INTERNATIONAL DISTRIBUTOR AGREEMENT

THIS AGREEMENT is made between RSI Systems, Inc., a Minnesota, USA corporation
("RSI"), and Canon Trading USA, a California, USA Corporation ("Distributor")
and shall be effective as of September 20, 1996.

BACKGROUND

RSI is in the business of manufacturing and marketing video communication
products for use in video conferencing applications. Distributor is in the
business of acting as a distributor in the territory described on Exhibit B
("the territory"). RSI desires to enter into a distribution agreement with
Distributor for the purpose of developing a market for certain of RSI's products
in the territory, on the terms and conditions set forth in this agreement. "As a
result, RSI desires to appoint Distributor to market the products on an
exclusive basis in the Territory and understands and acknowledges that
Distributor will be doing so through Distributor's sub- distributor, Canon Sales
Co., Inc., who will market the Products in the Territory, under
Sub-distributor's private label and serial numbers, to end-users directly or
through its dealers".

TERMS AND CONDITIONS

NOW THEREFORE, in consideration of the mutual promises contained herein, the
parties hereto agree as follows:

1. Products. The term "products" shall mean those products of RSI listed on
Exhibit A. This list of Products may be changed from time to time by mutual
agreement of the parties, provided, however, that RSI shall retain the sole
right to make alterations in, or to discontinue the manufacture of, any of the
Products, or to discontinue the sale of any Product in any territory, including
the Territory, at any time without incurring any obligation to Distributor.
Distributor acknowledges that RSI may produce certain products that it will not
include on Exhibit A.

2. Exclusive Distributorship

         2.1 Subject to the terms and conditions contained herein, RSI grants to
the Distributor, and the Distributor hereby accepts appointment as Exclusive
Distributor of Products in the territory.

         2.2 Although it is not RSI's intention to compete with Distributor for
orders in the Territory, nothing contained herein shall prohibit or restrict RSI
from selling directly or through other outlets if Distributor is unable or
unwilling to sell and service customers or areas of the Territory, or if a
customer refuses to do business with Distributor. RSI may sell to such customer
directly or through others without liability to Distributor, provided that
Distributor has confirmed in writing its unwillingness or inability to sell and
service, or the customer's unwillingness to do business with Distributor.

         2.3 Distributor will not solicit orders for the Products from customers
located outside the Territory through any means, including advertising.

3. Scope of Work. RSI will manufacture, or cause to be manufactured, and deliver
the Products and Spare Parts, and will accept and fill Distributor's Purchase
Orders subject to the terms and conditions of this Agreement. Unless otherwise
agreed upon by the parties, RSI and its subcontractors will provide all of the
mechanical and electronic engineering design, manufacturing technology, labor,
material and facilities necessary for its production of the Products and Spare
Parts.

4. Distributor Not Made An Agent. Each of the parties is an independent
contractor and nothing contained herein shall be deemed or construed to create
the relationship of an agency, partnership, joint venture, franchise or any
other association or relationship between the parties except that of an
exclusive distributor. Neither party shall have any authority to bind the other
party in any respect.

5. Ordering & Adjustment.

         5.1 Purchase Orders. Distributor will order Products and Spare Parts
through Purchase Orders. Within seven (7) days of receipt of Purchase Orders,
RSI will confirm delivery dates. RSI shall ship or caused to be shipped, the
Products and Spare Parts to meet those delivery dates.

        Distributor's Purchase Orders will be deemed accepted by RSI when RSI
accepts them in writing; RSI accepts them orally and confirms them in writing or
RSI actually ships, or causes to be shipped, Product. No additional or different
provisions than those in this Agreement proposed by RSI or Distributor will
apply unless expressly agreed to in writing by both parties. Distributor and RSI
hereby give notice of their objection to any such additional or different terms
proposed by the other.

        5.2 Buffer Inventory

        RSI will supply Distributor with a recommended Spare Parts stocking list
which will be utilized by Distributor as a guide in meeting its stocking
requirements.

        RSI agrees to hold a mutually established quantity of Product and Spare
Parts for emergency stocking purposes. Distributor may draw on these inventories
without restriction until the quantities are exhausted.

        RSI agrees to rotate this inventory on a first in first out basis.
Within sixty (60) days of termination of this Agreement, Distributor agrees to
purchase the Product and Spare Parts held in these buffer inventories.

         5.3 Adjustments and Rescheduling


         (a) Increases/Decreases. Notwithstanding Section 5.1, Distributor may
adjust Products and Spare Parts quantities under Purchase Orders upon the
consent of RSI, which consent shall not be unreasonably withheld.

         (b) Rescheduling. Distributor may reschedule the delivery date of
undelivered Product, without charge, provided notice is given at least thirty
(30) days prior to the original delivery date and the extent of the rescheduling
does not exceed ninety (90) days. 

         (c) IN NO EVENT WILL DISTRIBUTOR BE LIABLE FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO ANY LOST PROFIT, ARISING OUT
OF ANY ADJUSTMENT OR RESCHEDULING OF PURCHASE ORDERS IN CONFORMITY WITH THE
PROVISIONS OF SECTIONS OF SECTIONS 5.3 (a) AND 5.3 (b) ABOVE.

         5.4 All orders of Distributor for Products shall be subject to such
reasonable allocation as, in the reasonable judgment of RSI, may be equitable in
the event of any shortages of any Products at any time.

6. Delivery, Carrier & Risk of Loss.

         6.1 Shipment of Products; Payment of Shipping Costs. Distributor will
arrange for shipment of the Products through a carrier designated by
Distributor. Distributor will have the right to modify such designation from
time to time, as deemed necessary or appropriate by Distributor, in
Distributor's sole and absolute discretion. In the event no carrier is
designated by Distributor, RSI will select a common surface carrier at its
discretion.

         6.2 Passage of Title and Risk of Loss. Title and risk of loss or damage
to the Products or Spare Parts will pass to Distributor upon receipt by
Distributor's designated carrier or the RSI selected common carrier at the FOB
point.

         6.3 Delivery Date. RSI will deliver, or caused to be delivered,
Purchase Order quantities to the FOB point on or before the date for delivery as
confirmed in accordance with Section 5.1 herein. TIME AND DATE OF DELIVERY ARE
OF THE ESSENCE FOR ALL PURCHASES UNDER THIS AGREEMENT. RSI will pay Distributor
the difference in costs associated with expedited freight in the event Purchase
Order quantities are not delivered to the FOB point by such date.

         6.4 Failure to Meet Delivery Date. If RSI fails to meet Distributor's
delivery schedule on all or any part of any Purchase Order and does not provide
Distributor with written assurance of delivery within ten (10) days of the
Purchase Order delivery date, or RSI fails to so deliver within such time
period, then Distributor, without prejudice to any other rights or remedies
available to Distributor under law or otherwise, may terminate such or any part
of such Purchase Order and procure, upon such terms and in such manner as
Distributor may deem appropriate, the Product covered by such Purchase Order. In
such event, Distributor's sole liability to RSI shall be limited to payment for
items delivered to and accepted by Distributor at the expiration of the ten (10)
day period described above. With respect to the portion of such Purchase Order
not terminated, if any, the unit price will not change and RSI will otherwise
continue performance under this Agreement.

7. Pricing.

         7.1 Prices. Subject to the terms and conditions of this Agreement, RSI
agrees to deliver the Products and Spare Parts at the prices set forth in
Exhibit "A", the Product and Price Schedule. Prices for Products and Spare Parts
are FOB RSI's Minneapolis, MN warehouse (the "FOB Point"). Such prices may not
be increased during the initial term of this Agreement, and may only be
modified thereafter, as follows: After the Initial Term of this Agreement, RSI
may increase prices at any time upon sixty (60) days notice; provided RSI will
honor each order made or mailed by Distributor before such price change becomes
effective at the price in effect when such order was made or mailed.

         7.2 Most Favored Customer Pricing. RSI hereby warrants that at no time
will the prices charged Distributor exceed the prices offered other customers
for similar products, quantities and delivery requirements under similar terms
and conditions. In the event RSI provides prices and/or terms for the Products
or Spare Parts more favorable than those set forth herein to another of such
customers, Distributor will be entitled to a reduction and/or amendment
retroactive to the date such prices and/or terms have been made available to
such other customer.

8. Spare Parts.

         8.1 Purchase. Notwithstanding any expiration of the term of this
Agreement, Distributor or a Distributor designated third party will be able to
purchase Spare Parts beginning at the date of initial production of the Product
or implementation of a design change, and extending for a period of three (3)
years after the last shipment of the respective Product under this Agreement.
Such purchases will be governed by the applicable terms and conditions set forth
in this Agreement. Notwithstanding the foregoing, however, for the three (3)
year period after the last shipment of the respective Product under this
Agreement, RSI may make a comparable substitute for the Spare Parts for the
Products available where Spare Parts are no longer available.

9. Inspection. Products and Spare Parts purchased pursuant to this Agreement may
be subject to inspection at the FOB Point, within a reasonable time after
delivery, but in no event more than forty-five (45) days after receipt by
Distributor's sub-distributor. Distributor will reject and notify RSI of
defective or nonconforming Products and Spare Parts and, to the extent
reasonably feasible, the nature of the defect. If Distributor does not expressly
reject Products and/or Spare Parts within such forty-five (45) days, such
Products and Spare Parts will be deemed accepted by Distributor; except that any
such acceptance will not relieve RSI from any responsibility or liability it may
have with respect to Epidemic Failures as hereinafter defined.

10. RSI'S Responsibilities.

         10.1 RSI will provide the Product documentation to Distributor upon the
Effective Date of this Agreement, including, without limitation, final repair
parts lists and service manuals. RSI will also provide such other documentation
necessary to assist Distributor or an approved third party in the preparation of
materials for servicing, repairing and inspection of the Products. Any printed
material will be in English on reproducible materials, and available to
Distributor.

         10.2 Training. RSI will, at its cost and expense, provide initial
training for the Products. Distributor will have the right to purchase
additional training as required during the term of this Agreement on such terms
and conditions as RSI and the distributor mutually agree upon.

         10.3 Software/Diagnostics. As such time as RSI ceases to support the
Products, RSI will provide three (3) copies of service software which will
include the following: (a) Burn-in; (b) System test; (c) Diagnostics; and (d)
Microcode. Such software/diagnostics will be supplied in machine readable format
with compilation instructions. Update to all such software/diagnostics shall be
provided to Distributor as and when developed by RSI.

         10.4 License Rights. RSI hereby grants to Distributor a non-exclusive,
world-wide right and license to use and copy, solely for purposes of this
Agreement: (a) the documentation delivered pursuant to this Section 10; (b)
Software/Firmware; and (c) the service software. Distributor will not remove
RSI's copyright notice from any RSI material copied pursuant to this Section 10.
RSI hereby grants to Distributor the right to sublicense the license rights set
forth in this Section 10.4 to Distributor's authorized repair facilities,
subject to the requirements of Section 19.3. The license rights set forth in
this Section 10 will survive any termination or expiration of this Agreement.

         10.5 RSI will offer to any and all Distributor repair source or third
party repair vendors Spare Parts for the Products at the prices offered to
Distributor.

11. Distributor Responsibilities. In addition to the duties and responsibilities
outlined elsewhere in this Agreement, Distributor agrees as follows:

         11.1 Distributor shall devote its best efforts to promote the sale of
Products in the Territory. Distributor shall provide its customers with all
necessary and appropriate training and support regarding the use of the
Products. Distributor will also set up Products for its customers and train its
customers to properly operate and maintain Products. Distributor will fulfill
these responsibilities throughout the Territory using its own personnel.

         11.2 Distributor shall retain, or subcontract with, expert service
personnel qualified to promptly provide repair service and technical support to
customers, and to offer RSI feedback respecting the quality and reliability of
Products. When Distributor makes repairs which are covered by RSI's warranty
described in Section 14.1, RSI will provide any required replacement parts at
its expense.


         11.3 Distributor shall cooperate with RSI in regard to all of RSI's
commercially reasonable sales activities related to the products. Such
cooperation shall include attendance at and assistance with trade shows, and
other marketing events when reasonable requested by RSI.

         11.4 Distributor shall promptly furnish to RSI any information which
RSI may determine necessary or appropriate (including such details as RSI may
request) to ascertain current or potential sales of the Products in the
Territory. Distributor further agrees to inform RSI promptly of any change in
market conditions in the Territory which Distributor reasonably believes might
affect current or potential sales of Products in the Territory.

         11.5 Distributor shall maintain an inventory of Products sufficient to
enable Distributor to fill customer orders.

         11.6 Distributor shall cooperate with RSI in responding to customer
complaints concerning the Products and shall take such action to promptly
resolve such complaints as may be reasonably requested by RSI.

         11.7 Distributor shall not, in any way, alter Products, except by prior
written approval of RSI.

         11.8 All costs, including salaries, payroll taxes, severance pay and
other expenses incurred by Distributor in connection with its performance under
this Agreement shall be borne solely by Distributor.

12. Term of Agreement and Termination.

         12.1 This Agreement will come into force on the Effective Date and will
remain in effect for a period of three (3) years (the "Initial Term") unless
earlier terminated by either party pursuant to this Section 12. Upon expiration
of the Initial Term, the Agreement will automatically be renewed for successive
one (1) year periods unless either party notifies the other in writing of its
intent not to renew at least ninety (90) days in advance of the
expiration/renewal date.

         12.2 Either party may suspend its performance and/or terminate this
Agreement immediately upon written notice at any time if:

         (a)      The other party is in material breach of any warranty, term,
                  condition or covenant of this Agreement other than those
                  contained in Section 21 and fails to cure that breach within
                  thirty (30) days after written notice of that breach;

         (b)      The other party is in material breach of any warranty, term,
                  condition or covenant of Section 21; provided, however, that
                  the other party has ten (10) days after written notice of that
                  breach within which it may discuss said breach with the first
                  party prior to termination; or

         (c)      The other party: (i) becomes insolvent; (ii) fails to pay its
                  debts or perform its obligations in the ordinary course of
                  business as they mature; (iii) admits in writing its
                  insolvency or inability to pay its debts or perform its
                  obligations as they mature; or (iv) makes an assignment for
                  the benefit of creditors.

         12.3 The following terms apply to any termination under this Agreement:

         (a)      Immediately upon any termination of this Agreement, RSI shall,
                  to the extent and at times specified by Distributor, stop all
                  work on outstanding Purchase Orders, incur no further direct
                  cost, and protect all property in which Distributor has or may
                  acquire an interest.

         (b)      Except as provided in Section 11, immediately upon any
                  termination of this Agreement, each party will return to the
                  other party or, pursuant to the other party's written
                  instructions, destroy all materials in its possession
                  containing Confidential Information of the other party.
                  Returned Confidential Information materials shall be shipped
                  freight collect.

         (c)      If this Agreement and any Purchase Orders issued hereunder are
                  terminated by Distributor, the Distributor, in addition to any
                  other rights provided herein, may require RSI to transfer
                  title and deliver to Distributor any completed Products. RSI
                  will protect and preserve for Distributor's benefit such
                  property in the possession of RSI, provided, however, that
                  Distributor has paid to RSI all invoices then due and owing.

         12.4 In the event of termination of this agreement, whether upon the
expiration of its term or pursuant to the provisions of this Article 12, neither
party shall be liable to the other for compensation, reimbursement or damages on
account of the loss of prospective profits, or on account of expenditures,
investments, leases, employee termination pay or other commitments or expenses
relating to its business or good will.

         12.5 In the event of termination, Distributor agrees to advise RSI of
the status of all its efforts pertaining to the sale of the Products in the
Territory.

         12.6 Upon termination of this Agreement for any reason, RSI or its
nominee shall have the option of purchasing all or any portion of the Products
held by Distributor on the date of termination which are new, non-obsolete, and
in salable condition, by giving notice to Distributor within 30 days after the
termination date except such Products for which Distributor has open but
unfilled orders. The price of such Products shall be the price paid to RSI by
Distributor for such Products.

         12.7 Notwithstanding anything contained herein to the contrary,
Sections 8, 10.3, 10.4, 10.5, 12.3, 14, 15, 16, 17, 18, 19.1, 21 and 28 of this
Agreement shall survive termination of this Agreement and shall remain in full
force and effect.

         12.8 It is expressly understood and agreed that the right of
termination set forth in this Article 12 is absolute, and that the parties have
considered the possibility of such termination and the possibility of loss and
damage resulting therefrom, in making expenditures pursuant to the performance
of this Agreement. It is the express intent and agreement of the parties that
neither shall be liable to the other for damages or otherwise by reason of the
termination of this Agreement as hereinabove provided.

         12.9 The parties expressly agree that they notice periods in this
Section 12 are reasonable under the contemplated circumstances.

13. Waiver of Breach. The waiver or failure of either party to enforce the terms
of this Agreement in one instance shall not constitute a waiver of said party's
rights under this Agreement with respect to other violations. No waiver of any
of the terms of this Agreement shall be binding unless it is in writing.

14. Warranty.

         14.1 (a) Liens, Materials and Workmanship. RSI warrants that the
Products and Spare Parts purchased and delivered hereunder: (i) will be free and
clear of all liens and encumbrances; (ii) with respect to hardware (Products and
Spare Parts), will be free from defects in design, materials, workmanship and
construction under normal use and service for a period of one (1) year from
delivery to the Sub-distributor not to exceed fifteen (15) months from the date
of manufacture; and (iii) with respect to firmware and software used in
connection with the Products and Spare Parts ("Software/Firmware"), will be in
substantial accordance with the documentation supplied to Distributor and free
from defects which substantially affect system performance.

         (b) General Representations. RSI represents and warrants to Distributor
that: (i) it has the power and authority to enter into this Agreement; (ii) to
the best of RSI's knowledge, the Products and Spare Parts can be efficiently
manufactured; (iii) it is the owner or authorized licenser of the
software/firmware and all portions thereof and that it has a right to grant
Distributor a license for its use and possession without violating the rights of
any third party; (iv) in connection with the manufacture of the Products and
Spare Parts, there will be no infringement of any patent, copyright, trade
secret, mask work right or other proprietary right of any third party; and (v)
each of RSI's employees, subcontractors or agents involved in the manufacture of
the Products and Spare Parts will have signed an agreement with RSI (that is no
less restrictive than Distributor's standard proprietary rights and
non-disclosure agreement) agreeing to keep in confidence Distributor's
Confidential Information.

         14.2 Epidemic Failures. RSI will, at Distributor's option, promptly
repair or replace Products or Spare Parts delivered under this Agreement or
accept return of the same for full credit, which exhibit Epidemic Failures
within fifteen (15) months of the date of manufacture. RSI will take action,
immediately after Distributor's notification of an Epidemic Failure situation,
to correct the cause and will inform Distributor in ten (10) working days of
such action. In addition, RSI will be responsible for the costs identified in
Section 14.3. Epidemic Failure means defects in manufacturing and/or design
deficiencies of the same root cause, including but not limited to use of
defective components or maladjustment's whether occurring during manufacture,
packing or shipment, affecting Products or Spare Parts when the failure rate is
in excess of three percent (3%) of the Products or Spare Parts delivered within
any two (2) month period.

         14.3 Freight and Incidental Costs. The responsibility for costs
associated with freight and other items for defective or nonconforming Products
and Spare Parts required to be corrected, repaired or replaced pursuant to
Section 14.2 above will be borne according to the following table:

TYPE OF RETURN   INCIDENTAL COSTS*   FREIGHT IN**            FREIGHT OUT***

Warranty (14.1)         RSI       RSI: up to 90 days       RSI: up to 90 days
                                  from date of shipment    from date of shipment
                                  of product to Canon      of product to Canon

Epidemic (14.2)         RSI       RSI: up to 180 days      RSI: up to 180 days
                                  from date of shipment    from date of shipment
                                  of product to Canon      of product to Canon

        The Distributor, Sub-Distributor or Customer would be responsible for
payment of freight in or out beyond the liability for Warranty and Epidemic
stated herein.

* "Incidental Costs" include, but are not limited to, reasonable costs for labor
for diagnostics, Part removal and replacement and repair costs of Distributor
and Distributor's service provider(s).

** "Freight In" includes freight from Distributor's service provider(s) to
Distributor and from Distributor to RSI or RSI's repair centers/vendors.

*** "Freight Out" includes freight from RSI or RSI's repair centers/vendors to
Distributor. In the case of Epidemic Failures, Freight Out shall also include
freight from Distributor directly to Distributor's customers or to Distributor's
service provider(s) as appropriate.

        Notwithstanding the foregoing, where Product or Spare Parts are returned
to RSI under warranty (paragraph 14.1) or Epidemic Failure (paragraph 14.2), and
are not defective, RSI will bear all Freight and Incidental costs as set forth
herein.

        In addition, where Product is returned under a claim of warranty or
Epidemic Failure and is defective because of a "caused failure" (supported by
RSI written documentation to that effect) such as blown fuses or component
damage from environmental causes, RSI will make repairs as authorized in writing
by Distributor, subject to RSI's good faith determination as to whether the
Product is repairable. RSI will make the aforesaid written documentation
available to Distributor upon its written request. Should the parties mutually
agree that the incidence of caused failure is such that charges should be
assessed for repair, a fee for such repair, will be mutually agreed upon.

         14.4 Repair/Replacement by RSI. Upon rejection of Product by
Distributor, after inspection, Distributor agrees to obtain a return
authorization number from RSI prior to returning any Product or defective Spare
Part. Distributor will return the defective item, to the RSI facility designated
from time to time by RSI, together with a statement describing the defect.
Distributor's cost of labor to inspect and remove defective parts to install
replacement parts, will be borne solely by RSI. Product found not to be
defective will be returned to Distributor with a written report of RSI's
findings.

         14.5 Repair/Replacement by Distributor. Distributor or its authorized
repair facilities may repair defective Products and Spare Parts if it is deemed
by Distributor and RSI to be the most time and cost effective approach. In such
event, Distributor will promptly submit to RSI in writing, to the extent
available, the serial numbers and date code of the defective Products or Spare
Part units, the date Distributor received the defective unit, the nature of the
defects found, the date of repair of the defective units by Distributor or its
authorized repair facility, and the quantity of Spare Parts utilized by
Distributor in the repair. Distributor will send to RSI the defective Products
or Spare Parts, or parts removed therefrom. RSI will provide Distributor with
the necessary replacement parts at no cost, and reimburse the costs stated in
this Section 14.

15. General Indemnities.

         15.1 RSI's General Indemnity. RSI agrees to defend any proceeding or
action brought by a third party against Distributor to the extent based on a
claim that any of the Products caused property damage or personal injury due to
the acts or failure to act of RSI. RSI agrees to indemnify Distributor for any
losses, damages or reasonable expenses, including legal expenses and counsel
fees, arising from such acts or failures to act. RSI's obligation to so defend
and indemnify Distributor is contingent on Distributor's compliance with Section
15.3.

         15.2 Distributor's General Indemnity. Distributor agrees to defend any
proceeding or action brought by a third party against RSI to the extent based on
a claim resulting from the acts or failure to act of Distributor in marketing
the Products, including but not limited to warranties made by Distributor or its
agents regarding the Product; and Distributor agrees to indemnify and hold RSI
harmless from any losses, damages, or reasonable expenses, including legal
expenses and counsel fees, arising from such acts or failures to act.
Distributor's obligation to so defend and indemnify RSI is contingent on RSI's
compliance with Section 15.3.

         15.3 Notice/Defense. Each party shall promptly notify the other party
of any claim, demand, proceeding or suit of which the other party becomes aware
which may give rise to a right of defense or indemnification pursuant to this
Section ("Claim"). Notice of any Claim which is a legal proceeding, by suit or
otherwise, must be provided to the indemnifying party within thirty (30) days of
first learning of such proceeding. Notice shall include an offer to tender the
defense of the Claim to the indemnifying party. The indemnifying party, if its
accept such tender, shall be entitled to take over sole control of the defense
of the Claim. That control shall include the right to take any and all actions
necessary to completely and finally resolve the Claim by settlement or
compromise. Upon acceptance of tender, the indemnified party shall cooperate
with the indemnifying party with respect to such defense and settlement, and the
indemnifying party will pay expenses reasonably incurred by the indemnified
party in providing such cooperation, except that the indemnifying party shall
not be required to pay the indemnified party for everyday operating expenses
incurred in the ordinary course of doing business. In the event a claim is
settled, both parties agree not to publicize the settlement and will make every
effort to ensure the settlement agreement contains a non-disclosure provision.

16. Limitation of Liability.

EXCEPT AS SET FORTH IN SECTION 18 AND 15, IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL
DAMAGES OF ANY KIND, INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS OR DAMAGES TO
BUSINESS REPUTATION, WHETHER IN AN ACTION FOR CONTRACT, STRICT LIABILITY OR TORT
(INCLUDING NEGLIGENCE) OR OTHERWISE, AND WHETHER OR NOT THE OTHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE AND NOTWITHSTANDING THE FAILURE OF
ESSENTIAL PURPOSE OF ANY REMEDY.

17. Trademarks and Trade Names.

         17.1 Neither party will, without the other party's prior written
consent, use any trademarks, service marks, trade names, logos or other
commercial or product designations of the other party, for any purpose, except
as are incidental only to the sale of Products by Distributor and the right to
use such Products by Distributor's customers. Whenever Distributor shall make
reference to its relationship with RSI, whether in advertising or otherwise,
Distributor shall describe its relationship only as a distributor of the
Products. Any other use by Distributor of RSI's trade name and/or trademark or
any other trade names or trademarks associated with the Products must be
previously approved in writing by a duly authorized officer of RSI. Distributor
shall not register RSI's trade name or trademark or any other trade names or
trademarks associated with the Products in the Territory.

         17.2 Distributor shall not remove, cover, change, or add to the labels
affixed by RSI to Products without first receiving RSI's written approval.

18. Proprietary Rights Indemnity.

         18.1 Indemnity. RSI represents to Distributor that the Products, Spare
Parts, Documentation, Software/Firmware and service software (provided by RSI
hereunder) will not infringe any patent, copyright, trademark right, trade
secret, mask work right or other proprietary right of any third party. RSI will,
at its expense and at Distributor's request, defend or settle any claim or
action brought against Distributor, and Distributor's subsidiaries, affiliates,
directors, officers, employees, agents, independent contractors and customers,
to the extent it is based on a claim that the Products, Spare Parts,
Documentation and/or service software provided under this Agreement infringes or
violates any patent, copyright, trademark, trade secret, mask work right or
other proprietary right of a third party, and RSI shall indemnify and hold
Distributor harmless from and against any costs, damages and fees reasonably
incurred by Distributor and/or its customers, including but not limited to, fees
of attorneys and other professionals, that are attributable to such claim;
provided that: (a) Distributor gives RSI reasonably prompt notice in writing of
any such suit and permits RSI, through counsel of its choice, to answer the
charge of infringement and defend such claim or suit; (b) Distributor provides
RSI information, assistance and authority, at RSI's expense, to enable RSI to
defend such suit; and (c) RSI will not be responsible for any settlement made by
Distributor without RSI's written permission. In the event Distributor agrees to
settle the suit, RSI agrees not to publicize the settlement nor to permit the
party claiming infringement to publicize the settlement without first obtaining
Distributor's written permission. Without prejudice to the generality of the
foregoing, RSI's indemnity obligations under this Section 16 include any claim
or action there (i) infringement is attributable to the incorporation or
combination of one or more of Distributor's components into the Product, and
(ii) such claim or action could not have been avoided by incorporating or
combining some other component which would have been an infringement but for a
license being grated, then RSI will obtain a license allowing incorporation or
combining of Distributor's component as part of the Product is possible at
Distributor's expense.

         18.2 Duty to Correct. Notwithstanding Section 15.1, should the
products, Spare Parts, Documentation, Software/Firmware or service software
become the subject of a claim of infringement of a third party's proprietary
right, RSI will, at RSI's expense: (a) procure for Distributor the past right to
sue and sell/license and the future right to continue to use and sell/license
the Products, Spare Parts, Documentation or service software; (b) replace or
modify the Products, Spare Parts, Documentation or service software to make such
non-infringing, provided that the same function is performed by the replacement
or modified Product, Spare Part, Documentation or service software to
Distributor satisfaction; or (c) if the past and future rights to continue to
use and sell/license cannot be procured or the Product, Spare Part,
Documentation or service software cannot be replaced or modified at reasonable
expense, reimburse Distributor for the total amount paid under this Agreement.

19. Licenses, Approvals and Registration of Products, Compliance with Laws.

         19.1 Distributor agrees to use its best efforts to obtain promptly from
the proper authorities in the Territory, all registrations, licenses, and
approvals required for the import, sale and distribution by Distributor of the
Products in the Territory. Distributor shall promptly send a copy of any such
registration or license to RSI. Upon termination of this Agreement, except for
RSI's breach, Distributor agrees to use reasonable efforts to assign and to
transfer to RSI any and all such registrations and/or registration rights for
the Products in the Territory which are not in the name of RSI and to take any
and all such necessary steps to effectuate such assignment and transfer, or if
such assignment and transfer is not possible, to use its reasonable efforts to
obtain in RSI's name, all licenses and approvals which may be necessary for the
import and sale of the Products in the Territory. All such efforts in this
Section 16.1 shall be at RSI's sole cost and expense.

         19.2 Distributor shall comply with all applicable laws and regulations
of the Territory pertaining to the importation, distribution, sales and
marketing of the Products in the Territory and in any manner otherwise
pertaining to performance by Distribution of its obligations under this
Agreement.

         19.3 Agency Approvals; Product Safety. All regulatory approvals and
certifications pertaining to the Territory will be obtained by RSI. RSI will
provide sample units at RSI's expense and bear all other costs reasonably
related to any re-certifications required as a result of changes in the
Products. Product safety requirements will be complied with by RSI as required
for the Products.

20. Appointment of Subdistributors. Distributor may, without the prior written
approval of RSI, appoint any subdistributors in the Territory in connection with
the performance of this Agreement.

21. Confidential Information. Each party will protect the other's Confidential
Information from unauthorized dissemination and use with the same degree of care
that each such party uses to protect its own like information, but at a minimum,
with a reasonable degree of care. Neither party will use the other's
Confidential Information for purposes other than those necessary to perform this
Agreement and only employees of the receiving party who have a need to know such
Confidential Information shall have access thereto. Neither party will disclose
to third parties the other's Confidential Information without the prior written
consent of the other party.

22. Force Majeure. Neither party will be liable for delay or failure to perform
caused by acts which are beyond the reasonable control of the party so affected,
including, but not limited to, governmental acts or directives (official or
unofficial); strikes (legal or illegal); acts of God; war (declared or
undeclared); insurrection; riot or civil commotion; fires, flooding or water
damage; explosions; embargoes; imposition of countervailing duties or
surcharges; or significant governmental actions or regulations which affect the
cost of the Product. The delayed party will give the other party written notice
of such force majeure promptly and in any event, within fifteen (15) days of
discovery. With respect to any delays in delivery of the part of RSI, once any
cause of delay is removed, RSI will make every reasonable effort to meet the
schedules which had previously been agreed upon the parties. The delayed party's
time for performance or cure under this section shall be extended for a period
equal to the duration of the cause or 90 days, whichever is less.

23. Notice. All notices under this Agreement shall be in writing, and may be
delivered by hand or sent by facsimile transaction or registered mail, return
receipt requested. Notices sent by mail shall be deemed received on the date of
receipt indicated by the return verification provided by the national postal
service involved. Notices sent by facsimile transaction shall be deemed received
the day on which sent, and shall be conclusively presumed to have been received
in the event that the sender's copy of the transmission contains the "answer
back" of the other party's facsimile transmission. Notices shall be given, or
sent to the parties at the following addresses:

                If to Distributor:      Canon Trading USA, Inc.
                                        15955 Alton Parkway
                                        Irvine, CA 92718-3616
                                        Atten:  Brian (Masami) Minezaki

                If to RSI:              RSI Systems, Inc.
                                        7400 Metro Blvd. Suite 475
                                        Edina, MN 55439 USA
                                        Atten:  Donald Lies

Any party hereto may designate any other address for notices given it hereunder
by written notice to the other party given at least ten (10) days prior to the
effective date of such change.

24. Entire Contract. This Agreement, including all Exhibits, constitutes the
entire agreement between the parties with respect to the subject matter hereof,
and supersedes and replaces all prior or contemporaneous understanding or
agreements, written or oral, regarding such subject matter. No amendment to or
modification of this Agreement shall be binding unless in writing and signed by
a duly authorized representative of both parties. No provision contained on the
reverse side of any Purchase Order form or any provision of any RSI
acknowledgment form will be effective. Except for the Purchase Order-specified
quantities and delivery dates specified on the face of the Distributor's
Purchase Orders, the terms governing the manufacture, delivery, acceptance and
payment for the Products and Spare Parts will be governed by the terms and
conditions of this Agreement. In the case of conflict between this Agreement and
any Purchase Order, the terms of this Agreement will prevail.

25. Assignability: Change in Ownership. This Agreement is personal to
Distributor and, except as permitted in this Agreement, may not be sold,
assigned, or transferred without the written consent of RSI. Distributor shall
promptly notify RSI, where an entity purchases a controlling interest in it
(more than 50% of the outstanding shares). In such event, or in the event of the
sale by the Distributor of that portion of the business operation which includes
all or most of the Products, where RSI has not consented to that change or sale,
then this Agreement may be terminated at any time thereafter by RSI upon written
notice given at least sixty (60) days in advance of the effective date of
termination. RSI may assign this Agreement to any subsidiary or division
controlled by it, or to an entity purchasing a substantial portion of the
business operation which includes all or most of the Products.

26. Severability. In the event that any provision of this Agreement is held
invalid by the final judgment of any court of competent jurisdiction, the
remaining provisions shall remain in full force and effect as if such invalid
provision had not been included herein.

27. Remedies. In recognition of the irreparable harm that a violation of
obligations under this Agreement would cause the other, each party, their
respecture agrees that in addition to any other relief afforded by law, an
injunction against such violation may be issued against it and every other
person concerned thereby, it being understood that both damages and an
injunction shall be proper modes of relief and are not to be considered mutually
exclusive remedies.

28. Disclosure of Agreement. Except as required by law or governmental
regulation, neither party shall disclose this Agreement or the contents thereof
to any third party without the prior written consent of the other, such consent
not to be unreasonably withheld. Press releases, exhibitions, or advertising of
any kind using any trademarks, trade names, model designations, or corporate
names of either party and regarding this Agreement may not be made without the
express prior written consent of the other party.

29. U.N. Convention Excluded. The U.N. Convention of Contracts for the
International Sale of Goods shall not apply to this Agreement.

30. Language. This Agreement may be translated into any language but it shall be
construed and interpreted in English.

31. Applicable Law and Forum Selection. Except as altered or expanded by this
Agreement, the substantive law (and not the law of conflicts) of the state of
Minnesota U.S.A., shall govern this Agreement in all respects as to the
validity, interpretation, construction and enforcement of this Agreement and all
aspects of the relationship between the parties to this Agreement.

32. Notwithstanding the foregoing, RSI reserves the right to bring suit against
Distributor for moneys due RSI in the courts of Distributor's jurisdiction, or
where Distributor has assets.

33. Survival. All representations or warranties made in this Agreement and all
terms and provisions hereof intended to be observed and performed after the
termination hereof, shall survive such termination and continue thereafter, in
full force and effect.

IN WITNESS WHEREOF, the parties have hereunto set their hands and seal as of the
day and year first above written.


CANON TRADING USA, INC.                 RSI SYSTEMS, INC.




____________________________________   ____________________________________ 
Signature                      (Date)  Signature                      (Date)




____________________________________    Donald C. Lies  President
Name                            Title   Name            Title


EXHIBIT A
THE PRODUCT AND PRICE SCHEDULE

Product: The RSI ERIS 1000 Video Conferencing System for direct connection and
         use exclusively with personal computer (PC) or Apple Macintosh (Mac).
         Includes standard accessories of microphone with stand, SCSI cable,
         Software (latest/current version at the time of the shipment), User
         manual.

Price:   US $1,850 FOB RSI Systems' Warehouse, Minneapolis, Minnesota

Payment: 32 days after the invoice date.


EXHIBIT B
TERRITORY

The territory covered by this agreement is the country of Japan.


EXHIBIT C
WARRANTY AND SERVICE POLICIES

1. Sub-distributor's Inspection Rights

Notwithstanding Distributor's inspection rights in Section 9 of the Agreement,
Sub-distributor may conduct its own inspection of the Product and Spare Parts
upon receipt. Sub-distributor will notify RSI when a Product or Spare Part is
found defective and RSI will assign a Return Material Authorization (RMA)
number. Every three (3) months during the term of this Agreement,
Sub-distributor will return to RSI the defective Products and Spare Parts
accumulated and assigned an RMA number.

2. Buffer Inventory of Replacement Product

RSI will make available to Sub-distributor additional units of product for use
as buffer inventory totaling no less than 5% of the total quantity of such
order. As such, this buffer inventory will be invoiced to Sub-distributor under
the following terms:

        Price to be the same as that in Exhibit A. Payment terms granted to be
90 days from date of invoice. These terms shall allow Distributor,
Sub-distributor to rotate their buffer inventory for resale and to accommodate
any product exchanges or warranty activities that might occur. In the event that
Sub-distributor notifies RSI that the buffer inventory levels in this Section 2
are insufficient to meet demand, RSI may deliver to Sub-distributor such
additional units of buffer inventory under the payment terms and conditions
outlined herein as may be reasonably requested by Sub-distributor.

3. Labeling of Product

RSI will be responsible for affixing Sub-distributor's name/logo and serial
number in a permanent manner to each unit of Product ordered. Sub-distributor
will provide RSI with the artwork for the name/logo to be affixed.
Sub-distributor will also provide RSI with serial numbers with each order of
Product.

4. End-User Support, Service and Maintenance

4.1 Defective Product; Notification

Except in an emergency, Sub-distributor will notify Distributor when it becomes
aware of defective Product or Spare Parts and Distributor will obtain an RMA
from RSI. In an emergency, however, Sub-distributor may obtain an RMA directly
from RSI.

4.2 Shipment of Returned Product
Freight and incidental costs for Product returned by Sub-distributor pursuant to
an RMA will be borne by RSI in accordance with Section 14.3 of the Agreement.
RSI will also bear freight and incidental costs for additional buffer inventory
ordered pursuant to Section 2 above.

4.3 Modifications to Products and Spare Parts

RSI may modify the Products or Spare Parts upon thirty (30) days prior written
notice to Distributor specifying in detail all engineering or design changes to
be made. Modifications to Products or Spare parts related to product safety and
government regulations, however, may be made without such notice provided that
RSI notifies Distributor promptly after such modification is implemented.

4.4 Service Plan

RSI and Sub-distributor will discuss implementation of a Service Plan by
Sub-distributor on mutually agreeable terms pursuant to which Sub-distributor
will perform warranty and out of warranty service on the Products.