Document:

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                                                                  EXHIBIT 10.2.7

                         CONSULTING SERVICES AGREEMENT

     Effective August 30, 1999, ("Effective Date") Linuxcare, Inc., a Delaware
corporation with offices at 6034 Fulton Street, San Francisco, CA 94121
("Linuxcare") and Macmillan USA, Inc., a Maryland corporation (the "Company" or
"Macmillan") with offices at 201 West 103 Street, Indianapolis, IN 42690, agree
as follows (the "Agreement"):

     1.  Services. Linuxcare shall use reasonable commercial efforts to
         --------
undertake and complete the technical support services specified in Schedule A
("Services") in accordance with and substantially on the schedule specified
therein. However, the Company understands that Linuxcare's performance is
dependent in part on the Company's cooperation with Linuxcare and Company's
provision of materials and data necessary for Linuxcare to complete the
Services. Accordingly, dates or time periods relevant to performance by
Linuxcare hereunder shall be appropriately and equitably extended to account for
any delays due to the Company. From time to time Company may propose additional
services that it wants Linuxcare to perform by providing an amended Schedule A.
Linuxcare will review such amended Schedule A reasonably and in good faith and
discuss with Company the proposed addition; each addition will become effective
upon signature by both parties hereto. Linuxcare may either perform the Services
itself, or through subcontractors, but the use of such subcontractors shall only
be permitted with the written consent of the Company. Linuxcare shall be solely
responsible for the selection and supervision of all subcontractors.

     2.  Payment and Forecast.
         --------------------

         a.  Company shall make payments to Linuxcare for Services in accordance
with Schedule A. Each payment will be made in U.S. dollars in and from the
United States and will be made no later than forty five (45) days from the
receipt of Linuxcare's invoice for such amounts. Such amounts shall be billable
to Company each month for time spent in the immediately preceding month and
shall be submitted with a detailed report describing such Services rendered.
Company shall be responsible for any such taxes that accrue with the exception
of taxes on Linuxcare's net income. No payment to Linuxcare will be made with
government funds.

         b.  Linuxcare acknowledges and agrees that, except as provided in this
Section 2, it shall not be entitled to, and the Company shall not be obligated
to pay, any monies or other compensation for the Services provided and rights
granted under this Agreement.

         c.  Company shall provide a forecast to Linuxcare of the estimated
number of hours of Services per month needed hereunder in accordance with
Schedule A prior to the commencement of each calendar quarter.

     3.  Ownership. As between the parties, Company will retain or own all
         ---------
right, title and interest (including all patent rights, copyrights, trade secret
rights, mask work rights and

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

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other rights throughout the world (collectively, "Intellectual Property
Rights")) in its Proprietary Information (as defined below) and in the results
that may be produced as part of the Services rendered hereunder ("Results"),
provided that Company shall have no ownership of or license to any Developer
Stock except as may be set forth in a license agreement executed between the
parties. "Developer Stock" means Linuxcare's Proprietary Information,
preexisting software, engines, development tools and routines, as well as
derivatives and modifications thereof; provided that if any such derivative or
modification is made in the course of performance under this Agreement, then it
will qualify as Developer Stock only if it (a) has substantially the same
functionality as other Developer Stock and (b) has general applicability apart
from the Services. The parties hereby make any assignments necessary to achieve
the foregoing ownership provisions and will reasonably assist each other in
perfecting such ownership.

     4.   Representations and Warranties.
          ------------------------------

          a.  Linuxcare represents and warrants that: (i) the Services shall be
performed and Results created in accordance with, and shall not violate,
applicable laws, rules or regulations, and standards prevailing in the industry;
(ii) Linuxcare has full power and authority to enter into and perform its
obligations under this Agreement; this Agreement is a legal, valid, and binding
obligation of Linuxcare, enforceable against it in accordance with its terms
(except as may be limited by bankruptcy, insolvency, moratorium, or similar laws
affecting creditors' rights generally and equitable remedies); and (iii)
entering into this Agreement will not violate the Charter or By-laws of
Linuxcare or any material contract to which it is a party:

          b.  The Company represents and warrants that: (i) it has full power
and authority to enter into and perform its obligations under this Agreement;
(ii) this Agreement is a legal, valid, and binding obligation of the Company,
enforceable against it in accordance with its terms (except as may be limited by
bankruptcy, insolvency, moratorium, or similar laws affecting creditors' rights
generally and equitable remedies); and (iii) entering into this Agreement will
not violate the Charter or By-laws of the Company or any material contract to
which it is a party.

          c.  Indemnity by Linuxcare. Linuxcare will defend or settle, at its
sole expense, any action brought against Company, to the extent based on a third
party claim that the Services or Results provided by Linuxcare infringe any
third party U.S. patent, trademark, copyright or other proprietary right.
Linuxcare will indemnify, hold harmless and pay any settlement and other costs
and damages incurred by Company as a result of such claim; provided that
Linuxcare is (i) promptly informed in writing of such claim and action; (ii)
given exclusive authority and control to defend, settle or otherwise remove or
avoid such claim and action; and (iii) provided with all reasonable assistance
that it requests in connection with such claim and action. Linuxcare shall not
be responsible for costs or expenses incurred without its prior written
authorization. The remedy set forth in this Section 4c shall not apply to the
extent that such infringement claim arises from (i) use of the Results in a
manner for which it was not intended, (ii) use of the Results with any
equipment, hardware or software where the Results would not have infringed such
rights; (iii) modifications by or at the direction or request of Company or its
end users; (iv) willful infringement by Company or its end users; (v) the
negligence or misconduct of Company or its end users; or (vi) breach of this
Agreement or a Linux license by a

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party other than Linuxcare. Linuxcare shall have no obligation or responsibility
under this Section 4c for damages, costs, expenses and other losses to the
extent that Company knew of the possibility of, and failed to take reasonable
actions to, prevent or mitigate such losses, costs, expenses and damages. In the
event that Linuxcare reasonably believes that any aspect of the Services or
Results may infringe any intellectual property rights, Linuxcare may, at its
option, (i) procure for Company the right to continue obtain such Services; (ii)
modify the Service or Results to avoid such infringement; or (iii) immediately
terminate this Agreement. SECTION 4c STATES THE ENTIRE LIABILITY AND OBLIGATION
OF LINUXCARE AND THE EXCLUSIVE REMEDY OF COMPANY WITH RESPECT TO INFRINGEMENT OF
ANY INTELLECTUAL PROPERTY RIGHTS.

     5.   Confidentiality. Each party agrees that all code, inventions,
          ---------------
algorithms, know-how and ideas and all other business, technical and financial
information it obtains from the other are the confidential property of the
disclosing party ("Proprietary Information" of the disclosing party). All
software, engines, tools and techniques used by Linuxcare to perform the
Services shall be Proprietary Information of Linuxcare. The parties hereto agree
and acknowledge that all Results shall be Proprietary Information of Company.
Except as expressly and unambiguously allowed herein, the receiving party, with
respect to the disclosing party's Proprietary Information, will: (i) hold such
Proprietary Information in strict confidence; (ii) not disclose such Proprietary
Information to any third party (except subcontractors) without the disclosing
party's consent; (iii) use diligent efforts to protect such Proprietary
Information, such efforts to be no less than the efforts used by disclosing
party to protect its own similar confidential and proprietary materials; and,
(iv) similarly bind its employees and subcontractors in writing. The receiving
party shall not be obligated under this Section 5 with respect to information
the receiving party can document:

          (1)  is or has become readily publicly available without restriction
through no fault of the receiving party or its employees or agents; or

          (2)  is received without restriction from a third party lawfully in
possession of such information and lawfully empowered to disclose such
information; or

          (3)  was rightfully in the possession of the receiving party without
restriction prior to its disclosure by the other party; or

          (4)  was independently developed by employees or consultants of the
receiving party without access to such Proprietary Information; or

          (5)  must be disclosed in order to comply with any relevant law,
regulation, or judicial order.

     The parties hereby acknowledge that any breach of this Section 5 will cause
irreparable harm to the disclosing party, and that damages will not be an
adequate remedy for such a breach. Accordingly, the parties hereby agree that
the injured party will be free to seek equitable relief for such a breach,
including preliminary injunction if appropriate, without need to post a bond.

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     6.   Limited Liability.
          -----------------

          a.   NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE,
LINUXCARE SHALL NOT BE LIABLE OR OBLIGATED UNDER ANY SECTION OF THIS AGREEMENT
OR UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE
THEORY (I) FOR ANY AMOUNTS IN EXCESS IN THE AGGREGATE OF THE FEES PAID TO IT
HEREUNDER OR (II) FOR ANY COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY,
SERVICES OR RIGHTS OR (III) FOR LOSS OR CORRUPTION OF DATA OR INTERRUPTED USE.

          b.   NEITHER PARTY SHALL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER
OF THIS AGREEMENT UNDER ANY CONTRACT. NEGLIGENCE, STRICT LIABILITY OR OTHER
THEORY FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES. NOTHING IN THIS SECTION 6B
SHALL AFFECT THE PARTIES' RIGHTS AND OBLIGATIONS UNDER SECTION 4C.

     7.  Warranty and Disclaimer. Linuxcare represents and warrants to Company
         -----------------------
that the Services performed under this Agreement will be performed in a
professional and workman-like manner. EXCEPT AS STATED IN THIS AGREEMENT,
LINUXCARE MAKES NO WARRANTIES TO ANY PERSON OR ENTITY WITH RESPECT TO ANY
DEVELOPER STOCK, ANY DELIVERABLE OR ANY SERVICES OR LICENSES AND DISCLAIMS ALL
WARRANTIES, EXPRESS AND IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF
MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE. COMPANY'S
AND END USER'S SOLE AND EXCLUSIVE REMEDY, AND LINUXCARE'S SOLE AND EXCLUSIVE
LIABILITY, FOR ANY BREACH OF THE FOREGOING WARRANTY IS LINUXCARE'S COMMERCIALLY
REASONABLE EFFORTS TO RE-PERFORM THE SERVICES AT NO ADDITIONAL COST TO COMPANY.

     8.   Term and Termination.
          --------------------

          a.  The term of this Agreement shall be for one (1) year from the date
hereof or until terminated in accordance with the express terms of this
Agreement.

          b.  Either party may terminate this Agreement upon 30 days notice to
the other party of a breach of this Agreement unless such breach is cured within
that period. Termination under this Section 7(a) shall be Company's sole remedy
for any delay or failure by Linuxcare to perform Services under this Agreement.

          c.  Company may terminate this Agreement at any time upon sixty (60)
days notice to Linuxcare, provided that Company pays all accrued amounts due for
Services rendered up to the effective date of such termination.

          d.  Sections 3 through 7 of this Agreement, any accrued rights to
payment, and any remedies for breach of this Agreement shall survive termination
or expiration of this Agreement.

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     9.   Publicity and Press Releases. Except to the extent necessary under
          ----------------------------
applicable laws or for ordinary marketing purposes, the parties agree that no
press releases or other publicity relating to the substance of the matters
contained herein will be made without joint approval.

     10.  Assignment. Neither party shall have any right or ability to assign,
          ----------
transfer, or sublicense any obligations or benefit under this Agreement without
the written consent of the other except that a party may assign and transfer
this Agreement and its rights and obligations hereunder to any third party who
succeeds to substantially all its business or assets.

     11.  Notice. All notices under this Agreement shall be in writing, and
          ------
shall be deemed given when personally delivered or three days after being sent
by prepaid certified or registered U.S. mail to the address of the party to be
noticed as set forth herein or such other address as such party last provided to
the other by written notice.

     12.  Independent Contractor. Linuxcare agrees to perform the Services
          ----------------------
hereunder solely as an Independent Contractor. The parties to this Agreement
recognize that this Agreement does not create any actual or apparent agency,
partnership, franchise, or relationship of employer and employee between the
parties. Neither party is authorized to enter into or commit the other party to
any agreements. Further, neither party shall be entitled to participate in any
of the other party's benefits, including without limitation any health or
retirement plans. The Company shall not be liable for Worker's Compensation,
unemployment insurance, employers' liability, employer's FICA, social security,
or withholding tax, for or on behalf of Linuxcare or any other person consulted
or employed by Linuxcare in performing Services under this Agreement.

     13.  Miscellaneous.
          -------------

          a.  The failure of either party to enforce its rights under this
Agreement at any time for any period shall not be construed as a waiver of such
rights.

          b.  No changes or modifications or waivers are to be made to this
Agreement unless evidenced in writing and signed for and on behalf of both
parties.

          c.  In the event that any provision of this Agreement shall be
determined to be illegal or unenforceable, that provision will be limited or
eliminated to the minimum extent necessary so that this Agreement shall
otherwise remain in full force and effect and enforceable.

          d.  This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to the conflicts of laws
provisions thereof. Headings herein are for convenience of reference only and
shall in no way affect interpretation of the Agreement.

          e.  Except as otherwise expressly stated in this Agreement, the rights
and remedies of a party set forth herein with respect to failure of the other to
comply with the terms of this Agreement (including, without limitation, rights
of full termination of this Agreement) are not exclusive, the exercise thereof
shall not constitute an election of remedies and the aggrieved

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party shall in all events be entitled to seek whatever additional remedies may
be available in law or in equity.

          f.   No liability or loss of rights hereunder shall result to either
party from delay or failure in performance (other than payment) caused by force
majeure, that is, circumstances beyond the reasonable control of the party
affected thereby, including, without limitation, acts of God, fire, flood, war,
government action, compliance with laws or regulations (including, without
limitation, those related to infringement), strikes, lockouts or other serious
labor disputes, or shortage of or inability to obtain material or equipment.

          g.   EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY DISCLAIMERS
AND LIABILITY AND REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL BARGAINED
FOR BASES OF THIS AGREEMENT AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT AND
REFLECTED IN DETERMINING THE CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER THIS
AGREEMENT.

                                         LINUXCARE

                                         /s/ Signature Illegible

                                         By  _______________

                                         Address: 6034 Fulton St.
                                         San Francisco, CA 94121

                                         MACMILLAN USA, INC.

                                         /s/ Signature Illegible

                                         By  _______________

                                         Address: 201 W 103RD ST
                                         INDIANAPOLIS IN 46290
                                         ---------------------

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                                  SCHEDULE A

                                   SERVICES
                                   --------

1.   SERVICES: During the term of this Agreement, Linuxcare shall provide
technical support services to support end users of Macmillan Mandrake-branded
and Quake-branded products.

     Hours. Linuxcare support personnel will be available to provide support to
     -----
     end users 24 hours a day/ 7 days a week.

     Language. Support will be provided only in English.
     --------

     Method. Linuxcare shall provide standard support to end users via world
     ------
wide web, e-mail and facsimile. In addition, Linuxcare shall make telephonic
support available at the cost of * for the first minute a call for telephone
support and * for each additional minute of such telephone call.

     Resolution. Linuxcare will send an end user a resolution for an incident or
     ----------
a report detailing the status of resolution efforts within 24 hours of Linuxcare
being notified of the incident by end users.

     Company Personnel. Linuxcare will provide technical support to the
     -----------------
following two Company personnel: (1) Steve Schafer and (2) Jim Lefevere. Such
personnel may be changed by Company upon written notice to Linuxcare so long as
only two persons shall have such access. Linuxcare shall have no obligation to
provide support to additional Company personnel.

     End User Assistance. Linuxcare's Services under this Agreement are
     -------------------
conditional upon end user and Company providing reasonable assistance to
Linuxcare, including without limitation: (i) end users providing Linuxcare with
accurate information regarding an incident; and (ii) end users taking all steps
necessary to carry out procedures for the rectification of errors or
malfunctions.

     Escalation. Where a reported incident meets the following guidelines, such
     ----------
incident shall be escalated to the status of "Linuxcare Professional Services"
and the parties may mutually agree in a separate writing upon the terms and
conditions under which Linuxcare will provide such services, including without
limitation, additional fees to be charged by Linuxcare.

     Eligibility of Software. Linuxcare Services shall not include services
     -----------------------
requested as a result of, or with respect to, the following, and any such
services if provided by Linuxcare shall be provided (if at all) as part of a
separate Linuxcare Professional Services contract:

          (i) accident; unusual physical, electrical or electromagnetic stress;
neglect; misuse; failure of electric power, air conditioning or humidity
control; failure of rotation media;

[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

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operation of the Software with other media not meeting or not maintained in
accordance with the manufacturer's specifications; or causes other than ordinary
use;

          (ii)   improper installation by End User or use of the software that
deviates from any operating procedures established by Company; or

          (iii)  modification, alteration or addition or attempted modification,
alteration or addition of the software undertaken by persons other than Company
or Company's authorized representatives.

     Hardware Support:
     ----------------

     For Linux Operating System products, Linuxcare shall provide support in the
following areas: (i) installation of Linux distribution and (ii) installation
and support of drivers located on Linux distribution CD's.

     For Quake and Quake II products, Linuxcare shall provide the following
support: (i) installation of Quake on hardware which meets the minimum
specifications for systems as set forth in the applicable documentation, and
(ii) configuration of support for hardware devices support by Quake CD's.

     For Oracle Products, Linuxcare shall provide the following support: (i)
installation of Oracle on hardware which meets the minimum specifications for
systems as set forth in the applicable documentation, and (ii) configuration of
support for hardware devices support by Oracle.

2    FEES AND FORECAST. The fees for Services (exclusive of telephone support
     -----------------
which is calculated separately in accordance with Section 1 above) will be
calculated based upon the following service level matrix:

     LEVEL     HOURS OF SERVICE           FEES
               DURING A CALENDAR MONTH

      1        0-125 hours                     * per/hr
      2        126-150 hours                   * per/hr
      3        151-175 hours                   * per/hr
      4        176-200 hours                   * per/hr
      5        201-225 hours                   * per/hr
      6        226-250 hours                   * per/hr
      7        251-300 hours                   * per/hr
      8        301-350 hours                   * per/hr
      9        351-400 hours                   * per/hr
     10        Over 401 hours                  * per/hr

[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

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     Fee Calculation. Fees will be charged based upon the cumulative actual
     ---------------
number of hours of Service provided by Linuxcare each month. For example, if
Company utilized 306 hours of Service during a calendar month, Company would be
obligated to pay Linuxcare U.S.   (306 hours charged at   per hour) or if
Company utilized 224 hours of Service during a calendar month, Company would be
obligated to pay Linuxcare U.S. $   (224 hours charged at    per hour).

     Forecasts. No more than seven days prior to each calendar quarter, Company
     ---------
shall provide notice to Linuxcare of the estimated hours of Service for each
month during the next calendar quarter ("Forecast"). This Forecast will be non-
binding on the level of hourly support required hereunder, but will constitute
Company's good faith estimate of its use of Linuxcare Services.

                                       9<PAGE>

                                                                  EXHIBIT 10.2.8

                                                      Agreement Number: NES 99-1

                           MASTER SERVICES AGREEMENT

     This agreement ("Agreement") is made as of June 1, 1999 ("Effective Date"),
between Linuxcare, Inc., a Delaware corporation with an office at 650 Townsend
Street, San Francisco, CA 94103, USA (Phone: 415-354-4878; Fax: 415.701.7457)
("Linuxcare") and the "Customer" listed below.

Customer: NEC Software Ltd.                Contact: Atsuo Suzuki
Address:  1-18-6 Shinkiba Koutou-Ku        Phone:   +81-3-5569-3251
          Tokyo 136-8608, Japan            Fax:     +81-3-5569-3308
                                           E-Mail:  suzuki@d2.bsd.nes.nec.co.jp

                             SERVICES INFORMATION

                    Service Level:          Gold SLA as defined in Exhibit B
                    Service Fee Period:     October 1, 1999 - September 30, 2000
                    Service Incident Cap:   40
                    Service Fee:            *

                               SERVICES PROVIDED

     Subject to payment of all applicable fees, Linuxcare will use reasonable
commercial efforts to perform the support services specified in the Statement of
Work ("SOW") attached hereto as Exhibit B ("Services") and incorporated herein,
in accordance with the Terms and Conditions attached hereto as Exhibit A, and
incorporated herein (collectively the "Exhibits"). Linuxcare may change the SOW,
the Service Fee, and the services that will be performed for a particular
Service Level, at any time; such changes will take effect at the beginning of
the next Service Fee Period. Customer understands that Linuxcare's performance
is dependent in part on Customer's actions. Accordingly, any dates or time
periods relevant to performance of Services by Linuxcare shall appropriately and
equitably extended to account for any delays resulting from changes to Customer
products or otherwise due to Customer. Customer may request additional hours or
levels of Services ("Extended Services"), which Linuxcare may provide at
Linuxcare's sole discretion, provided that Customer pays Linuxcare's then
current fees for such Extended Services.

     The Exhibits contain, among other things, warranty disclaimers and
     ------------------------------------------------------------------
liability limitations. Any different or additional terms of any related purchase
---------------------
order, confirmation, or similar form even if signed by the parties after the
date hereof shall have no force or effect. References in this Agreement or the
Exhibits to a capitalized term appearing on this cover page shall have the
meaning or value of such term on this cover page.

NEC Software: Linuxcare:

By: /s/ YOSHINARI FURUMICHI          By: /s/ Justin T. Powell

Name: YOSHINARI FURUMICHI            Name: Justin T. Powell
      -------------------                  ----------------

Title: GENERAL MANAGER               Title: Director of Asia Pacific Operations
       ---------------                      -----------------------------------

[*]= CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>

                                   EXHIBIT A

                             TERMS AND CONDITIONS

1.   Training. Subject to payment of all fees, Linuxcare will provide the
     --------
     training specified in Linuxcare's current, published "Linuxcare Training
     Programs" documentation. Unless otherwise arranged between Customer and
     Linuxcare, all training shall occur at Linuxcare's facilities in San
     Francisco, California. The fees for training will be Linuxcare's current,
     published training fees, less the Training Discount ("Training Fees").

2.   Fees and Payment. Customer shall pay Linuxcare the fees for the selected
     ----------------
     Service Level shown in the Services Information section of this Master
     Services Agreement for each Service Fee Period. ("Service Fees"). Customer
     will pay the Service Fees for the initial Service Fee Period within 30 days
     of the Effective Date. Customer will pay the Service Fees for subsequent
     Service Fee Periods within 30 days after receipt of Linuxcare's invoice.
     Customer will also pay Linuxcare all Training Fees and Extended Services
     fees within 30 days after receipt of Linuxcare's invoice therefor. All
     payments are non-refundable. Any payments over 15 days overdue will bear a
     late payment fee of the lower of 1.5% per month of the outstanding balance
     or the maximum rate allowed by law. Linuxcare shall refund to Customer any
     amounts actually paid to Linuxcare by Customer which exceed amounts due
     hereunder, minus any costs, fees, taxes, duties or other implications, if
     any, arising in connection with such overpayment.

3.   Proprietary Rights. As between the parties, Linuxcare will retain all
     ------------------
     right, title and interest in and to any software, tools, techniques, and
     other materials used in connection with providing the Services ("Linuxcare
     Materials"). As between the parties, Customer will retain all right, title
     and interest in and to any software, products, documentation and other
     materials it supplies. Linuxcare hereby assigns to Customer all right,
     title and interest, in any work product created as part of the Services
     ("Work Product"), but this assignment does not include any portion of the
     Linuxcare Materials, and will not prevent Linuxcare from using the
     expertise, ideas and know-how learned while performing Services for other
     purposes (including, without limitation, for itself or on behalf of third
     parties).

4.   Confidential Information. Each party ("receiving party") agrees that all
     ------------------------
     code, inventions, algorithms, know-how and ideas and all other business,
     technical and financial information it obtains from the other party
     ("disclosing party"), but not including work product that is assigned to
     Customer by Linuxcare pursuant to Section 3, are the confidential property
     of the disclosing party ("Confidential Information" of the disclosing
     party). Except with the consent of the disclosing party, the receiving
     party shall hold in confidence and not use or disclose any Confidential
     Information of the disclosing party for at least five (5) years after this
     Agreement expires or otherwise terminates. The receiving party's
     nondisclosure obligation shall not apply to information it can document:
     (i) is generally available to the public other than through breach of this
     Agreement; (ii) is rightfully disclosed to the receiving party by a third
     party; (iii) is independently developed by the receiving party without use
     of any Confidential Information of the disclosing party, or (iv) is
     disclosed to pursuant to law or an order requirement, guidance, or request
     of a court or government authority. Because of the unique and proprietary
     nature of the Confidential Information, it is understood and agreed that
     the disclosing party's remedies at law for a breach by the receiving party
     of its obligations under this Section will be inadequate and that the
     disclosing party shall be entitled to equitable relief (including without
     limitation provisional and permanent injunctive relief and specific
     performance). Nothing stated herein shall limit any other remedies provided
     under this Agreement or available to the disclosing party at law. Upon
     expiration or termination of this Agreement for any reason, each party will
     return all copies of all Confidential Information of the other party in its
     possession or control.

5.   Termination. This Agreement will have an initial term of the earlier of one
     -----------
     year from the Effective Date or the date that Customer uses up its
     Incidences under its Service Level (initial "Service Fee Period") and shall
     automatically renew on each anniversary of the initial Service Fee Period
     for subsequent Service Fee Periods (subject to payment of Linuxcare's then
     current rates for additional Incidences)
<PAGE>

     unless terminated by either party. For the purposes of this Agreement,
     "Incident" shall mean a single identified customer issue or problem. Each

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<PAGE>

     Incident is only valid during the Service Fee Period it was purchased in.
     One call or e-mail may include multiple Incidents, and a single Incident
     may require more than one call or e-mail to resolve. Either party may
     terminate this Agreement upon thirty (30) days written notice to the other
     party, except if Linuxcare is terminating the Agreement such termination
     will not be effective until the end of any fully paid-up Service Fee
     Period. Linuxcare may terminate this Agreement at any time in the case of
     non-payment by Customer of any fees, unless Customer pays such fees in full
     within ten (10) days after such notice. Sections 4, 5, 7, 8, and 9 of this
     Agreement, and all accrued rights to payment, shall survive termination.
     Termination is not an exclusive remedy and all other remedies will be
     available whether or not termination occurs.

6.   Warranty and Disclaimer. Linuxcare hereby warrants to Customer, and only
     -----------------------
     Customer, that all Services shall be performed in a professional and
     workmanlike manner. THE PARTIES ACKNOWLEDGE THAT THIS IS AN AGREEMENT FOR
     SERVICES AND NOT FOR THE SUPPLY OF GOODS. EXCEPT FOR THE FOREGOING,
     LINUXCARE MAKES NO OTHER WARRANTIES OR REPRESENTATIONS AS TO THE SERVICES
     RENDERED, AND HEREBY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES,
     INCLUDING BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY,
     FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT. LINUXCARE FURTHER
     DISCLAIMS ANY WARRANTY THAT THE SERVICES WILL SUCCEED IN RESOLVING ANY
     PROBLEM, OR THAT ANY WORK PRODUCT OF THE SERVICES WILL BE FREE FROM PROGRAM
     ERRORS.

7.   Limitation of Liability. NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR
     -----------------------
     OTHERWISE, AND EXCEPT FOR BODILY INJURY, LINUXCARE SHALL NOT BE LIABLE OR
     OBLIGATED WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT OR UNDER ANY
     CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY:
     (I) FOR ANY AMOUNTS IN EXCESS IN THE AGGREGATE OF THE FEES PAID TO IT
     HEREUNDER WITH RESPECT TO THE APPLICABLE SERVICES; (II) FOR ANY COST OF
     PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY, SERVICES OR RIGHTS; OR (III)
     FOR INTERRUPTION OF USE OR LOSS OR CORRUPTION OF DATA.

8.   NEITHER PARTY TO THIS AGREEMENT SHALL BE LIABLE OR OBLIGATED WITH RESPECT
     TO THE SUBJECT MATTER OF THIS AGREEMENT OR UNDER ANY CONTRACT, NEGLIGENCE,
     STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY: (I) FOR ANY MATTER
     BEYOND ITS REASONABLE CONTROL, OR (II) FOR ANY INCIDENTAL, INDIRECT OR
     CONSEQUENTIAL DAMAGES OR LOST PROFITS.

9.   Legal Compliance. Customer shall comply with the U.S. Foreign Corrupt
     ----------------
     Practices Act and all applicable export laws, restrictions, and regulations
     of the U.S. and foreign agency or authority. Each party agrees that it
     shall comply with applicable law in performance of its obligations under
     this Agreement.

10.  Miscellaneous. This Agreement is not assignable or transferable by Customer
     -------------
     without the prior written consent of Linuxcare; any attempt to do so
     shall be void. Linuxcare may assign this Agreement in whole or in part, or
     subcontract the performance of Services to third parties. Services may be
     used solely by Customer for Customer's internal use for Customer's own
     benefit. The parties agree that they are independent contractors and that
     this Agreement and relations between Linuxcare and Customer hereby
     established do not constitute a, joint venture, agency or contract of
     employment between them, or any other similar relationship. Neither party
     has the right or authority to assume or create any obligation or
     responsibility on behalf of the other. Any notice, report, approval or
     consent required or permitted hereunder shall be in writing. No failure or
     delay in exercising any right hereunder will operate as a waiver thereof,
     nor will any partial exercise of any right or power hereunder preclude
     further exercise. If any provision of this Agreement shall be adjudged by
     any court of competent jurisdiction to be unenforceable or invalid, that
     provision shall be limited or eliminated to the minimum extent necessary so
     that this Agreement shall otherwise remain in full force and effect and
     enforceable. Any waivers or amendments shall be effective only if made in
     writing. This Agreement is the complete and exclusive statement of the
     mutual understanding of the parties and supersedes and cancels all previous
     written and oral agreements and communications relating to the subject
     matter of this Agreement. The prevailing party in any action to enforce
     this Agreement will be entitled to recover its attorney's fees and costs in
     connection with such action.

                                                                     Page 2 of 3
<PAGE>

11.  Governing Law and Jurisdiction. This Agreement which is in English, shall
     ------------------------------
     be interpreted in accordance with the commonly understood meaning of
     the words and phrases hereof in the United States of America. Any dispute,
     controversy or claim arising out of or relating to this Agreement or to a
     breach thereof, including its interpretation, performance or termination,
     shall be finally resolved by arbitration. The arbitration shall be
     conducted in English and in accordance with the commercial rules of the
     International Chamber of Commerce which shall administer the arbitration
     and act as appointing authority. The arbitration, including the rendering
     of the award, shall take place in San Francisco, California which shall be
     the exclusive forum for resolving such dispute, controversy or claim. For
     the purposes of this arbitration, the provisions of this Agreement and all
     rights and obligations thereunder shall be governed and construed in
     accordance with the laws of the State of California. United States of
                                              ----------
     America, without regard to the conflicts of laws provisions thereof. The
     decision of the arbitrators shall be binding upon the parties hereto, and
     the expense of the arbitration (including without limitation the award of
     attorneys' fees to the prevailing party) shall be paid as the arbitrators
     determine. The decision of the arbitrators shall be executory, and judgment
     thereon may be entered by any court of competent jurisdiction.
     Notwithstanding anything contained in this Paragraph, each party shall have
     the right to institute judicial proceedings against the other party or
     anyone acting by, through or under such other party in any federal or state
     court located within the County of San Francisco, CA, USA in order to
     enforce the instituting party's rights hereunder through reformation or to
     obtain injunctive relief ("Court Actions"). Accordingly, each party agrees
     to the exclusive and personal jurisdiction of the state and federal courts
     located within the County of San Francisco, CA, USA for such Court Actions.

NEC Software:                        Linuxcare:

By: /s/ YOSHINARI FURUMICHI          By: /s/ Justin T. Powell

Name: YOSHINARI FURUMICHI            Name: Justin T. Powell

Title: GENERAL MANAGER               Title: Director of Asia Pacific Operations

                                                                     Page 3 of 3
<PAGE>

                                   EXHIBIT B

                               STATEMENT OF WORK

CONTROL

     Document ID                    NES_SOW
     Location                       /Documents/Linuxcare/NEC/NES/NES_SOW.doc
     Originator                     Jay Powell
     Issue Date                     9/21/1999
     Status                         Approved
     Version                        1.0

DISTRIBUTION

     Linuxcare                      Jay Powell, Jim Fisher
     NES                            Atsuo Suzuki

     VERSION                 MODIFIED BY   DATE      DESCRIPTION

     0.1                     Jay Powell    08/23/99  Draft Proposal
     0.2                     Jay Powell    09/10/99  Revised incident cap to by
                                                     Suzuki-san of NES. as
                                                     advised by Lawyers. lower
                                                     price as proposed Minor
                                                     formatting changes

     1.0                     Jay Powell     9/21/99  Revised incident cap to
                                                     proposed by Suzuki-san of
                                                     lower price further as NEC.

                                                                     Page 1 of 7
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<S>                                                                <C>
1      INTRODUCTION                                                3

2      RELATIONSHIP OBJECTIVES                                     4

   2.1  SHORT-TERM OBJECTIVES                                      4
   2.2  LONG TERM OBJECTIVES                                       4

3      SERVICE PROPOSAL-SHORT-TERM (REF 2.1)                       5

   3.1  SLA SERVICES                                               5
      3.1.1  Hours of Operation:                                   5
      3.1.2  Distribution:                                         5
      3.1.3  Platforms:                                            5
      3.1.4  Phone, Web, e-mail support:                           5
      3.1.5  Resolution or report:                                 5
      3.1.6  First point of contact:                               6
      3.1.7  Authorized customer contacts:                         6
      3.1.8  Telnet access to customer's system:                   6
      3.1.9  View Active Incident Status online:                   6
     3.1.10  Software updates:                                     6
     3.1.11  Access to Script library:                             6
     3.1.12  Access to online configuration DB:                    6
   3.2  PROBLEM REPORTING PROCEDURES                               6
   3.3  SERVICE RESTRICTIONS                                       7
   3.4  SOW SERVICE PERIOD AND RENEWAL                             7
</TABLE>

                                                                     Page 2 of 7
<PAGE>

1 INTRODUCTION

This NEC Software Statement of Work No. 99-1 ("SOW") effective October 1, 1999
is agreed upon by sets forth the Agreement between Linuxcare Inc. ("Linuxcare")
and NEC Software, Ltd. ("NES") regarding the services to be provided by services
provided by Linuxcare pursuant to the Master Services Agreement between
Linuxcare and NES dated October 1, 1999.

This document is intended solely for NES and Linuxcare and is not be circulated
outside of these organizations without written consent from Linuxcare Inc.

                                                                     Page 3 of 7
<PAGE>

2    RELATIONSHIP OBJECTIVES

2.1  SHORT-TERM OBJECTIVES

NES and Linuxcare shall undertake a 12-month trial composed of standard Gold
Service Level Agreement ("SLA") back-line support for NES's Linux system
integration business. The Gold SLA as specified herein will ensure that the NES
engineers are provided the support services that they require to provide the
quality of their Linux based support solutions to their business partners.
During this trial period Linuxcare and NES will evaluate their ability to work
together in the Japanese market to encourage the growth of Linux based solutions
deployed in corporate Japan.

2.2  LONG TERM OBJECTIVES

Assuming successful conclusions of the above objectives (Ref. 2.1) Linuxcare and
NES will evaluate NES entering into a "Linuxcare Certified Partner" program that
includes NES providing Linux Services across multiple lines of business
currently offered by Linuxcare.

Clarification of these objectives shall occur following evaluation of the first
year support agreement and the short-term objectives defined above (Ref. 2.1).
Should NES and Linuxcare decide to enter into a future agreement this shall
represent a separate contract from this initial backline support agreement.

                                                                     Page 4 of 7
<PAGE>

3 SERVICE PROPOSAL - SHORT-TERM (REF 2.1)

Linuxcare will use reasonable commercial efforts to provide Gold SLA services,
which for purposes of this SOW has been deemed "Gold" Service Level Agreement
("SLA") as further defined in Section 3.1. These services are to be used by NES
to support NES's "Customer Base" from their Tokyo Linux support center.
"Customer Base" shall mean those third party customers, which NES has a
contractual obligation to provide Linux operating support services as of the
effective date of this SOW. Additional third party customers may be added to the
"Customer Base" with the prior written permission of Linuxcare.

3.1  SLA SERVICES

The Gold SLA is based on the following Linuxcare standard Gold SLA service
options set forth below:

3.1.1  HOURS OF OPERATION:

9am - 6pm (JST) weekdays excluding Japanese national holidays.

3.1.2  DISTRIBUTION:

Distribution support includes all major Distributions. Major Distributions are
defined as Caldera, Debian GNU/Linux, Laser5 Linux, Linux-Mandrake, LinuxPPC,
Red Hot, Slackware Linux, Stampede, SuSE, TurboLinux, UltraLinux, and Yellow
Dog.

3.1.3  PLATFORMS:

Platforms that will be supported are the Alpha, Intel, MIPS, and SPARC
platforms, and such other platforms as Linuxcare may make generally available to
its other Gold SLA service customers.

3.1.4  PHONE, WEB, E-MAIL SUPPORT:

Telephone, World Wide Web, and e-mail support services will be available during
the hours set forth above. Telephone support will be provided in the Japanese
language support subject to Linuxcare's ability (using commercially reasonable
efforts) to staff its Japanese office with trained personnel. NES and Linuxcare
will cooperate, with each providing assistance and each at their own respective
cost, to provide Japanese telephone support until such time as Linuxcare is able
to appropriately staff its Japanese office with trained personnel. Linuxcare's
shall have the right to use existing Japanese speaking staff based in its San
Francisco office to fulfill its obligations under this Section 3.1.4.

3.1.5  RESOLUTION OR REPORT:

Resolution or report will be issued one (i) business day (as defined by the
Hours of Operation) following report of an incident to Linuxcare.

                                                                     Page 5 of 7
<PAGE>

3.1.6  FIRST POINT OF CONTACT:

The first point of contact for NES will be a Linuxcare level 2 engineer (as
defined by Linuxcare).

3.1.7  AUTHORIZED CUSTOMER CONTACTS:

NES shall designate two (2) Authorized customer contacts and provide their names
and contact information to Linuxcare. Linuxcare shall have no obligation to
provide support to NES personnel other than the NES Authorized customer
contacts.

3.1.8  TELNET ACCESS TO CUSTOMER'S SYSTEM:

Telnet access into the NES's support center servers provided to Linuxcare
engineers at the discretion of NES, but at no additional cost to Linuxcare.

3.1.9  VIEW ACTIVE INCIDENT STATUS ONLINE:

Linuxcare shall make summary online incident reports available to NES for each
incident reported to Linuxcare by NES.

3.1.10  SOFTWARE UPDATES:

Selected Linux software updates will be made available to NES through the
Linuxcare web site (http://www.linuxcare.com). NES rights with respect to such
                    ------------------------
Software updated will be

subject to the applicable of source licenses.

3.1.11  ACCESS TO SCRIPT LIBRARY:

Access to the Linuxcare Script Library will be made available to NES (and not
NES customers) through the Linuxcare web site (http://www.linuxcare.com). These
                                               ------------------------
scripts are not to be released to NES customers without prior written consent
from Linuxcare for each instance.

3.1.12  ACCESS TO ONLINE CONFIGURATION DB:

Access to the Linuxcare online configuration database will be made available to
NES through the Linuxcare web pages (http://www.linuxcare.com). This access is
                                     ------------------------
solely granted to NES and is not to be released to NES customers.

3.2  PROBLEM REPORTING PROCEDURES

When NES contacts Linuxcare with an incident report, NES shall provide the
following information:

     1.   Name of NES engineer placing the call. This individual must be one of
          the Authorized customer contacts.

                                                                     Page 6 of 7
<PAGE>

     2.   Name of individual and individual's company that logged the initial
          incident report with NES.

     3.   Description of the incident.

     4.   Description of the steps taken by NES to resolve the problem locally.

Linuxcare will track this information; NES shall not intentionally (or through
gross negligence) mislead Linuxcare regarding any of the above points.

3.3  SERVICE RESTRICTIONS

The services provided by Linuxcare are to be used at NES's support center and
are intended to allow for NES to support Customer Base. NES may not use
Linuxcare services provided hereunder for the purpose of providing corporate
Linux support. Accordingly, NES shall not:

     *    Sell Linuxcare support packages to Japanese corporate customers
          without prior written consent from Linuxcare for each sale.

     *    Make any additional or conflicting representations or warranties on
          behalf of Linuxcare.

     *    Use the trademark Linuxcare name, logo, or catch phrase "At the Center
          of Linux" without prior written consent from Linuxcare in each case.

3.4  SOW SERVICE PERIOD AND RENEWAL

The initial term of this SOW shall continue for the period of 12 months of
service or 40 reported incidents, whichever comes first (the "Term"), unless
earlier terminated under this Master Service Agreement. This SOW shall renew for
additional Terms in accordance with the terms of the Master Service Agreement.
Two (2) months prior to expiration of an existing Term or at 30 reported
incidents (whichever comes first), NES and Linuxcare shall meet to: (1) evaluate
the quality of the service provided, and (2) evaluate whether it is appropriate
to adjust the duration of a future Term (including the number of incidents
reported therein), and (3) in the case of agreement with respect to an
adjustment of the duration of the Term, mutually agree in writing as to the
duration of such future Term.

NEC Software:                         Linuxcare:

By: Yoshinari Furumichi               By:  /s/ Justin T. Powell
Name: YOSHINARI FURUMICHI             Name: Justin T. Powell
Title: GENERAL MANAGER                Title: Director of Asia Pacific Operations

                                                                     Page 7 of 7

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