EXHIBIT 10.16

                             DISTRIBUTION AGREEMENT
                             ----------------------

     THIS  AGREEMENT  dated  the  lst  day  of  January,  1995  by  and  between
MICRO-MEDICAL  DEVICES,  INC., 317 Paragon Way,  Castle Pines Village,  CO 80104
("Micro-Medical") and MEDICAL DYNAMICS, INC., ("MEDY"), 99 Inverness Drive East,
Englewood,  Colorado 80112, USA, a company organized and existing under the laws
of the State of colorado.

                                  WITNESSETH:

     WHEREAS, Micro-Medical is manufacturing and selling medical products;

     WHEREAS,  MEDY has appropriated  facilities,  knowledge and ability to sell
such products;

     WHEREAS,  MEDY desires to purchase finished products from Micro-Medical for
distribution bearing Micro-Medical labels, trademarks, and trade names; and

     WHEREAS,  Micro-Medical  is willing to  manufacture  its products with such
labeling,  trademarks,  and trade names  (provided they are in conformance  with
applicable law and regulation) for MEDY.

     NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:

1. DEFINITIONS
   -----------

     1.1 The term  "Products" as used in this Agreement  shall mean the products
listed on Schedule a which may be manufactured by Micro-Medical pursuant to this
Agreement,  which  products  will  bear the  labels,  trademarks,  trade  names,
identifying  marks  and   technological  and  ornamental  design   modifications
according  to design  criteria  submitted  by MEDY,  as well as spare  parts and
accessories,  and also all  improvements  and  products in  replacement  thereof
manufactured by or for Micro-Medical for use in this Products.

     1.2 The term  "Supplier"  as used in this  Agreement  shall  mean any third
party who provides materials, goods or services to Micro-Medical.

2. RELATIONSHIP
   ------------

     2.1  Micro-Medical  hereby agrees to exclusively  manufacture  for MEDY the
Products pursuant to this Agreement.

<PAGE>


     2.2 (a) MEDY hereby grants authority to Micro-Medical to use MEDY's labels,
trademarks,   trade  names,   identifying  marks  and  other  technological  and
ornamental design modifications solely for the manufacture of Products.

         (b)  Micro-Medical   hereby   grants  authority  to  MEDY  and  to  any
sub-distributors  that may be appointed by MEDY to sue  Micro-Medical's  labels,
trademarks as listed in Schedule "B" and trade names in the sale of Products.

     2.3 The  relationship  created  between  the parties by this  Agreement  is
solely that of seller and buyer.  Purchase and sale of, or any other transaction
concerning  the  Products  shall be carried  out by MEDY in the name and for the
account of MEDY and MEDY shall not enter into any agreements  with third parties
in any  way  binding  Micro-Medical.  MEDY  may,  in its  discretion,  establish
subdistributor  relationships  with third  parties at prices and terms as may be
determined by MEDY from time-to-time.

     2.4 Nothing herein  contained shall constitute this Agreement to be a joint
venture, partnership, or relationship of principal and agent.

     2.5 (a) No provisions  of this  Agreement  shall  constitute a grant of any
license of any kind to Micro-Medical  for the use,  manufacture,  or sale of any
trademark,  tradename,  or product which is  proprietary  to and the property of
MEDY except as specifically set forth herein.

         (b) No provisions  of this  Agreement  shall  constitute a grant of any
license of any kind to MEDY for the use, manufacture,  or sale of any trademark,
tradename,  or product which is proprietary to and the property of Micro-Medical
except as specifically set forth herein.

3. PURCHASE ORDERS
   ---------------

     3.1 MEDY shall submit  firm,  non-cancelable  purchase  orders for Products
pursuant  to this  Agreement  at least 60 days  before  delivery  of Products is
requested.  MEDY  submits  herewith its initial  purchase  order for delivery of
Products during the 90 day period  beginning 60 days after the execution of this
agreement.

     3.2 Products are sold F.O.B. Micro-Medical's facility.

     3.3 In case of any conflict or ambiguity  between this  Agreement  and each
separate  purchase order,  this Agreement shall prevail,  unless it is expressly
set forth in writing and executed by the parties  hereto,  that a deviation from
this agreement  shall prevail over a contrary  provision in this  Agreement.  No
unilateral  term set forth in any  order,  invoice or other  document,  shall be
effective to negate any term contained in this  Agreement,  irrespective  of the
delivery or acceptance of a product under such document.


                                       2
<PAGE>

4. TERM
   ----

     4.1 The term of this Agreement shall be for 66 months from January 1, 1995.
The parties hereto may extend or renegotiate the term by mutual written consent.

     4.2 In addition,  Micro-Medical hereby grants MEDY a first right of refusal
to distribute all future  products  directly  related to the items  described in
Schedule A, and any  revisions,  modifications,  enhancements,  or  improvements
thereto, or substitutions therefore. Micro-Medical shall give MEDY not less than
60 days notice of any such product and, unless  affirmatively  rejected by MEDY,
such product will be included herein.

     4.3 In addition,  Micro-Medical hereby grants MEDY a first right of refusal
to  purchase  any  portion  of the  products  listed  on  Schedule  A for  which
Micro-Medical  may  receive a bona fide offer from a third party  ("Third  Party
Offer").  Upon receipt of a Third Party Offer,  Micro-  Medical shall convey the
terms  thereof to MEDY which may  (within 90 days of the date it  receives  said
notice  from  Micro-Medical)  exercise  its right  hereunder  and  purchase  the
products  designated  in the Third Party Offer at the same price and on the same
terms set forth in the Third Party Offer.  If MEDY does not exercise  this right
of first refusal,  then this Agreement becomes  non-exclusive as to any products
purchased pursuant to the Third Party Offer provided such purchase occurs within
30 days after the expiration of MEDY's right of first refusal  contained in this
section.

5. TERMINATION
   -----------

     5.1 MEDY may terminate this Agreement at anytime upon 90 days notice.

     5.2 Upon  termination,  MEDy is still liable for all orders placed prior to
the  termination  date in  accordance  with the terms of this  Agreement and the
submitted  purchase  orders  and  shall  promptly  return to  Micro-Medical  all
technical and clinical information in its possession regarding the Products.

     5.3 In addition to any termination rights of MEDY granted elsewhere in this
Agreement, MEDY may terminate this agreement without penalty if:

          (a) Any Product infringes any claim or patent of any other person; or

                                       3
<PAGE>


          (b) Micro-Medical fails to deliver Products 60 days after the purchase
     order therefor is placed by MEDY and accepted by Micro-Medical; or

          (c) A petition is filed  either  voluntarily  or  involuntarily  by or
     against  Micro-Medical  under the federal Bankruptcy Code, or a petition is
     filed against Micro-Medical for the appointment of a receiver; or

          (d)  any   governmental   approval   for  any   Product  or   facility
     manufacturing any Product is revoked, denied, cancelled, or withdrawn; or

          (e)   Micro-Medical    unreasonably   refuses   to   incorporate   any
     technological  or  ornamental  design  modifications  to  Products,   which
     modifications were proposed, in writing, by MEDY; or

          (f) If any substantiated  action or claim for damages resulting from a
     defect in any of the products listed on Schedule a is made against MEDY.

          (g) If MEDY notifies  Micro-Medical  of a substantiated  technological
     problem with any of the products listed on Schedule A and  Micro-Medical is
     unable to remedy the  problem  within 45 days from the date  notice of such
     problem is given to Micro-Medical by MEDY.

6. PRICING
   -------

     6.1 MEDY shall be free to fix its resale prices and other  conditions  with
its customers and sub-distributors.

     6.2 Unless otherwise agreed,  all sales of the Products to MEDY shall be at
the price set forth on  Schedule  "A",  which  prices  will be  reviewed  by the
parties  quarterly  during  the  first  year  of  this  contract,  and  annually
thereafter. No adjustment to the price (either increase or decrease, as a result
of changes in direct  costs) shall affect any open  purchase  order for Products
received prior to such adjustment.

7. CREDIT TERMS
   ------------

     7.1 Payment terms are 30 days after invoice date on all Products.

     7.2  At  such  time  as   Micro-Medical   receives   an  order  from  MEDY,
Micro-Medical  will  ship the  order  within  60 days FOB  Micro-Medical  to the
destination designated by MEDY.

                                       4
<PAGE>


     7.3 In the event that any governmental  authority under current law, or any
subdivision  thereof,  requires the payment of stamp taxes,  registration taxes,
turnover  taxes,  or other taxes or duties  levied on a  transaction  under this
Agreement by reason of the execution or the performance thereof, it shall be the
responsibility  of MEDY to pay all such taxes when due.  MEDY further  agrees to
indemnify  Micro-Medical  and hold it harmless  from all  liability  of whatever
nature which may be imposed on Micro-Medical  arising out of MEDY's failure, for
whatever reason, duly to pay such taxes.

     7.4 If  Micro-Medical  is  indebted  to MED for any  amount at the time any
payment by MEDY to Micro-Medical  is due (whether  pursuant to Paragraph 15.4 or
otherwise),  MEDY may credit 100% of such  payment  against a  reduction  in the
amounts due MEDY from Micro-  Medical.  Such credit will be taken by notice from
MEDY to Micro-Medical.

8. EXPENSES INCURRED BY MEDY
   -------------------------

     8.1 MEDY shall pay all expenses incurred by it in performance of its duties
as a seller and  distributor  of the  Products  and  Micro-Medical  shall not be
responsible for any such expenses.

     8.2 At its own expense,  MEDY shall give  appropriate  instructions  to its
purchasers  of the Products for the use of the Products  strictly in  accordance
with the specifications and manuals applicable to such Products.

9. WARRANTY
   --------

     9.1  Micro-Medical  warrants  that the  Products  are fit for all  purposes
described  in Micro-  Medical's  authorized  technical  data or sales  promotion
materials and are merchantable under their respective  descriptions in such data
or promotion  materials  Micro-Medical  hereby  disclaims  all other  warranties
relating to the Products, whether expressed or implied.

     9.2 Claims under the above  warranty shall be dispatched in writing by MEDY
to Micro-  Medical as soon as a warrant  claim is received by MEDY but not later
than thirty (30) days after the expiration of the warrant  period.  The warranty
period shall commence at the time of delivery of MEDY.

10. CHANGES IN THE PRODUCTS
    ------------------------

     10.1 MEDY will not  incorporate  any  technological  or  ornamental  design
modifications without the prior written consent of Micro-Medical,  which consent
will not be unreasonably withheld.

                                       5
<PAGE>


     10.2  Micro-Medical  has the right to make  changes to the  Products at any
time,  provided  the  changes  do not  affect  the form or the  function  of the
Product.  This does not,  however,  apply to the Products  already subject to an
accepted purchase order from MEDY or to the labeling,  trademarks,  trade names,
identifying  marks or other  differentiating  technological or ornamental design
modifications incorporated into the Products under this Agreement.

     10.3 Micro-Medical and MEDY, b reason of Section 12 hereof,  have exchanged
secrecy  agreements for the purpose of planning future technology and ornamental
modifications to the Products.  The result of such planning will be to determine
what, if any,  technological  or ornamental  design changes will be incorporated
into the Products to be delivered to MEDY pursuant to this Agreement.

11. ASSIGNMENT
    ----------

     11.1 This  Agreement  shall not be  assignable  by either party without the
prior written consent of the other party.

     11.2 MEDY may appoint sub-distributors for the Products.

12. CONFIDENTIALITY
    ---------------

     12.1 Any  technical,  commercial  or other  information  of a  confidential
nature disclosed by one party (the  "Disclosing  Party") to the other party (the
"receiving  Party") shall be treated as  confidential  and the  Receiving  party
shall not during the  duration of this  Agreement or for a three (3) year period
after  termination,  without the prior written consent of the Disclosing  Party,
disclose or pass it to any third party  except as may be required for the proper
performance  of the  Receiving  Party's  duties  hereunder,  to  its  employees,
regulatory  authorities or customers of MEDY or Micro-Medical or for the purpose
of legally enforcing its rights  hereunder.  Any transfer of such information to
any person including persons permitted to receive such information as aforesaid,
shall only be done  following  execution  of an  undertaking  by such  person to
maintain the confidentiality of such information. The Receiving Party shall take
steps  appropriate  under  the  circumstances  to  protect  the  status  of such
information as confidential.

     12.2 The information which is at time of disclosure or thereafter becomes a
part of the public  domain  through no fault of the Receiving  Party,  which has
been independently  developed by the Receiving Party as shown by written record,
and hereafter lawfully disclosed to the Receiving Party by the third party which
did not acquire the information under an obligation of confidentiality  from the
disclosing party will be excluded from the confidential information.

                                       6
<PAGE>


13. INFRINGEMENT OF INDUSTRIAL PROPERTY RIGHTS
    ------------------------------------------

     13.1 If MEDY or  Micro-Medical  becomes  aware  that the sale or use of the
Products  might infringe any  industrial  property right of a third party,  MEDY
shall give  Micro-Medical or Micro-Medical  shall give MEDY, as the case may be,
prompt notice thereof. MEDY shall cooperate with Micro-Medical at the expense of
Micro-Medical  in the  defense of any  action,  suit or claim by any third party
alleging any such infringement by Micro-Medical.

     13.2 Each party  undertakes  to inform the other party  immediately  of all
acts of unfair  competition  and of all  infringements  of  industrial  property
rights  of  Micro-Medical   and  MEDY   respectively.   Micro-Medical  and  MEDY
respectively  shall,  at no cost of the other  party,  give the other  party all
reasonable assistance in the protection against such acts and infringements.  If
Micro-Medical  decides not to protect its rights, MEDY may do so at its own cost
and with the assistance of Micro-Medical.

14. RELIEFS
    -------

     14.1 Either party shall e excused from fulfillment of any obligations other
than payment of product under this  Agreement only to the extent that and for so
long as such  performance  is prevented or delayed by causes  beyond its control
such as industrial  disputes,  riots,  floods, war, warlike  hostilities,  fire,
embargo,  shortage of labor or parts,  power,  fuel, means of  transportation or
common  lack of other  necessities,  which  shall be informed to the other party
without any delay.

15. MISCELLANEOUS
    -------------

     15.1  Waiver.  The  failure  of any part to insist in any  instance  upon a
strict performance of the provisions and conditions of this Agreement, shall not
be construed as a waiver for the further of any of the provisions and conditions
herein  contained,  but the same  shall  continue  and  remain in full force and
effect.

     15.2 Alteration, Etc. No alteration or amendment to this Agreement shall be
valid  unless such  alteration  or amendment is reduced to writing and signed by
the parties hereto.

     15.3  Notices.  Any notice  required  or  permitted  to be given under this
Agreement by one of the parties to the other, shall be given for all purposes by
delivery in person, by telex, by registered air mail, postage prepaid,  telegram
or by telefax addressed to:

                                       7
<PAGE>


     MEDY             Medical Dynamics, Inc.
                      99 Inverness Drive, East
                      Englewood, CO 80112
                      Attn:  Van a. Horsley, President
                      tel:  (303) 790-2990
                      fax:  (303) 799-1378

     Micro-Medical    Micro-Medical Devices, Inc.
                      317 Paragon Way
                      Castle Pines Village, CO 80103
                      Attn:  Edwin L. Adair, M.D., President
                      tel:  (303)
                      fax:  (303)

     Each  party may change its  address  by written  notice  given to the other
party in the manner set forth above.

     Unless otherwise  specifically  provided for herein, such notice shall take
effect upon receipt by  addressee,  provided that such notice shall be deemed to
have  arrived upon the  expiration  of ten (10) days from the date of sending in
case of mail and  forty-eight  (48)  hours  from the hours of sending in case of
telegram, telex, or telefax.


                                       8
<PAGE>


     15.4 Loan. Provided Micro-Medical conveys to MEDY adequate collateral, MEDY
will loan up to  $120,000  to  Micro-Medical  pursuant  to the  promissory  note
attached hereto.

     15.5  Sublease.  MEDY will  sublease  ____  square feet of office and other
space  in  MEDY's  existing  facilities  to  Micro-Medical  for the term of this
Distribution  Agreement.  MEDY and  Micro-Medical  will mutually agree as to the
definition of the space to be subleased.  Micro- Medical will pay MEDY $____ per
month as rent for the  subleased  space during the term of the  sublease,  which
rent  will  be  subject  to  adjustments  based  on any  adjustments  in  MEDY's
underlying  lease.  Micro-Medical  will also  reimburse  MEDY $___ per month for
anticipated use by  Micro-Medical of MEDY's  employees.  Both the rental payment
and the  reimbursement  for  employees  will be paid to MEDY not later  than the
first day of each month,  commencing  June 1, 1995.  The rental  payment and the
reimbursement  for employees  are intended to compensate  MEDY for actual direct
and  indirect  expenses  incurred by MEDY in  providing  space and  employees to
Micro-Medical;  consequently,  the parties  will review  Micro-Medical's  use of
MEDY's space not less than quarterly during the first year of this agreement and
annually thereafter, and will adjust the charges to Micro-Medical as the parties
may deem appropriate.

16. APPLICABLE LAW AND ARBITRATION
    ------------------------------

     16.1  This  Agreement  and  every  agreement  or sales  contract  resulting
herefrom, shall be governed by, and construed in accordance with the laws of the
State of  Colorado  as such law shall from time to time be in  effect,  and such
laws shall also govern in the settlement,  by arbitration,  court proceedings or
otherwise,  any and all  disputes  arising  between  the  parties as well as the
validity of the arbitration clause in Article 16.2 below.

     16.2 Any  controversy or claim arising out of or relating to this contract,
or the breach  thereof,  shall be settled by binding  arbitration  in accordance
with the Arbitration  Rules of the American  Arbitration  Association,  Judicial
Arbiter Group of Boulder, Colorado, or other recognized arbitration forum in the
Denver,  Colorado Metropolitan area, and judgment upon the award rendered by the
arbitrator(s)  may be  entered in any court  having  jurisdiction  thereof.  All
arbitration  proceedings  will be  held in  Denver,  Colorado,  and the  laws of
Colorado  (except for  conflict of laws  principles)  shall apply to all matters
arising hereunder.


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<PAGE>


     IN WITNESS  WHEREOF,  the parties have hereunto caused this Agreement to be
duly executed as of the day and year first above written.


MEDICAL DYNAMICS,                             MICRO-MEDICAL DEVICES, INC.



By: /s/ Van A. Horsley                        By: /s/ Edwin L. Adair
   ---------------------------                   -------------------------------
   Van A. Horsley, President                     Edwin L. Adair, M.C., President


                                       10
<PAGE>


                                   SCHEDULE A

     All  Products  Related  to  the  Universal   Sterile  Endoscopy  System  TM
including, but not limited to the following:


ITEM                           PATENT                     PRICE
----                           ------                     -----

Sterilizable Video           4.914,521
Camera Cover, being          reissue
the following:               RE.34,002

   1.)  Sterile                                   To Be Determined Per Agreement
   CCD Drapes
   (Single Chip)
   (Three Chip)

   2.)  USES  Camera

Sterile Surgical             App. No.             To Be Determined Per Agreement
Coupler and Drape            08/350,682


Windowed Self-               App. No.             To Be Determined Per Agreement
Centering Drape              08/318,271
for Surgical Camera


<PAGE>



                                   SCHEDULE B

TRADEMARKS OWNED BY MICRO-MEDICAL DEVICES, INC.

"USES" TM
Universal/Sterile Endoscopy System TM
Micro-Endoscopes TM
Micro-Laparoscopes TM
Micro-Arthroscopes TM
Micro-Systoscopes TM
Micro-Systo-Urethroscopes  TM 
Micro-Uretheroscopes TM  
Micro-FiberEndoscopes  TM
Micro-Hysteroscopes TM  
Micro-Salphingoscopes  TM 
Steril-CCD TM Coupler/Drape TM
Steri-Stick TM USES Camera TM 
SuperNova Light Source TM

Removable Core Endoscopes TM
Tethered Channels TM
Tethered Sheath TM

Adair Imaging Stone Basket TM
Adair Imaging Balloon Catheter TM
Safe Entry System TM
Access Expansion System TM
Biliary Stone Management System TM
Adair Imaging Cholangiogram Catheter TM

Adair Imaging Steerable Guide Wire TM

Liga-Loop TM
Liga-Stitch TM
Electro-Liga-Loop TM

Sterile Endoscopy Systems TM
Sterile Imaging Systems TM

Endotracheal Intubation System TM
Electronic Colposcopy TM
Percutaneous Laparoscopic Gastrostomy TM
Laparoscopic Intraperitoneal Biopsy System TM
Laparoscopic Barbitage System Tm
Laparoscopic Intraperitoneal Biopsy System with Imaging Needle TM