed Products as
           prepared pursuant to the terms of this Agreement, or any accompanying
           labels, containers and cartons, whether or not registered, constitute
           the exclusive property of Company or its licensors'. MD agrees that
           it shall only use, make reference to, or otherwise designate, either
           orally or in writing, Company's trademarks or its licensors'
           trademarks in the distribution of he Licensed Products, and shall not
           transfer such right to use, reference, and designate such trademarks
           to any other party. Upon termination of this Agreement in any manner
           provided herein, MD will cease and desist from using all Company
           copyrights, trademarks, trade names, or identifying slogans, and
           furthermore, MD will at no time adopt for use, without Company's
           prior written consent any word or mark which is similar to or likely
           to be confused with said identifying marks.

     12.2  Ownership by Company. MD shall not obtain or try to obtain for itself
           ---------------------
           anywhere in the world, any trademarks, trade names, copyrights or
           patents associated with the Licensed Products. MD acknowledges and
           agrees all such items are the exclusive property of Company or its
           licensors and agrees to immediately notify Company in writing of any
           actual or suspected infringement. MD acknowledges that all rights
                                                                      ------
           (including good Ail]) in Company's trademarks vest in Company and MD
           shall, if and when requested by Company, enter into a "user
           agreement" in the form reasonably required by Company without cost or
           charge to MD. MD agrees not to use any of Company's trademarks as any
           part of the name under which conducts its business; provided,
           however, that MD may refer to itself as an authorized distributor of
           The Licensed Products. MD agrees that it has or will acquire no right
                                                                           -----
           in Company's

                                       13
<PAGE>

           trademarks by virtue of its performance under this Agreement except
           for the limited rights of use as provided by this Agreement, and MD
                           ------
           acknowledges and agrees that it has no rip-ht to and shall not use.
           except as provided by this Agreement, any trademark consisting of or
           including Words, signs, color combinations, or other distinctive
           features identical with or similar to those used, applied for or
           registered by Company.

13.  General.

     13.1  Exclusion of Certain Damages. EXCEPT TO THE EXTENT OF ANY
           -----------------------------
           INDEMNIFICATION OBLIGATION FOR THIRD PARTY CLAIMS UNDER SECTIONS 10-
           3).AND 10.4, NEITHER PARTY SHALLUTINTIDER ANY CIRCUMSTANCES BE LIABLE
           TO THE OTHER PARTY FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
           PUNITIVE DAMAGES OR LOST OR IMPUTED PROFITS OR ROYALTIES ARISING OUT
           OF THIS AGREEMENT OR ITS TERMINATION, WHETHER FOR BREACH OF WARRANT
           OR.ANY OBLIGATION ARISING THEREFROM OR OTHERWISE, WHETHER LIABILITY
           IS ASSERTED IN CONTRACT OR TORT (INCLUDING NEGLIGENCE AND STRICT
           PRODUCT LIABILITY) AND IRRESPECTIVE OF WHETHER THE PARTY HAS BEEN
           ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE. EACH PARTY
           HEREBY WAIVES ANY CLAI.MS THAT THESE EXCLUSIONS DEPRIVE SUCH PARTY OF
           ANT ADEQUATE REMEDY.

     13.2  Notices. All notices or requests, including communications and
           --------
           statements which are required or permitted under he rems of this
           Agreement, shall be in writing and shall be sent by telex or
           facsimile, or sent by recognized commercial overnight courier, or
           mailed by United States registered or certified mail.

           Notices shall be effective upon receipt. Notices shall be sent to the
           parties at the following addresses:

           For MD:
                    Macmillan Distribution
                    Macmillan Publishing
                    201 West 1 03rd Street
                    Indianapolis, IN 46290
                    Attention: Doug Mills
                    FAX 4: (3 17) 5 81-4 92 0

           With a copy of notices to:

                    Legal Department
                    1633 Broadway
                    NewYork, NY 10019
                    Attention: General Counsel
                    FAX :~: (212) 654-7535

                                       14
<PAGE>

     For Company:

                    Sound Source Interactive
                    26115 Mureau Road, Suite B
                    Calabasas, CA 91302
                    Attn: Vincent Bitetti
                    FA.X4: (818) 878-0007

     13.3  Governing Law. THE VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION OF
           --------------
           ITS TERMS AND THE ENITERPRETATION OF THE RIGHTS AND DUTIES OF THE
           PARTIES HERETO SHALL BE GOVERNED BY.,VMD CONSTRUED EN' ACCORDANCE
           WITH THE SUBSTANTIVE LAWS OF THE STATE OFNEW YORK, NOTW~JTHSTANDING
           THE APPLICATION OF ANY CHOICE OF LAW OR RULE TO THE CONTRARY. THE
           PARTIES AGREE TO SUBMIT TO THE EXCLUSIVE JUPJSDICTION OVER ALL
           DISPUTES HER.EU`.NDER IN THE FEDERAL AND STATE COURTS IN THE STATE OF
           NEW YORK LOCATED IN' NEW YORK COUNTY.

     13.4  Force Maieure. Neither party will be deemed in default of this
                 --------
           Agreement to the extent that performance of prevented by reason of
           any act of God, fire, natural disaster, accident, act of government,
           shortages of material or supplies or any other cause beyond the
           control of such party; provided that the party interfered gives the
                                                                     -----
           other written notice thereof within ten (10) working days of any such
           event or occurrence. In the event of such a Force Mailer, the time
           for performance or cure will be extended for a period equal to the
           duration of the Force Maieure, but not in excess of six (6) months.

     13.5  Captions. All indices, titles, subject headings, section titles and
           ----------
           similar items contained in this Agreement are provided for the
           purpose of reference and convenience only and are not intended to be
           inclusive, definitive or to affect the meaning, content or scope of
           this Agreement.

     13.6  Amendment. No amendment or modification of this agreement will be
           made except by an instrument in writing signed by both parties. of
           either party hereto to prosecute its right with respect to any single
           or continuing breach of this Agreement act as a waiver of the right
           of that party to later exercise any right or remedy granted hereunder
           with respect to that same or any other breach of this Agreement by
           the other party hereto.

     13.7  Relationship. The relationship between MD and Company with respect to
           --------------
           all matters relating to this Agreement, will be that of independent
           contractors. Each party agrees that under no circumstances is it an
                                   ------
           agent, partner, franchisor/franchisee or joint venturer of the other,
           and neither parry has or owes the other an), special or fiduciary
           responsibility. Each part), acknowledges that it is not relying on
           the other for legal advice of any kind and has had the opportunity to
           review this Agreement with legal counsel of its own choosing.

                                       15
<PAGE>

     13.8  Severability. If any provision of this Agreement is found invalid or
           --------------
           unenforceable pursuant to judicial decree, such provision shall be
           enforced to the maximum ex-tent permissible and the remainder of This
           Agreement shall remain in full force and effect according to its
           terms.

     13.9  Binding Agreement./Assignment. The parties intend to be bound only
           -------------------------------
           upon full execution of a written agreement and no negotiation,
           exchange of draft or partial performance shall be deemed to imp]y an
           agreement. This Agreement, upon execution by both parties, will be
           binding upon the parties hereto. This Agreement shall not be assigned
           by either party, nor its rights or obligations hereunder assigned or
           delegated, without the prior written consent of the other.
           Notwithstanding the provisions of the preceding sentence. MD may
           assign its rights or delegate its obligations under this Agreement
                      ------    --------
           without the consent of Company to any affiliated entity or to its
           successor or the transferee(s) of all or substantially all of its
           stock or all or substantially all of its business assets by reason of
           merger. consolidation or sales or exchange of assets or other
           -------                           --------
           corporate reorganization.

     13.10 Absence of Limitations. Nothing in this Agreement shall limit in any
                   ---------------
           way MD's right to undertake and carry out is development, publishing,
                    -----
           distribution and/or marketing of its own or other party's software
           products regardless of content or target market, including but not
           limited to products that may be competitive With the Licensed
           Products.

     13.11 Entire Agreement. This Agreement and the Schedules hereto (Which are
                  ----------
           incorporated herein by this reference) constitute the entire
           agreement between the parties and supersede all prior negotiations,
           understandings, correspondence and agreements with respect to the
           same subject matter.

     13.12 Survival. The pro-6sions of Sections 9.3, 10, 11, 12 and 13 shall
           ---------
           survive termination or expiration of this agreement.


Sound Source Interactive                   Macmillan Distribution

By: _________________________________      By: _________________________________

Title: ______________________________      Title: ______________________________

Date:  ______________________________      Date:  ______________________________

                                       16
<PAGE>

                                   SCHEDULE A

                               LICENSED PRODUCTS

[To Be Inserted]

                                       17
<PAGE>

                                   SCHEDULE B

                               STATEMENT TEMPLATE

[To Be Inserted)

                                       18
<PAGE>

                                   SCHEDULE C

                         CERTAIN PAYMENT TERMS DEFINED

Distribution Fee: an amount equal to (i) twelve percent (12%) of Gross Revenue
-------------
for the Licensed Products for the month, (representing a 6% distribution fee and
a 6% affiliate management fee) less (ii) eight percent (8%) of the Returns
                                         ------
Credit for the Licensed Products for such month (the "Distribution Returns
Credit").

Authorized Deductions:
----------------------

       i.  the reserve for anticipated returns as provided for in Paragraph 6.3,
           against which actual returns shall be applied;

      ii.  the price protection or stock balancing credit described in Paragraph
           6.5. if any, for credits granted in the preceding month;

     iii.  the amount of costs associated with inventory and fulfillment, as set
           forth in Paragraph 6. 1;

      iv.  an amount equal to actual bad-debt write-offs taken by MD for sales
           of Licensed Product in the preceding months; and

       v.  the amount of any other deduction approved by Company (such as
           promotional expenses or cooperative expenses set forth in Paragraph
           4.6) that the parties have agreed shall be paid for or Credited by
                                      ------
           Company which approved deduction shall be taken by MD in the month in
           which such expenses are actually paid by MD or otherwise credited to
           customers.

Return Reserve: Seventeen and one half percent (17.5%) of Gross Revenues.
--------------

                                       19
<PAGE>

                                   SCHEDULE D

MACMILLAN DISTRIBUTION

1998 TERMS AND CONDITIONS
Distributor Program

Payment Terms:        Net 60 days from invoice date.

Distribution Rights:  North America only. The Company Vice President of Sales
                      must approve distribution beyond these areas, in writing.

Minimum Order:        (1) case-pack

Discounts:            MACMILLAN DISTRIBUTION reserves the right to decide, in
                      its sole discretion, at any time, which distributors it
                      shall sell its products through and whether any entity
                      qualifies or continues to qualify as a distributor. Two
                      additional discounts will be offered to distributors in
                      exchange for specific services listed below:

A.  Distributor services discount of 3% off net software purchases (net software
    -----------------------------------
        purchases are defined as: purchases less returns). This discount is
        identified on each invoice and reflects the distributor services
        including, one or more of, but not limited to, the following:

                      [_]   Advertising co-op assistance
                      [_]   Electronic ordering (EDI)
                      [_]   Mix assistance
                      [_]   Pre-ticketing
                      [_]   Plan-o-gramming
                      [_]   Shipping and/or storage charges

             To receive this discount, distributor must provide MACMILLAN
        DISTRIBUTION with the following reports on a monthly basis within 10
        business days from the close of each month:

                      [_]   Inventory report with net sales by sku

                      [_]   Net sales report by customer and by sku

                                       20
<PAGE>

     If the distributor fails to provide these reports within the required time,
MACMILLAN DISTRIBUTION at its sole discretion can chargeback the distributor the
total discount dollar amount given for that period.

     B.   Racking Services discount of 6% off net software purchases (net
          -------------------------------
          software purchases are defined as: purchases less returns), will only
          be credited to distributors for sales to those retail accounts-to
          which-distributor provides full racking services.

          To receive credit for the racking service, the distributor must supply
          MACMILLAN DISTRIBUTION with a written request for each account (and
          all included products) that they are providing racking services to.
          MACMILLAN DISTRIBUTION reserves the right to require proof of
          performance for all racking claims. Credit for all racking claims will
          be issued within 30 days following the close of the month provided
          that MACMILLAN DISTRIBUTION receives the monthly reports outlined in
          paragraph "A" of the section entitled "Discounts" above. Credits are
          based on monthly net units to customers for which racking services
          were provided, reflected on the monthly reports, calculated at the
          distributor's net cost. THERE WILL BE NO DEDUCTIONS FROM INVOICE FOR
          RACKING DISCOUNTS.

     Please note, MACMILLAN DISTRIBUTION defines racking as monthly, in-store
personnel providing physical inventory management of MACMILLAN D7STRIBUTTGN
skus.

Freight Policy:      F.O.B. destination via surface carrier,- retailer can
                     upgrade freight at their expense.

Defective Returns:   Please follow the procedure listed below:

     .    100% with MD approval.
     .    Freight F.O.B. origin.
     .    Returns must be received within 60 days of RA authorization.

Non-Defective Returns:

     .    1 for 1 stock balancing with MD approval.
     .    Order must be received within 30 days of RA approval.
     .    Freight F.O.B. Destination.
     .    Return must be received within 60 days of RA authorization.

Price Changes:

     .    There will be a 30-day written notice of the pending price change.

     .    Return requests must be in writing and should be faxed to MACMILLAN
          DISTRIBUTION, Attn: David Ellis at (317) 8177287.

     .    Upon review and approval, an RA form will be sent to you. No
          deductions are allowed against open invoices or from invoice payments.
          Use the RA form we provide and return to the MACMILLAN DISTRIBUTION
          designated warehouse: MACMILLAN DISTRIBUTION, c/o Macmillan Returns
          Department, 135 South Mt. Zion Road, Lebanon IN 46052.

                                       21
<PAGE>

     .    Returns must be received within 60 days of R.A authorization.

     .    Freight for returns must be prepaid.

     .    Unauthorized returns will be refused. Returns of non-MACMILLAN
          DISTRIBUTION product will be refused. Returns sent freight collect
          will be refused.

Price Changes: MACMILLAN DISTRIBUTION reserves the right to change the price it
               charges its customers for any product (sku). UPON WRITTEN
               NOTIFICATION OF A PRICE CHANGE THAT IS A REDUCTION, MACMILLAN
               DISTRIBUTION will provide price protection for existing
               inventories at each retailer (in-store and warehouse inventory).
               All requests for price protection must be received within 90 days
               from the written notification date with appropriate proof of
               inventory. Proof of inventory will be a report generated by the
               customer that reflects their current inventory position at the
               time the request is made. MACMILLAN DISTRIBUTION reserves the
               right, at its sole discretion, to audit the customer's inventory
               records.

Discounts:     EDI
               ---
               MACMILLAN DISTRIBUTION offers retailers a discount of 1 % off
               net software purchases (net software purchases are defined as:
               purchases less returns) in exchange for electronic ordering/
               reporting (EDI). To receive the EDI discount, retailer must also
               provide MACMILLAN DISTRIBUTION with an inventory report with
               net sales by sku on a weekly or monthly basis within 10 business
               days from the close of each month.

               Retail Distribution Center (RDC) Discount Program
               -------------------------------------------------
               MACMILLAN DISTRIBUTION offers qualifying retailers a discount
               of 2% off net software purchases (net software purchases are
               defined as: purchases less returns). To qualify for this program,
               the following qualifications must be met:

          Retailer must maintain a distribution center with truck-height loading
          and receiving dock capable of receiving multiple cartons on skids.

          Retailer must order in carton quantities.

          Retailer must order a minimum of 12 cartons per order.

          Retailer must provide MACMILLAN DISTRIBUTION with an inventory report
          with net sales by sku on a weekly or monthly basis within 10 business
          days from the close of each month.

          A retail distribution center can service any number of retail
          locations. Retailers also have the option of supplementing retail
          distribution center orders with orders at our standard terms.

       Contact your sales representative for participation request form.

     The EDI and RDC discounts are credited following the close of each
MACMILLAN DISTRIBUTION fiscal month.

                                       22
<PAGE>

SCHEDULE D Continued

MACMILLAN DISTRIBUTION
1999 TERMS AND CONDITIONS
Retailer Program

Payment Terms:   Net 60 days from invoice date.

Minimum Order:   No minimum order quantities.

Freight Policy:  F.O.B. destination via surface carrier; retailer may upgrade
                 freight at their expense. It is the customer's responsibility
                 to notify MACMILLAN DISTRIBUTION of any deadlines, special
                 handling or invoicing requests. All claims for damaged
                 shipments must be made within seven days of receipt of
                 merchandise by all consignees * to MACMILLAN DISTRIBUTION
                 Customer Service and to the delivering carrier.

Defective Returns: Please follow the procedure listed below:

          Return requests must be in writing and should be faxed to:
          MACMILLAN Distribution Attn: David Ellis at (317) 817 - 7287.

          Upon review and approval, a RA form will be sent to you. Use the RA
          form we provide and return to the MACMILLAN DISTRIBUTION designated
          warehouse: MACMILLAN DISTRIBUTION, c/o Macmillan Returns Department,
          135 Mt. Zion Road, Lebanon IN 46052.

          Returns must be received within 60 days of R.A- authorization.

          MACMILLAN DISTRIBUTION will pay freight on defective returns.

          Unauthorized returns will be refused. Returns of non-MACMILLAN
          DISTRIBUTION product will be refused.

Returns:  Retailers may return legitimate overstock of product which was
          purchased directly from MACMILLAN DISTRIBUTION with approval from MID
          management.

          Request for the price change credit must be received within 90 days of
          notice.

                                       23
<PAGE>

SCHEDULE E

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
ACCOUNT                   PROGRAM    DISCOUNT / FEE                   PAYMENT         COMMENTS
Discounts (Invoice                                                    METHOD
Item)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>        <C>                              <C>             <C>
Distributors              T & C'S    3% Net                           Credit          Gross less returns monthly
-----------------------------------------------------------------------------------------------------------------------------------
Distributors              T & C'S    6% Gross                         Credit          Detailing; reports required
-----------------------------------------------------------------------------------------------------------------------------------
Direct Retailers          T & C'S    2% Net                           Credit          Warehousing
-----------------------------------------------------------------------------------------------------------------------------------
Direct Retailers          T & C'S    1% Net                           Credit          EDI Ordering
-----------------------------------------------------------------------------------------------------------------------------------
GT Interactive            Standard   60% of Net                       Invoice
-----------------------------------------------------------------------------------------------------------------------------------
Toys R Us                 Standard   90% of Net                       Invoice         10% for Detailing
-----------------------------------------------------------------------------------------------------------------------------------
Beamscope*                Standard   92% of Net or Parity Pricing     Invoice
-----------------------------------------------------------------------------------------------------------------------------------
Ingram Micro Canada*      Standard   92% of Net or Parity Pricing     Invoice
-----------------------------------------------------------------------------------------------------------------------------------
MultiMicro*               Standard   92% of Net or Parity Pricing     Invoice
-----------------------------------------------------------------------------------------------------------------------------------
EB Canada*                Standard   92% of Net or Parity Pricing     Invoice         Typically older Parity priced
-----------------------------------------------------------------------------------------------------------------------------------
Major Connections         Standard   40% of Street                    Invoice
-----------------------------------------------------------------------------------------------------------------------------------
AOL                       Standard   35% of Street                    Invoice
-----------------------------------------------------------------------------------------------------------------------------------
Library Video             Standard   Buy 4, Get 1 Free                Invoice
-----------------------------------------------------------------------------------------------------------------------------------
Scholastic                Standard   35% of Street                    Invoice
-----------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------------
Fees (Co-op)
-----------------------------------------------------------------------------------------------------------------------------------
Office Max                Standard   5% Co-op Pass Through; 2 1/2%    Pass-Through    Product specific advertising is not paid by
                                     Detailing                                        the 5% fee
-----------------------------------------------------------------------------------------------------------------------------------
Staples                   Standard   5% Co-op Pass Through;2% PM      Pass-Through    Product specific advertising is not paid by
                                     Funds                                            the 5% fee
-----------------------------------------------------------------------------------------------------------------------------------
Staples                   Standard   $5,000-$15,000 Slotting Per      Pass-Through    Fee based upon tnix size
                                     Title
-----------------------------------------------------------------------------------------------------------------------------------
AAFES                     Standard   10% of Gross Purchases           Pass-Through    Detailing stores
-----------------------------------------------------------------------------------------------------------------------------------
Wal-Mart Canada           Standard   $500 CDN/$350 US (est)           Pass-Through    Slotting fee / sku  / month
-----------------------------------------------------------------------------------------------------------------------------------
Toys "R" Us Canada*       Standard   $500 CDN/$350 US (est)           Pass-Through    Slotting fee / sku  / month
-----------------------------------------------------------------------------------------------------------------------------------
Business Depot*           Standard   $25 CDN/$17.50 US (est)          Pass-Through    Slotting fee / facing /  store / one time
                                                                                      (per store)
-----------------------------------------------------------------------------------------------------------------------------------
Future Shop (Merisel)*    Standard   $500 CDN/$350 US (est)           Pass-Through    Slotting fee / sku  / month
-----------------------------------------------------------------------------------------------------------------------------------
Toys "R" US               Standard   5% Co-op Accrual                 Credit          Issued quarterly as Co-op expense
-----------------------------------------------------------------------------------------------------------------------------------
Office Depot              Standard   7% Co-op Pass Through            Pass-Through    Issued quarterly
-----------------------------------------------------------------------------------------------------------------------------------
Fry's                     Standard   3% Co-op Pass Through            Pass-Through    Product specific advertising is not paid by
                                                                                      the 5% fee
-----------------------------------------------------------------------------------------------------------------------------------
Electronics Boutique      Standard   $1,500 Sell Through Reporting    Pass-Through    Product specific advertising is not paid by
                                                                                      the 5% fee
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Notes

A) These discounts/fees are required to sell into the respective accounts.
B) It is likely that the requirements in any given program can be changed yearly
   (if this occurs, we will prvide an update to te program)
C) Parity Pricing In Canada is at the sole discretion of the publisher and can
   vary from title to title, the 92% of Net is not in addition to PP is required
   if PP is not offered
D) Canadian accounts are noted with an (*)

Approval

____________________
Publisher

____________________
Name

____________________                  __________________
Signed                                Date

                                       24