MEMORANDUM OF UNDERSTANDING


         This Agreement, dated as of November 1, 1996, between Videolabs, Inc.
(the "Company") and Ward Johnson, residing at 4507 Mooreland Avenue South,
Edina, Minnesota ("Johnson").

         WHEREAS, Johnson has served as the President and CEO of the Company;
and

         WHEREAS, Johnson and the Company desire to terminate Johnson's
employment as an officer of the Company on the terms and conditions set forth
herein;

         NOW, THEREFORE, the parties hereto agree as follows.

         1. Resignation. Effective November 1, 1996, Johnson hereby resigns from
each and every office and employment position with the Company with the limited
exception that beginning November 1, 1996 and continuing for the next seventeen
(17) months thereafter, Johnson shall serve as an employee of the Company solely
for the purpose of coordinating the consulting work to be provided to the
Company by Intertrade Associates Corp. as provided for in Section 3 hereof. The
compensation to be paid to Johnson for his services in coordinating such
activity shall be $1000 per month payable in accordance with the Company's
normal payroll schedule. At the end of such seventeen (17) month period
Johnson's employment shall terminate and no additional compensation or benefits
will be payable to Johnson with respect to his status as an employee of the
Company, except as specifically provided for herein. During this seventeen (17)
month term, the Company shall provide Johnson with the same health benefits
provided to officers of the Company from time to time. Upon expiration of such
seventeen (17) month term, Johnson shall be eligible for COBRA benefits from the
Company. As promptly as practicable, Johnson shall return to the Company all
documents, financial statements and other financial data, product information,
trade secrets, customer lists and other materials, records or information
relating to the Company and its business, whether in documentary form or stored
in computer readable discs or similar electronic storage devices ("Company
Information").

         2. Temporary Appointment. The Company agrees to cause Johnson to be
appointed as of November 1, 1996, to the position of Chairman of the Board of
Directors of the Company until the next annual meeting of the Company's
shareholders. In such position Johnson will have no operating responsibilities
nor any authority over the officers, employees or directors of the Company and
his sole function as Chairman will be to preside over meetings of the Board of
Directors. Johnson shall receive the same amount and type of compensation as
non-employee Directors of the Company, including payment of meeting fees and
discretionary awards of stock options. Johnson will have voice mail at the
Company and use of limited secretarial services but shall have no office or desk
at the Company's premises.


     3. Consulting Services.

                  (a) The Company shall retain Johnson's consulting firm,
         Intertrade Associates Corp., a Minnesota company ("Intertrade") to
         perform certain consulting services for the Company for a period of
         seventeen (17) months, commencing November 1, 1996. The following
         monthly fees shall be payable to Intertrade upon satisfactory
         performance of such services subject to adjustment as provided in
         paragraph 3(b) below:

                  Month 1 through Month 3            $ 9000 per month
                  Month 4 through Month 6            $ 7000 per month
                  Month 7 through Month 9            $ 5000 per month
                  Month 10 through Month 17          $ 3000 per month

         Payments shall be made monthly against invoice from Intertrade upon
         approval by the Company's CEO or CFO.

                  (b) The amounts payable by the Company in connection with the
         consulting services referred to in Paragraph 3(a) shall be reduced by
         fifty percent (50%) of the amount of "Net Revenues" (as hereinafter
         defined) which are earned by Johnson or Intertrade during the seventeen
         (17) month term of the consulting arrangement. Johnson shall submit a
         monthly statement of Net Revenues showing the details of the
         calculation of the Net Revenues and described herein. Fifty percent
         (50%) of the Net Revenues will be deducted from the final payments due
         Johnson under Paragraph 3(a); provided that if such final payments are
         not sufficient to reimburse the Company for such 50% of Net Revenues,
         Johnson shall personally reimburse the Company for the shortfall. For
         the purposes of this Agreement, the term "Net Revenues" shall mean:

                  (i) salary paid to Mr. Johnson by businesses other than the
                  Company;

                  (ii) the gross revenues of Intertrade other than the
                  consulting payments paid pursuant to Paragraph 3(a) and less
                  the amount of all expenses incurred by Intertrade in earning
                  such revenues, except compensation or benefits (including but
                  not limited to reimbursement of expenses) to Johnson or any
                  relative of Johnson; and

                  (iii) the net income calculated in accordance with the
                  previous subparagraph for any new company of which Johnson is
                  at least a fifty percent (50%) owner but specifically
                  excluding Amcom, Inc. and Z.H. Computer, Inc.

                  (c) The Company shall pay Intertrade a bonus of $5,000 upon
         delivery to the Company of each of the following three products
         provided such product is satisfactory in the sole discretion of the
         Company: Lo Cost Camera, Portable Camera, USB Camera. For purposes of
         this paragraph, "delivery" shall be defined as the first shipment of
         each such product to a final customer for payment by such customer.

                  (d) The Company shall permanently transfer to Intertrade at no
         cost the computer used by Johnson while an employee of the Company.
         Johnson shall provide the Company with a disc of Company data and files
         stored on such computer. The Company will transfer to Intertrade, where
         possible at minimal cost to the Company, any software licenses needed
         to operate any software currently loaded on to such computer.

         4. Continuing Assistance. For the next seventeen (17) months, Johnson
agrees to assist the Company at no cost other than reimbursement for direct
out-of-pocket expenses incurred by Johnson, in connection with any matters
(including but not limited to any litigation, governmental investigations or
inquiries) currently underway or which may arise in the future and which relate
to actions which occurred during his tenure as an officer or employee of the
Company. Johnson agrees to assist the Company in connection with the preparation
of disclosure documents and periodic reports by the Company under federal or
state securities laws or regulations, NASD or stock exchange rules or other
similar requirements. Such assistance shall include prompt completion and return
of Director and Officer Questionnaires relating to his tenure as an officer or
employee of the Company.

         5. Confidentiality. Johnson agrees that he shall forever hold as
confidential and not disclose to any person any Company Information or any trade
secrets, proprietary, financial, competitive or technical information regarding
the Company, its business, products or customers of which he has knowledge,
except as may be required by law.

         6. Noncompetition. Johnson shall not, and Johnson shall cause
Intertrade and any other corporation or entity which is controlled by Johnson
not to, (i) engage in any business, (ii) own or control any interest in or
control any business or entity, or (iii) be employed by any business or entity,
whether as an officer, director, employee, consultant or independent contractor,
which competes with the business of the Company anywhere in the United States
for a period of seventeen (17) months from the date of this Agreement.

         7. Future Development Activities. For a period of seventeen (17) months
from the date of this Agreement, in the event that Johnson, Intertrade or any
other entity controlled by Johnson shall create or develop any technology,
technique, product or device which may be useful or of interest to the Company
in connection with the business, technologies, techniques or products of the
Company (a "Development"), Johnson shall offer, or shall cause Intertrade or
such other entity to offer, to the Company the exclusive right of first refusal
to purchase, license or otherwise acquire or utilize such Development on
commercially reasonable terms which reflect both the anticipated costs and
benefits associated with pursuing such Development. Johnson shall provide
written notice to the Company of such Development and the terms of his offer of
all development rights to such Development and the compensation to be paid to
Johnson as a result thereof. The Company shall have the option for a period of
thirty 30 days to accept such offer in writing. In the event that the Company
determines to accept such offer, such Development shall be sold, licensed or
otherwise transferred by Johnson to the Company pursuant to such terms. In the
event that the Company declines to match such offer, Johnson will abandon the
Development and will not sell, license, or otherwise transfer all or any portion
of such Development to any other person or entity.

         8. Termination of Prior Agreement; Mutual Releases. Each of the Company
and Johnson hereby acknowledge and agree that this Agreement shall supersede the
Employment Agreement dated February 1, 1994 between the Company and Johnson and
that such Employment Agreement is hereby terminated and of no further force or
effect. Each of the Company and Johnson hereby forever releases the other from
and waives any claims of any kind which either may have against the other
arising from or in connection with Johnson's employment by the Company except as
provided in Sections 5, 6 and 7.

         9. Public Announcement. Any public announcement of the termination of
Johnson's termination of employment with the Company shall be subject to the
prior approval of each of the Company and Johnson, which approval shall not be
unreasonably withheld.

         10. Miscellaneous.

                  (a) Notices. All notices permitted or required to be given
         hereunder shall be in writing and shall be deemed given if delivered
         personally or by overnight courier service or five (5) days after
         having been mailed by certified mail, return receipt requested and
         postage prepaid, to the parties at the following addresses (or at such
         other address for a party as may be specified by like notice):

                           (i)      If to the Company:

                                    Videolabs, Inc.
                                    10925 Bren Road East
                                    Minneapolis, Minnesota 55343

                           (ii)     If to Johnson:

                                    Mr. Ward Johnson
                                    4507 Mooreland Avenue South
                                    Edina, Minnesota 55425

                  (b) Assignment. Neither party shall assign its rights under
         this Agreement without the prior written consent of the other party.
         The respective rights and obligations of the parties set forth in this
         Agreement shall be binding on and inure to the benefit of the parties
         hereto and their respective successors and permitted assigns.

                  (c) Expenses. Each party shall bear its respective costs and
         expenses incurred in connection with the preparation of this Agreement.

                  (d) Severability. If any provision of this Agreement is held
         to be invalid or unenforceable, such invalidity or unenforceability
         shall not affect or impair the validity or enforceability of the
         remaining provisions of this Agreement.

                  (e) Waiver. Any waiver of a provision of this Agreement must
         be in writing signed by the party waiving its rights and shall apply
         only in the specific instance and for the specific purpose given. The
         giving of a waiver in one instance or for one purpose shall not create
         any implied obligation to give a waiver in another instance or for
         another purpose.

                  (f) No Third Party Obligations. Nothing expressed or implied
         in this Agreement is intended to confer upon any person(s) or legal
         entity other than Johnson and the Company, and their respective
         successors and assigns, any rights, remedies, obligations or
         liabilities under or by reason hereof.

                  (g) Entire Agreement. This Agreement constitutes the entire
         agreement between the parties hereto and supersedes all prior
         agreements and understandings, both written and unwritten, with respect
         to the subject matter hereof. This Agreement may not be amended except
         in a writing duly executed by Johnson and the Company.

                  (h) Governing Law. This Agreement shall be governed by and
         construed and enforced in accordance with, the laws of the State of
         Minnesota.

                  (i) Headings. Titles to sections hereof are for information
         purposes only.

                  (j) Remedies. In the event of the violation or the threatened
         violation by Johnson of any of the covenants contained in this
         Agreement, the Company shall have (i) the right and remedy to
         specifically enforce the provision of Paragraphs 5, 6 and 7 of this
         Agreement, it being acknowledged that any such violation or threatened
         violation will cause irreparable injury to the Company and that money
         damages will not provide an adequate remedy to the Company, and (ii)
         any and all damages available and to which it is entitled by law.

                  (k) Construction of Agreement. This Agreement is the product
         of negotiations between Johnson and the Company, Johnson acknowledges
         that he was afforded the opportunity to consult with legal counsel, and
         no provision shall be construed for or against either party by reason
         of ambiguity in language.

                  (l) ADEA/MHRA Waiver. Johnson may rescind and revoke this
Agreement for any reason within fifteen (15) calendar days after signing it. To
be effective, the rescission or revocation must be in writing and hand delivered
or mailed to the Company's legal counsel, James B. Lockhart, Popham, Haik,
Schnobrich & Kaufman, Ltd., 222 South Ninth Street, Minneapolis, Minnesota
55402, within the 15-day period. If mailed, the rescission or revocation must be
postmarked within the 15-day period, properly addressed as set forth in the
preceding sentence, and sent by Certified Mail, Return Receipt Requested. If
delivered by hand, it must be given to James B. Lockhart within the 15-day
period.

         IN WITNESS WHEREOF, the parties have set their hand and seal through
their duly authorized representatives on the date first above written.


                                    VIDEOLABS, INC.




                                    By   /s/
                                         ------------------------
                                         James W. Hansen
                                         Its President






                                         /s/
                                         ------------------------
                                         WARD JOHNSON