Document:

<PAGE>

DISTRIBUTOR Name:                       B SQUARE CORPORATION
MS Agreement Number:                    *
Effective Date:                         OCTOBER 1, 2004
Expiration Date:                        SEPTEMBER 30, 2005
Distributor's MS ID Number:             0000051459
Territory:                              *

MICROSOFT OEM DISTRIBUTION AGREEMENT FOR SOFTWARE PRODUCTS FOR EMBEDDED SYSTEMS

This MICROSOFT OEM DISTRIBUTION AGREEMENT FOR SOFTWARE PRODUCTS FOR EMBEDDED
SYSTEMS ("Agreement") is entered into between Microsoft Licensing, GP A general
partnership organized under the laws of: State of Nevada, U.S.A ("MS") and the
company identified below ("DISTRIBUTOR") as of the Effective Date.

This Agreement consists of the following:

-  this Signature Page

-  Address Schedule

-  General Terms and Conditions

-  Performance Rebate Program Schedule

-  Use of MOO and ECE Schedule

By signing below, DISTRIBUTOR represents and warrants that the information
DISTRIBUTOR provides below and on each of the attached forms is accurate, and
that DISTRIBUTOR has read and understood, and will act in accordance with, all
of the terms set forth in the attached documents.

MICROSOFT LICENSING. GP                    B SQUARE CORPORATION

A general partnership organized under the  A company organized under the laws
laws of: State of Nevada, U.S.A            of: WASHINGTON, USA

BY: ________________________________       BY: /s/ Brian T. Crowley
      (signature)                              --------------------------------
                                               (signature)

Name: _______________________________      Name: Brian T. Crowley
      (printed)                                  (Printed)

Title: ______________________________      Title: President & CEO
      (printed)                                   (Printed)

Date: _______________________________       Date: 9-3-04

                                  CONFIDENTIAL

07/12/04 59528v.2
Microsoft OEM Distribution Agreement for Software Products for Embedded Systems

                                                                     Form 2.8.42
                                          Document Tracking Number: *

*  Confidential Treatment Requested

<PAGE>

                               ADDRESSES SCHEDULE
                      SHIPPING, BILLING, REBATES, SUPPORT

DISTRIBUTOR "SHIP TO" ADDRESS              DISTRIBUTOR BILLING ADDRESS

*                                          *
B SQUARE CORPORATION                       *
110 110th Ave. N.E.                        B SQUARE CORPORATION
Suite 200                                  110 110th Avenue NE
BELLEVUE, WA 98004                         Suite 500
UNITED STATES                              Bellevue, WA 98004
                                           UNITED STATES

Telephone: *                               Telephone: *
Fax: *                                     Fax: *
E-mail: *                                  E-mail: *

DISTRIBUTOR "MS EMBEDDED ADMINISTRATOR     DISTRIBUTOR TECHNICAL SUPPORT NUMBER
CONTACT" ADDRESS

*                                          425-519-5900
*
B SQUARE CORPORATION
110 110th Ave. N.E.
Suite 200
Bellevue, WA 98004
UNITED STATES

Telephone: *
Fax: *
E-mail: *

                                    PAYMENT

SEND PAYMENTS VIA WIRE TRANSFER ONLY TO:

Microsoft Licensing, GP
*
*
*
*
*
*
*

DISTRIBUTOR SHALL INCLUDE APPLICABLE MS INVOICE NUMBER(S) ON ALL PAYMENTS

Or to such other address or account as MS may specify from time to time.

                                       2

                                  CONFIDENTIAL

Microsoft OEM Distribution Agreement for Software Products for Embedded Systems,
# * dated October 1, 2004 between MS and B SQUARE CORPORATION

*  Confidential Treatment Requested
<PAGE>

DISTRIBUTOR "MOO AND ECE ADMINISTRATOR"

DISTRIBUTOR designates as its ECE and MOO Customer Administrator(s) the
following individual(s).

                    ECE AND MOO CUSTOMER ADMINISTRATOR NAME:

*                                          *
*                                          B SQUARE CORPORATION
B SQUARE CORPORATION                       10525 Vista Sorrento Parkway
110 110th Ave. N.E.                        Suite 100
Suite 200                                  San Diego, CA 92121
Bellevue, WA 98004                         UNITED STATES
UNITED STATES
                                           Telephone: *
Telephone: *                               Fax: *
Fax: *                                     E-mail: *
E-mail: *

                                     NOTICES

Any written notices related to this Agreement must be addressed to the contact
and locations outlined below, or such other contact or addresses as either
party may hereafter specify in writing.

DISTRIBUTOR INFORMATION                    MS INFORMATION

*                                          Microsoft Licensing, GP
*                                          6100 Neil Road
B SQUARE CORPORATION                       Reno. NV 89511-1132
110 110th Ave. N.E.                        U.S.A.
Suite 500                                  Attention: OEM Contracts
BELLEVUE, WA 98004                         Phone Number: *
UNITED STATES                              Fax Number: *

Telephone: *
Fax: *
E-mail: *

With a copy to:                            Copies of all DISTRIBUTOR NOTICES
                                           shall be sent to:

                                           Microsoft Corporation
                                           One Microsoft Way
                                           Redmond, Washington U.S.A. 98052
                                           Attention: Law and Corporate Affairs
                                           Re: Microsoft Licensing, GP - OEM
                                           Device Solutions Sales

                                           With an additional copy to:

                                           Microsoft Corporation
                                           One Microsoft Way
                                           Redmond, Washington USA 98052
                                           Attention: Vice President - OEM
                                           Device Solution Sales

                                        3

                                  CONFIDENTIAL

Microsoft OEM Distribution Agreement for Software Products for Embedded Systems,
# * dated October 1, 2004 between MS and B SQUARE CORPORATION

*  Confidential Treatment Requested

<PAGE>

                          GENERAL TERMS AND CONDITIONS

1. DEFINITIONS

(a)"Additional Licensing Provisions for MS Distributor" means licensing terms
and conditions for the Licensed Product as set forth by MS in the Royalty Rate
List.

(b) "Additional Licensing Provisions for OEM Customer" means licensing terms and
conditions for the Licensed Product as set forth by MS on the "Additional
Provisions for Licensing" label affixed to the Licensed Product package.
Courtesy copies of the Additional Licensing Provisions for OEM Customer may be
available on the ECE; however, in case of conflicting or inconsistent terms
between the Additional Licensing Provisions for OEM Customer set forth on the
Licensed Product packaging and courtesy text on the ECE, the former shall
control.

(c) "Additional Rights Agreement" means a supplemental agreement that describes
such additional OEM Customer rights as MS may identify from time to time (for
example, use of Third Party Installers).

(d) "Associated Product Materials" or "APM" means COAs, documentation, external
media containing software and/or other tangible materials related to the
Licensed Product, which MS may designate from time to time as redistributable
components of a Licensed Product. DISTRIBUTOR shall acquire APM from an AR.

(e) "Authorized Replicator" or "AR" means an MS-authorized supplier of Licensed
Product. A listing of ARs may be posted at the ECE, and such listing may be
updated by MS from time to time. MS will make commercially reasonable efforts to
provide prior notice to DISTRIBUTOR of the termination of an AR's authorization
to supply Licensed Products.

(f) "Certificate of Authenticity" or "COA" means a non-removable sticker
designated by MS which is specific to the Licensed Product.

(g) "Embedded Application" means industry or task-specific software programs
and/or functionally, not generally available to consumers, that (i) provide the
primary functionality of the Embedded System, (ii) are designed to meet the
functionality requirements of the specific industry into which the Embedded
System is being marketed, and (iii) offer significant functionality in addition
to the Licensed Product software.

(h) "Embedded System" means an OEM Customer's computer system or computing
device which (i) is based on the Licensed Product(s), (ii) utilizes not more
than two(2) central processor units, (iii) is designed for use with an Embedded
Application, (iv) is not marketed as general purpose personal computing device,
and (v) is not useable as a commercially viable substitute for a general purpose
computing device such as a personal computer or multi-function server.

(i) "Image" means the Licensed Product binaries and the OEM Customer's
binaries (including, without limitation, an Embedded Application) which are
installed on the Embedded System.

(j) "Licensed Product" means the Microsoft product(s) identified as licensed on
the Royalty Rate List and in the form as available to DISTRIBUTOR from an AR
and/or a MS affiliate for redistribution to OEM Customers. A Licensed Product
may include APM, software, tools, utilities and related documentation and/or
other items identified by MS as components of the Licensed Product.

(k) "Media Packaging Guidelines" means the instruction posted on the ECE that
describe how an OEM Customer shall package and label certain media containing
the Licensed Product. DISTRIBUTOR shall refer each OEM Customer to the Media
Packaging Guidelines. MS reserves the right to modify the Media Packaging
Guidelines with sixty(60) days notice.

(l) "Microsoft Embedded Distributor Licensing and Operations Guide" means the
guide provided by MS in connection with the Agreement and published on the ECE.
The Microsoft Embedded Distributor Licensing and Operations Guide contains
general licensing, operational and product ordering information.

(m) "MS Embedded Communication Extranet" or "ECE" means the web site located at
* (or such successor URL as MS may designate from time to time). DISTRIBUTOR's
user name and initial password for the ECE will be sent to the ECE and MOO
Administrator email address provided by DISTRIBUTOR in the Notices section of
the Addresses Schedule.

(n) "MS OEM Online" or "MOO" means the Internet site located at * (or such
successor URL as MS may designate from time to time) accessed and used by
DISTRIBUTOR in connection with certain aspects of its performance under this
Agreement.

(o) "MSCORP" means Microsoft Corporation, a general partner or the direct or
indirect parent of MS, as applicable.

(p) "OEM Customer" means an original equipment manufacturer of one or more
Embedded Systems which (i) has signed a current OEM Customer Agreement provided
by DISTRIBUTOR or for which DISTRIBUTOR has received verification of current OEM
Customer status from MS, and (ii) is located within the Territory.

(q) "OEM Customer Agreement" means the pre-printed, serialized OEM Customer
License Agreement for Embedded Systems as made available by MS from time to
time. For additional information on the OEM Customer Agreement, DISTRIBUTOR
should contact its Microsoft account manager.

(r) "Royalty Rate List" means the list of Licensed Products corresponding
royalty rates, Additional Licensing Provisions for MS Distributor and other
information that MS provides as part of the Royalty Rate List.

(s) "Recovery Image" means a copy of the Image as originally installed on the
Embedded System which may be used to reinstall such Image. OEM Customer may
distribute additional software together with the Recovery Image, provided that
(i) such additional software is necessary for the installation or operation of
the Recovery Image, and (ii) OEM Customer owns or maintains effective licenses
for such additional software.

(t) "Sales-Out and Royalty Reporting Guidelines" means the format and
instructions for electronic submission to MS of sales-out information as
reasonably requested by MS (for example, end user country code or postal code)
and the number of units of Licensed Product distributed by DISTRIBUTOR posted on
ECE. MS reserves the right to modify such guidelines with sixty (60) days
notice.

(u) "Supplies" means MSCORP and other licensors or suppliers of Licensed Product
or portions thereof.

(v) "Supplemental Code" means additional or replacement code of any portion of a
Licensed Product as MS may provide to DISTRIBUTOR from time to time. Any
additional license rights or limitations related to the Supplemental Code will
be described in the Additional Licensing Provisions for MS Distributor provided
in the Royalty Rate List or in a Supplemental Code letter from MS.

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                                  CONFIDENTIAL

Microsoft OEM Distribution Agreement for Software Products for Embedded Systems,
# * dated October 1, 2004 between MS and B SQUARE CORPORATION

*  Confidential Treatment Requested
<PAGE>

(w) "Territory" means the specific country(s) or region(s) of the world set
forth on the Signature Page into or within which DISTRIBUTOR may distribute the
Licensed Product.

(x) "Third Party Installer" means a third party entity approved by MS in writing
to perform certain activities for OEM Customers(s).

(y) "Update Image" means an Image that consists of an updated version of the
Licensed Product binaries (or the previously distributed version thereof) and
an undated version of the OEM Customer's binaries (or the previously
distributed version thereof).

2.    LICENSE GRANT AND LIMITATIONS.

(a) Subject to all terms and conditions of this Agreement, MS grants to
DISTRIBUTOR a non-exclusive, limited license to distribute Licensed
Product(s) into or within the Territory only to OEM Customers, and Third
Party Installers (solely upon OEM Customer's request and after DISTRIBUTOR's
receipt and review of a copy of MS' letter to such OEM Customer approving the
applicable Third Party Installer), and other entities that MS may authorize in
writing to DISTRIBUTOR, provided that DISTRIBUTOR shall:

      (i) order and acquire from an AR only Licensed Products listed on the then
current Royalty Rate List;

      (ii) if MS has removed a Licensed Product from the then current Royalty
Rate List, only continue to distribute the Licensed Product until the earlier
of:

            (A) DISTRIBUTOR's inventory of the Licensed Product is exhausted;

            (B) a final shipment date set or advised by MS; or

            (C) cancellation or expiration of this Agreement (including any
      extensions or successor agreements);

      (iii) distribute the Licensed Product in the unopened form/packaging as
received from the AR and/or MS;

      (iv) not modify or delete the contents or packaging of the Licensed
Product;

      (v) track the COA serial numbers distributed to OEM Customers and Third
Party Installers, and submit such information to MS upon request;

      (vi) maintain a level of security sufficient to prevent loss or
unauthorized distribution of Licensed Product (including COAs and other APM).
In the event DISTRIBUTOR fails to account for distribution of Licensed Product
delivered to DISTRIBUTOR, DISTRIBUTOR shall pay MS for such missing Licensed
Product in accordance with the terms set forth in Section 4(k) below, less
undistributed Licensed Product which can be shown to the resonable satisfaction
of MS to have been destroyed by DISTRIBUTOR or lost to fire, flood or
equivalent; and

      (vii) order and acquire from an AR on behalf of OEM Customers, and deliver
to such OEM Customer, Recovery Images and Update Images that are based on
Licensed Products listed on the then current Royalty Rate List.

(b) DISTRIBUTOR shall not provide to OEM Customer any document, information or
contractual provisions that contradict, conflict with or purport to supersede
the terms and conditions of the OEM Customer Agreement, any Additional Rights
Agreement or the Additional Licensing Provisions for OEM Customer.

(c) DISTRIBUTOR shall comply with the Additional Licensing Provisions for MS
Distributor set forth in the Royalty Rate List.

(d) DISTRIBUTOR shall perform the following steps for each potential OEM
Customer as a function of its role in the licensing process. DISTRIBUTOR shall:

      (i) ensure that it uses the most current forms of the OEM Customer
Agreement and any Additional Rights Agreement(s) made available by MS to
provide additional rights to the OEM Customer;

      (ii) advise each potential OEM Customer that only an authorized signatory
of the prospective OEM Customer may execute the OEM Customer Agreement, or any
Additional Rights Agreement;

      (iii) provide the OEM Customer a courtesy copy of the Additional Licensing
Provisions for OEM Customer for the Licensed Product when the OEM Customer first
acquires such Licensed Product;

      (iv) provide the location of the OEM Customer ECE to an OEM Customer;

      (v) verify that (A) the information provided by the potential OEM Customer
is complete and correct, (B) no changes or alterations have been made to the
OEM Customer Agreement or any Additional Rights Agreement, and (C) each such
agreement has been properly completed and executed by the potential OEM
Customer;

      (vi) comply with the instructions regarding Additional Rights
Agreement(s) on the ECE if the OEM Customer requests Additional Rights
Agreement(s) from DISTRIBUTOR;

      (vii) provide Recovery Images and Update Images to OEM Customers as
received from an AR and in accordance with the Media Packaging Guidelines;

      (viii) provide Supplemental Code and any related Additional Licensing
Provisions for OEM Customer only in the manner set forth in the then current
Royalty Rate List and/or a Supplemental Code letter from MS;

      (ix) at the end of each business week, express mail to MS both OEM
Customer-signed originals of the OEM Customer Agreements and any Additional
Rights returned to DISTRIBUTOR, provided that each such OEM Customer is located
in the Territory;

      (x) upon notice from MS that an OEM Customer Agreement executed by a
potential OEM Customer is unacceptable, immediately discontinue distribution of
Licensed Product(s) to such potential OEM Customer and make reasonably
commercial efforts to retrieve any Licensed Products(s) previously distributed
to the potential OEM Customer;

      (xi) notify MS within ten (10) days of any change regarding the OEM
Customer's information.

(e) MS agrees that between the time DISTRIBUTOR obtains the OEM Customer's
signature on the OEM Customer Agreement and such date as MS countersigns (i)
DISTRIBUTOR may ship Licensed Product(s) to the OEM Customer and (ii) as
between MS and DISTRIBUTOR, the OEM Customer Agreement shall be deemed
countersigned by MS.

(f) DISTRIBUTOR shall instruct each OEM Customer that the OEM Customer may only
distribute Licensed Product(s)(including APM):

      (i) with the OEM Customer's Embedded Systems;

      (ii) which OEM Customer obtained directly from an MS-authorized
distributor; and

      (iii) in accordance with the OEM Customer Agreement.

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                                  CONFIDENTIAL

Microsoft OEM Distribution Agreement for Software Products for Embedded Systems,
# * dated October 1, 2004 between MS and B SQUARE CORPORATION

*  Confidential Treatment Requested
<PAGE>

(g) DISTRIBUTOR shall not remove or obscure any copyright, trademark or patent
notices that appear on the Licensed Product as delivered to DISTRIBUTOR.

(h) DISTRIBUTOR shall not use any name or trademark confusingly similar to or
undertake any other action that will interfere with or diminish MS or MSCORP
right, title or interest in, any Licensed Product trademark(s) or trade name(s),
and will comply with reasonable guidelines provided by MSCORP from time to time
for reference to, and use of, such Licensed Product mark(s) or name(s).

(i) (i) DISTRIBUTOR shall not use or display any logo of MS or its
Suppliers (including without limitation any stylized representation of the
Microsoft name used by MS or MSCORP) in DISTRIBUTOR's materials or packaging
unless authorized in a logo license between DISTRIBUTOR and MS or its Suppliers.

    (ii) MSCORP may, from time to time, designate one or more logos for use with
the Licensed Product. Use of such logo(s) is optional. This Agreement does not
grant DISTRIBUTOR or an OEM Customer the right to use or display MS or MSCORP
logo(s); to obtain additional information regarding availability of logo(s) and
logo licenses, DISTRIBUTOR should contact its Microsoft account manager.

(j) Upon notice from MS, DISTRIBUTOR shall promptly discontinue distribution of
Licensed Product to an OEM Customer. DISTRIBUTOR shall cooperate with MS in
investigating instances of distribution of Licensed Product(s) in violation of
this Section 2.

(k) DISTRIBUTOR shall not reverse engineer, decompile or disassemble any
Licensed Product except as permitted by applicable law which cannot be waived by
this subsection 2(k). Solely in connection with the terms and conditions of
Article 6 of the European Community's Directive for the Legal Protection of
Computer Programs, OJL 122/42 (17 May 1991), and only with respect to
jurisdictions which have adopted the same terms and conditions by legislation
implementing the Directive, DISTRIBUTOR acknowledges that information on
interoperability of the Licensed Product with other products is readily
available.

(l) MS reserves all rights not expressly granted in this Agreement.

(m) DISTRIBUTOR shall make no representation, nor any express or implied
warranty to third parties (including, without limitation, to any OEM Customer or
end users), on behalf of MS. DISTRIBUTOR shall defend, indemnify and hold MS
and its Suppliers harmless against all damages and costs, including reasonable
attorneys' fees, that MS and its Suppliers incur in connection with any warranty
or representation by DISTRIBUTOR.

(n) This Agreement does not give DISTRIBUTOR title to any Licensed Product,
packaging, papers, materials, and/or other property of MS related to a
Licensed Product. In particular:

      (i) MS has and will retain title to all Licensed Product (and related
papers and materials) from the time that the Licensed Product is acquired by
DISTRIBUTOR from ARs until DISTRIBUTOR distributes the Licensed Products in
Compliance with the Agreement.

      (ii) As MS owns all Licensed Product(s) in the possession and control of
DISTRIBUTOR, MS may take possession of or destroy all Licensed Product
inventory (and related papers and materials) when this Agreement expires or is
canceled, or after the final shipment date as set forth in Section
2(a)(ii)(B), even if an intervening bankruptcy or insolvency case is filed by or
against DISTRIBUTOR or a receiver or trustee is appointed to operate or
liquidate DISTRIBUTOR.

      (iii) In no circumstances will any receiver or trustee of DISTRIBUTOR be
entitled to sell or distribute any Licensed Product obtained by DISTRIBUTOR
pursuant to the Agreement except in strict compliance with the terms of the
Agreement, and only with the express written consent of MS.

3. ROYALTY RATE LIST.

(a) At least fifteen (15) days prior to the first day of each month, MS will
post on the ECE, or provide to DISTRIBUTOR by electronic notice (email) or
written notice, or such other website as MS may designate from time to time the
Royalty Rate List for the upcoming month.

(b) MS may modify the Royalty Rate List upon notice to DISTRIBUTOR. Submission
of Licensed Product orders to AR(s) or distribution of Licensed Product after
the effective date of any modifications to the Royalty Rate List shall
constitute DISTRIBUTOR's acceptance of such modifications. New royalty rates
will be effective upon such notice or on the date specified on the Royalty Rate
List.

(c) The royalty rate(s) and Additional Licensing Provisions for MS Distributor
for any Licensed Product removed from the Royalty Rate List shall be as stated
on the last Royalty Rate List that included the Licensed Product.

4. REPORTS AND PAYMENTS.

(a) DISTRIBUTOR agrees that it will maintain a tracking system for a period of
three(3) years after the expiration or cancellation of this Agreement, which
allows for complete tracking of shipments by

      (i) Licensed Product - including quantity, COA sticker serial numbers,
shipment dates, and APM. Upon MS request, DISTRIBUTOR will provide a
reconciliation that will account for beginning and ending COA, Licensed Product
and APM inventory, acquisitions from ARs, distribution to OEM Customers and
Third Party Installers, customer returns, and COAs, Licensed Product and APM
that cannot be distributed for any reason;

      (ii) OEM Customer - including contact name, address, and telephone number,
and OEM Customer Agreement number, DISTRIBUTOR shall take all steps necessary to
ensure that DISTRIBUTOR's collection and provision of information as required
by the Sales-Out and Royalty Reporting Guidelines is in compliance with all
applicable national data protection laws.

(b) DISTRIBUTOR shall ensure that all reports submitted by DISTRIBUTOR to MS
under this Agreement are accurate and complete.

(c) Within fifteen (15) days after the end of each calendar month, and fifteen
(15) days after the termination, cancellation or expiration date of this
Agreement for the final full or partial month, DISTRIBUTOR shall complete and
electronically submit a sales-out and royalty report, in accordance with the
then current Sales-Out and Royalty Reporting Guidelines.

(d)(i) For each calendar month, DISTRIBUTOR shall remit payment(s) to MS as
specified in the Payment and Reporting section of the Addresses Schedule.
Subject to applicable law, a one percent (1%) monthly charge will be assessed on
all amounts that are past due.

   (ii) If MS is required by any tax authority to collect value added tax or
other transactions tax on royalties, MS will include the tax on its invoice and
DISTRIBUTOR must pay the amount in full.

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                                   CONFIDENTIAL

Microsoft OEM Distribution Agreement for Software Products for Embedded Systems,
# * dated October 1, 2004 between MS and B SQUARE CORPORATION

*  Confidential Treatment Requested

<PAGE>

      (iii) All payments must be in U.S. dollars and amounts owed will not be
satisfied by a tender or any recovery pursuant to any judgment which is
expressed in or converted by MS to any currency other than the full amount of
U.S. dollars payable under this Agreement.

(e) For each unit of Licensed Product distributed by DISTRIBUTOR, DISTRIBUTOR
agrees to pay MS the royalty rates set forth in the Royalty Rate List in effect
during the month in which Licensed Product is shipped by DISTRIBUTOR.
DISTRIBUTOR shall pay royalties within forty-five (45) days after the end of
each calendar month in which Licensed Product was shipped, and within forty-five
(45) days after the cancellation or expiration date of this Agreement for the
final full or partial month.

(f) After review of DISTRIBUTOR's financial condition, payment history and
overall credit worthiness, MS may require any combination of the following
payment assurances:

      (i) an initial payment amount equal to the estimated Licensed Product
royalties for the first calendar quarter of the Agreement

- DISTRIBUTOR may not recoup such initial payment amount against royalties due
to MS or apply it against payments to any AR.

- If DISTRIBUTOR has complied with all material terms of this Agreement when it
expires, MS will refund the initial payment amount (net of amounts due MS)
within forty-five (45) days of DISTRIBUTOR's final royalty report and payment
for Licensed Products distributed during the term of this Agreement; or

(ii) a third party guarantee, performance bond, letter of credit, prepayment of
royalties, or other security; or

(iii) periodic updated financial statements; or

(iv) written assurances of due performance.

Until the payment assurances are received and acceptable to MS, MS may suspend
DISTRIBUTOR's license rights or require ARs to refuse to fill DISTRIBUTOR's
orders.

(g) DISTRIBUTOR's obligations to pay MS royalties and to pay charges from AR
are unconditional. If DISTRIBUTOR does not meet MS payment terms, MS may,
without limiting its remedies,do any of the following:

      (i) require the AR to hold all pending DISTRIBUTOR orders; or

      (ii) cancel this Agreement; or

      (iii) invoice DISTRIBUTOR for all Licensed Product previously acquired
based on reports submitted to MS by the AR(s) and charge DISTRIBUTOR an
additional royalty equal to thirty percent (30%) of the highest royalty for such
Licensed Product(s).

      - For the first noncompliant payment, DISTRIBUTOR will have an additional
      five (5) days from MS' notice thereof to correct the problem.

      - After the second noncompliant payment, MS may invoice DISTRIBUTOR
      monthly based on reports submitted to MS by the AR(s).

If MS chooses any of those options, DISTRIBUTOR shall continue to meet all other
terms of this Agreement.

(h) If DISTRIBUTOR discovers an over-reporting error, DISTRIBUTOR shall report
the error to MS in writing within two (2) calendar months after the end of the
calender month in which the product was shipped to be eligible for an adjustment
of the royalty amount owed to MS.

(i) MS may require ARs to refuse or limit orders placed by DISTRIBUTOR which, in
MS' sole opinion, are in quantities greater than DISTRIBUTOR will be able to
distribute or make timely payment for in compliance with this Agreement.

(j) Royalties are separate from, and in addition to, any charges by the AR for
Licensed Products ordered by DISTRIBUTOR. Royalties also exclude any taxes,
duties, fees, excises or tariffs imposed on any of DISTRIBUTOR's activities in
connection with this Agreement. Such charges, taxes, duties, fees, excises or
tariffs, if any, shall be paid by DISTRIBUTOR.

(k) If DISTRIBUTOR distributes any Licensed Product in violation of this
Agreement or DISTRIBUTOR is unable to account for missing Licensed Product, then
MS, without limiting its remedies, may demand and DISTRIBUTOR agrees to pay MS
the full applicable royalty rate for the Licensed Product(s) plus an additional
royalty equal to thirty percent (30%) of the highest royalty rate for the
Licensed Product(s). In the event the applicable royalty rate has
been paid, DISTRIBUTOR shall pay an additional royalty equal to thirty
percent (30%)of the royalty rate for the applicable Licensed Product(s).
DISTRIBUTOR shall pay such additional royalty within thirty(30) days of receipt
of MS' invoice.

(l) If DISTRIBUTOR is required by any non-U.S.A. tax authority to withhold
income taxes on payments to MS, then DISTRIBUTOR may deduct such taxes from the
amount owed MS and shall pay them to the appropriate tax authority, provided
that within sixty (60) days of such payment, DISTRIBUTOR delivers to MS an
official receipt for any such taxes withheld or other documents necessary to
enable MS to claim a U.S.A. Foreign Tax Credit. If DISTRIBUTOR is located in a
jurisdiction that utilizes the Value Added Tax or sales tax numbers ("VAT
Number") for tax identification purpose, DISTRIBUTOR's VAT Number shall be
provided in the Addresses Schedule. DISTRIBUTOR shall make certain that any
taxes withheld are minimized to the extent permitted by applicable law.
DISTRIBUTOR agrees to pay MS a one percent (1%) monthly charge on tax amounts in
receipts or documents that are not delivered to MS within the sixty (60) days
identified above.

(m) If DISTRIBUTOR conducts business in the U.S.A. and qualifies for a state
resale tax exempt certificate, then DISTRIBUTOR shall provide MS with a copy of
its U.S.A. state resale tax exempt certificate, if applicable, with this
Agreement when it is returned for signature by MS.

(n) Upon request by MS, DISTRIBUTOR shall provide MS with DISTRIBUTOR's current
audited financial statements.

(o) (i) Pursuant to MS' instructions, DISTRIBUTOR shall enter data into the
Embedded Systems tracking tool made available by MS including, status of MSCORP-
provided leads, "design-win", and/or "design-in" information as described in the
Embedded Systems tracking tool instructions. Prior to submitting such entries,
DISTRIBUTOR shall confirm their accuracy. DISTRIBUTOR's failure to adequately
pursue MSCORP provided leads may result in a decrease in the number of such
leads provided to DISTRIBUTOR.

      (ii) Upon MS request, DISTRIBUTOR shall provide to MS further details on
any of the entries made by DISTRIBUTOR in accordance with subsection 4(o)(i)
above.

(p) For COAs, Licensed Product(s) and APM damaged irreparably during the
ordinary course of DISTRIBUTOR's business, DISTRIBUTOR shall

      (a) maintain a log in the format specified by MS of each damaged or
destroyed COA, Licensed Product(s) and APM that includes the date damaged or
destroyed, item's name and number, and cause of damage or destruction; and

            (b) return each damaged item to the Supplier from which the item was
acquired.

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5. MS OEM ONLINE AND MS EMBEDDED COMMUNICATIONS EXTRANET.

DISTRIBUTOR shall comply with the terms and conditions set forth in the Use of
MS OEM Online and MS Embedded Communications Extranet Schedule.

6. LICENSED PRODUCT RECALLS, WITHDRAWALS, AND SUSPENSIONS.

(a) DISTRIBUTOR shall immediately stop distributing a Licensed Product if MS or
its Suppliers notify DISTRIBUTOR that the Licensed Product is recalled,
withdrawn or suspended.

(b) DISTRIBUTOR shall accept returns of Licensed Product from OEM Customers if
MS or its Suppliers notify DISTRIBUTOR that the Licensed Product is recalled,
withdrawn or suspended.

      (i) DISTRIBUTOR shall accept returned Licensed Product only in unopened
packages.

      (ii) DISTRIBUTOR shall, at MS' option, issue a credit to the OEM
Customer's account or replace the returned Licensed Product.

      (iii) DISTRIBUTOR shall, at MS' option, ship the returned Licensed Product
to an AR or a third party designated by MS. DISTRIBUTOR shall certify to MS
that the returned Licensed Product was shipped to an AR or MS' designated third
party.

      (iv) If the Licensed Product recall, withdrawal or suspension was caused
by reasons outside of DISTRIBUTOR's control, MS will pay for DISTRIBUTOR's
reasonable shipping and destruction costs.

      (v) DISTRIBUTOR shall promptly arrange for replacement units of Licensed
Product from the AR.

(c) No royalty accrues for Licensed Product DISTRIBUTOR distributes to replace
Licensed Product returned due to recalls, withdrawals, suspensions or defects.

(d) If DISTRIBUTOR issues a credit to an OEM Customer for Licensed Product(s)
returned because of recalls, withdrawals, suspensions or defects or for Licensed
Product returned in an unopened package, DISTRIBUTOR may claim a royalty offset
based on the royalty rate originally reported by DISTRIBUTOR for the returned
Licensed Product.

7. RETURNS.

(a) DISTRIBUTOR shall accept returns if

      (i) an OEM Customer refuses to accept Additional Licensing Provisions for
OEM Customer and returns the unopened Licensed Product package within time
specified in Section 7(b) below; or

      (ii) a Licensed Product is incomplete or defective in Licensed Product
media and/or Licensed Product materials and OEM Customer returns Licensed
Product within the time specified in section 7(b) below:

      (iii) If MS has established an end of life date for a Licensed Product,
DISTRIBUTOR may report returns of such Licensed Product up to two (2) calendar
months after its end of life date.

(b) DISTRIBUTOR shall align its return policy with the over-reporting error
report requirements set forth in Section 4(h).

(c) Except for returns that DISTRIBUTOR is expressly authorized or directed to
make by MS, MS will not accept any returns of Licensed Product.

(d) DISTRIBUTOR shall manage any returns in accordance with the then current
Microsoft Embedded Distributor Licensing and Operations Guide.

(e) DISTRIBUTOR shall defend, indemnify, and hold MS and its Suppliers harmless
from and against all damages, costs and expenses, including reasonable
attorneys' fees, incurred due to DISTRIBUTOR's continued distribution of
Licensed Product after MS has notified DISTRIBUTOR to stop distributing the
Licensed Product.

8. DELIVERY.

Neither MS nor its Suppliers shall have any liability for failure to deliver
Licensed Product by any particular date.

9. NO WARRANTIES. LICENSED PRODUCT IS PROVIDED "AS IS" AND WITH ALL FAULTS. THE
ENTIRE RISK AS TO SATISFACTORY QUALITY, PERFORMANCE, ACCURACY, AND EFFORT IS
WITH OEM CUSTOMER. MS AND ITS SUPPLIERS DISCLAIM ALL REPRESENTATIONS AND
WARRANTIES, WHETHER EXPRESS, IMPLIED, OR STATUTORY, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE AND ANY
IMPLIED WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OF TRADE. MS AND ITS
SUPPLIERS ALSO DISCLAIM ANY COMMON-LAW DUTIES RELATING TO ACCURACY OR LACK OF
NEGLIGENCE. THERE IS NO WARRANTY AGAINST INTERFERENCE WITH DISTRIBUTOR'S
ENJOYMENT OF THE LICENSED PRODUCT OR AGAINST INFRINGEMENT.

10. DAMAGE EXCLUSIONS/LIMITATION OF LIABILITY/EXCLUSIVE REMEDY.

(a) DISTRIBUTOR agrees that total, cumulative liability of MS, Suppliers, and/or
their respective officers, employees, and agents (collectively, "MS
Representatives") to DISTRIBUTOR, whether in contract, (including any provision
of the Agreement), tort, or otherwise, for each Licensed Product, shall not
exceed one hundred percent (100%) of the amount paid by DISTRIBUTOR to MS for
that Licensed Product during the term of this Agreement. DISTRIBUTOR's exclusive
remedy for any breach of the Agreement by MS or by MS Representatives will be
the recovery of DISTRIBUTOR's direct damages incurred in reasonable reliance,
limited to the foregoing amount.

(b) EXCLUSION OF CERTAIN DAMAGES AND LIMITATION OF TYPES OF LIABILITY. EXCEPT AS
PROHIBITED BY LAW, IN NO EVENT WILL MS OR ANY MS REPRESENTATIVES BE LIABLE TO
DISTRIBUTOR OR TO ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL,
INDIRECT, OR ECONOMIC DAMAGES, REGARDLESS OF THE THEORY OF LIABILITY (INCLUDING
WITHOUT LIMITATION PRODUCT LIABILITY OR NEGLIGENCE), OR FOR ANY LOST REVENUE,
PROFIT, DATA, PRIVACY OR SECURITY, OR FOR ANY PUNITIVE DAMAGES, ARISING OUT OF
OR RELATED TO THE USE OF OR INABILITY TO USE LICENSED PRODUCT, EVEN IF MS OR MS
REPRESENTATIVES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. This
exclusion and limitation shall apply even if any remedy fails of its essential
purpose.

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(c) RELEASE. DISTRIBUTOR releases MS and MS Representatives from all liability
in excess of the limitations set forth above.

11. PROHIBITED USES OF LICENSED PRODUCT/CONSPICUOUS NOTICE TO OEM CUSTOMERS.

OEM CUSTOMERS ARE EXPRESSLY PROHIBITED FROM MANUFACTURING OR MARKETING EMBEDDED
SYSTEMS THAT ARE DESIGNED TO USE LICENSED PRODUCT IN OPERATION OF NUCLEAR
FACILITIES, IN AIRCRAFT NAVIGATION, IN AIRCRAFT COMMUNICATION, IN AIRCRAFT
FLIGHT CONTROL, IN AIRCRAFT AIR TRAFFIC CONTROL SYSTEMS, OR IN OTHER DEVICES OR
SYSTEMS IN WHICH SERIOUS INJURY OR DEATH TO THE OPERATOR OF THE DEVICE OR
SYSTEM, OR TO OTHERS DUE TO A MALFUNCTION (INCLUDING, WITHOUT LIMITATION,
SOFTWARE RELATED DELAY OR FAILURE) COULD REASONABLY BE FORESEEN. DISTRIBUTOR
SHALL PROVIDE CONSPICUOUS WRITTEN NOTICE TO ALL OEM CUSTOMERS OF THIS LIMITATION
ON PROHIBITED USES OF LICENSED PRODUCT.

12. INTELLECTUAL PROPERTY INFRINGEMENT.

(a) MS agrees to defend DISTRIBUTOR in a lawsuit or other judicial action, and
pay the amount of any adverse final judgment (or settlement to which MS
consents) from such lawsuit or judicial action, for any third party claim(s)
that the Licensed Product(s) infringe any copyright or trademark rights
enforceable in any Included Jurisdictions (defined in Section 12(e) below)
("Claim"). With regard to any Claim, MS' obligations are subject to the
following conditions:

      (i) DISTRIBUTOR must promptly notify MS in writing of the Claim;

      (ii) MS shall have sole control over defense and/or settlement of the
Claim; and

      (iii) DISTRIBUTOR shall provide MS with reasonable assistance in the
defense of the Claim and shall not take a position adverse to MS.

(b) In the event that MS is required to defend a lawsuit or other judicial
action pursuant to Section 12(a) above the such lawsuit or other judicial action
includes allegations (other than a Claim) with respect to non-MS products, then
DISTRIBUTOR shall retain, at its sole expense, separate counsel to defend
against such allegations, and agrees to reimburse MS for any and all attorneys'
fees and costs incurred by MS with respect to defending against such
allegations. Moreover, MS and its Suppliers shall have no liability for any
intellectual property infringement claim (including a Claim) based on
DISTRIBUTOR's manufacture, use, sale, offer for sale, importation or other
disposition or promotion of the Licensed Product or trademark after MS' notice
that DISTRIBUTOR should cease manufacture, use, sale, offer for sale,
importation or other disposition or promotion of such Licensed Product or
trademark due to such claim . DISTRIBUTOR shall defend, indemnify and hold MS
and its Suppliers harmless from and against all damages, costs and expenses,
including reasonable attorneys' fees incurred due to DISTRIBUTOR's continued
distribution of the allegedly infringing Licensed Product after MS provides
such notice.

(c) In addition to the obligations set forth in Section 12(a) above, if MS
receives information concerning a Claim, MS may at its expense, but without
obligation to do so, undertake such further actions such as:

      (i) procuring for DISTRIBUTOR such copyright or trademark right(s) or
license(s) as may be necessary to address the Claim; or

      (ii) replacing or modifying the Licensed Product or trademark to make it
non-infringing (in which case DISTRIBUTOR shall immediately cease distribution
of the allegedly infringing Licensed Product or use of the allegedly infringing
trademark).

(d) With regard to any claim (other than a Claim) that the Licensed Product
infringes any third party intellectual property rights, DISTRIBUTOR shall
promptly notify MS in writing of such claim. MS shall have no obligation to
defend DISTRIBUTOR or pay damages arising out of such claim. Notwithstanding the
absence of any such obligation(s), MS reserves the option, in its sole
discretion and at its expense, to assume at any time defense of any such claim.
In the event that MS assumes defense of any such claim.

      (i) MS shall notify DISTRIBUTOR in writing of that election;

      (ii) MS shall have sole control over defense and/or settlement of the
claim;

      (iii) DISTRIBUTOR shall provide MS with reasonable assistance in the
defense of the claim and shall not take a position adverse to MS;

      (iv) MS shall thereafter defend DISTRIBUTOR against that claim; and

      (v) MS shall pay any adverse final judgment (or settlement to which MS
consents) resulting from such claim (or in the case of a claim based on an
allegation of patent infringement, MS shall pay up to an amount not to exceed a
reasonable royalty based on the per copy price paid by DISTRIBUTOR for copies of
the Licensed Products subject to the claim).

(e) Neither MS nor its Suppliers shall have any obligation to DISTRIBUTOR for
any Claims that arise outside the geographical boundaries of the Included
Jurisdiction. "Included Jurisdictions" means Australia, Canada, the European
Union, Japan, Norway, Switzerland and the United States.

13. LICENSED PRODUCT SUPPORT.

(a) This Agreement does not include technical support by MS to DISTRIBUTOR, OEM
Customers or end users.

(b) DISTRIBUTOR shall provide commercially reasonable support for the Licensed
Products to OEM Customers and shall advise OEM Customers accordingly.

(c) For the term of this Agreement, either (i) DISTRIBUTOR shall have and
maintain a valid technical support services contract for the Licensed Product(s)
with MSCORP through Microsoft Services for Embedded Partners or with a third
party for an equivalent level of such services, or (ii) MS verifies that
DISTRIBUTOR itself provides an equivalent level of such services. If the
DISTRIBUTOR chooses to acquire support through MSCORP, DISTRIBUTOR acknowledges
that MSCORP may charge applicable support fees under such contract.

(d) DISTRIBUTOR shall provide MS with ninety (90) days prior written notice of
any substantive change in DISTRIBUTOR's support policy for the Licensed Product.

14. ASSIGNMENT.

(a) This Agreement shall not be assigned or sublicensed by DISTRIBUTOR in whole
or in part (by contract, merger, operation of law, or otherwise). Any assignment
or sublicense in violation of this provision shall be void and of no effect.

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(b) This Agreement, and any related agreement(s) to which MS is a party or by
which MS is benefited, including all rights and obligations there under, may be
assigned by MS to a MS affiliate, provided that such assignment does not
constitute an unreasonable and material impairment of the ability of DISTRIBUTOR
to obtain the performance to which it is entitled under the assigned Agreement.
MS shall provide DISTRIBUTOR with notice of such assignment, provided, however,
that failure to provide notice shall not affect the effectiveness of any such
assignment. From and after such assignment, all references to "MS" contained in
the Agreement, or any related documents or items shall refer to the assignee
identified in the applicable assignment notice to DISTRIBUTOR, and all
references to "Suppliers" shall include assignor.

15. TERM.

(a) This Agreement runs from the Effective Date through the Expiration Date
specified on the Signature Page of this Agreement. MS may extend the term of
this Agreement upon written or electronic notice to DISTRIBUTOR. DISTRIBUTOR's
acquisition or distribution of Licensed Product during an extension signifies
DISTRIBUTOR's agreement to the term of the extension. Both parties agree to be
bound by the terms of any extension notification, if accepted by DISTRIBUTOR.

(b) This Agreement will automatically extend for thirty (30) days for the
limited purpose of allowing DISTRIBUTOR to distribute inventory of Licensed
Product ("Limited Purpose Extension") if:

      (i) MS has not canceled this Agreement,

      (ii) MS has not suspended DISTRIBUTOR's distribution rights, and

      (iii) DISTRIBUTOR and MS do not enter into a successor agreement to this
Agreement.

During the Limited Purpose Extension, DISTRIBUTOR may distribute Licensed
Product, but DISTRIBUTOR may not acquire Licensed Product from an AR.
DISTRIBUTOR must comply with all payment and reporting requirements of the
Agreement for Licensed Product distributed during the Limited Purpose Extension.

(c) (i) This Agreement does not create any express or implied obligation to
renew or extend the Agreement or to continue the parties' relationship on the
same terms. Regardless of the number of renewals, this Agreement will always be
a fixed term agreement and not an indefinite term agreement.

16. NONCOMPLIANCE AND CANCELLATION.

(a) (i) MS may suspend any rights granted to DISTRIBUTOR under this Agreement,
and/or require ARs to refuse to fulfill or to limit orders placed by
DISTRIBUTOR, and/or cancel this Agreement in its entirety or as to any
individual Licensed Product(s), in MS' sole discretion. Without limiting the
foregoing, MS may cancel this Agreement if DISTRIBUTOR submits "zero dollar"
royalty reports for at least three calendar months.

    (ii) DISTRIBUTOR hereby waives any right it may have under applicable law or
regulation to require MS to seek the approval, order, decision or judgment of
any court or government agency before MS may suspend or cancel this Agreement or
any rights granted to DISTRIBUTOR under this Agreement.

(b) (i) If, subject to applicable law, DISTRIBUTOR becomes insolvent, enters
bankruptcy, reorganization, composition or other similar proceedings under
applicable laws, whether voluntary or involuntary, or admits in writing its
inability to pay its debts, or makes or attempts to make an assignment for the
benefit or creditors, any cancellation shall be effective upon notice to
DISTRIBUTOR or as soon thereafter as is permitted by applicable law;

    (ii) To the extent allowed by the applicable law, DISTRIBUTOR's license
rights herein shall be suspended as of the date DISTRIBUTOR becomes insolvent,
enters reorganization, composition or other similar proceedings under applicable
laws, whether voluntary or involuntary, or admits in writing its inability to
pay its debts, or makes or attempts to make an assignment for the benefit of
creditors.

(c) Upon cancellation or expiration of this Agreement, all DISTRIBUTOR's license
rights shall immediately ease and DISTRIBUTOR shall

      (i) immediately cease distribution of all Licensed Product,

      (ii) immediately stop using all MS and its Suppliers names, trade names,
trademarks, and logos; and

      (iii) within ten (10) business days from expiration or cancellation of the
Agreement or (B) the end of the Limited Purpose Extension, return to (A) to an
AR in accordance with the Microsoft Embedded Distributor Licensing and
Operations Guide all Licensed Product(s), COAs and APM in inventory and property
of MS or its Suppliers that DISTRIBUTOR possesses, and (B) to MS at the notices
address indicated in the Addresses Schedule, all OEM Customer Agreement and
Additional Rights Agreement forms. MS, its Suppliers and ARs are not required to
refund, credit, or adjust amounts paid for the Licensed Product(s) returned to
MS.

Each party must assist the other to terminate this Agreement in an orderly
manner.

(d) When this Agreement terminates or if MS suspends DISTRIBUTOR's distribution
rights, MS may take any actions that may be advisable to prevent unauthorized
distribution of Licensed Product(s) then in inventory and to ensure timely
return or destruction of such Licensed Product(s).

(e) DISTRIBUTOR expressly agrees that, except as otherwise set forth in this
Agreement, the cancellation or expiration of this Agreement in accordance with
its terms shall not cause MS or any of its Suppliers to pay any indemnification,
severance or termination payment or benefit to DISTRIBUTOR, or any of
DISTRIBUTOR's suppliers. If MS or any of its Suppliers is required by law, court
order or otherwise to pay to DISTRIBUTOR or any of its subsidiaries or
affiliates, or a third party, any compensation, severance pay or benefit other
than as set forth in this Agreement ("Benefits"), DISTRIBUTOR shall indemnify MS
and/or the relevant Supplier from the payment as well as from any reasonable
costs and expenses (including, but not limited to, attorneys' fees and expenses)
incurred by them in connection with their involvement in any judicial or
administrative proceeding in connection thereto in any foreign jurisdiction (the
Benefits, together with any costs and expenses indemnifiable by DISTRIBUTOR
pursuant to this paragraph referred to collectively as the ("Indemnifiable
Payments"). DISTRIBUTOR irrevocably authorizes MS

      (i) to set off against the payment of the obligations of MS under this
      Agreement, the amount of any and all Indemnifiable Payments, and

      (ii) to hold, pending final determination of the amount of the
      Indemnifiable Payments, the payment of the obligations of MS under this
      Agreement as security for the payment of all Indemnifiable Payments by
      DISTRIBUTOR to MS, if MS, in its sole discretion, determines that there
      are reasonable grounds

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*  Confidential Treatment Requested

<PAGE>

    to believe that MS is or shall be required to pay any Indemnifiable
Payments.

(f) The remedies available to MS under this Agreement for DISTRIBUTOR's breach
are not exclusive. In addition to such remedies, MS may exercise any and all
legal, equitable or other remedies available to it.

(g) Section 2(m), 9, 10, 12, 16(c-f), 17, 18, 19, 20, 21(b) and 22 of this
Agreement shall survive cancellation or expiration of this Agreement.

17. NONDISCLOSURE.

(a) DISTRIBUTOR shall keep confidential:

      (i) the terms of this Agreement, including, without limitation, the
Royalty Rate List(s),

      (ii) information on the ECE and MS OEM Online, information concerning
current and potential OEM Customers, MS and its Suppliers royalty rate
information, the terms of agreements concerning MS and its Suppliers products,
license negotiations, any information relating to released or unreleased MS and
its Suppliers software products, the marketing or promotion of any MS and its
Suppliers product, and MS and its Suppliers business policies or practices that
MS or its Suppliers disclosed to DISTRIBUTOR and is non-public information, and

      (iii) any other information that, in the circumstances surrounding the
disclosure or in the nature of the information, ought in good faith to be
treated as confidential.

(b) DISTRIBUTER may disclose the terms of the Agreement in confidence to its
immediate legal and financial consultants as required in the ordinary course of
DISTRIBUTOR'S business.

18. AUDITS.

(a) During the term of the Agreement and for three (3) years thereafter, and
within fourteen (14) days of MS' written request, DISTRIBUTOR shall make
available at a single, readily accessible location all records (including
complete financial statements) relating to the distribution, other disposition
and inventory level of each copy of each Licensed Product.

(b) To verify compliance with the terms of the Agreement, MS may cause an audit
or inspection to be performed by its designated independent and internationally
recognized certified public accountants or chartered accountants during regular
business hours at DISTRIBUTOR's premises upon not less than fourteen (14) days
written notice. DISTRIBUTOR agrees to provide such MS-designated audit or
inspection team with access to all DISTRIBUTOR relevant records and premises,
provided that:

      (i) such access shall be limited to those areas related to the storage of
Licensed Products and to those records DISTRIBUTOR is obligated to provide under
this Section 18; and

      (ii) MS designated auditors may be escorted by DISTRIBUTOR personnel when
on DISTRIBUTOR premises, and shall not unreasonably interfere with DISTRIBUTOR's
normal course of business.

(c) If the audit reveals discrepancies exceeding the lesser of twenty five
thousand dollars (US$25,000) or two percent (2%) of royalties paid to MS by
DISTRIBUTOR during the term of the Agreement, or an intentional breach of any
DISTRIBUTOR obligation (individually referred to as a "Material Discrepancy"),
DISTRIBUTOR shall pay MS, in addition to any unpaid amounts due, the costs of
the audit. In the event of a Material Discrepancy, DISTRIBUTOR shall pay MS, in
addition to unpaid amounts due, the costs of the audit, plus an additional
royalty of twenty-five percent (25%) of the applicable product royalty for each
underreported copy of Licensed Product.

(d) Provided that a Material Discrepancy is not disclosed in an immediately
preceding audit, audits under this Section 18 shall not be performed more
frequently than on an annual basis. Upon written request of DISTRIBUTOR, and
only after the conclusion of an audit, MS shall provide DISTRIBUTOR with a
summary of the findings and conclusions of such audit.

19. NOTICES.

(a) MS, through an authorized MS representative, may give DISTRIBUTOR notices,
authorizations and requests

      (i) by posting them to the ECE,

      (ii) by electronic mail (email) at the email address listed in the
Addresses Schedule,

      (iii) by facsimile transmission at the fax number listed in the Addresses
Schedule or

      (iv) in writing at the address(es) indicated in Addresses Schedule.

(b) DISTRIBUTOR may give MS notices, authorizations and requests

      (i) by facsimile transmission on company letterhead by an authorized
representative of DISTRIBUTOR at the fax number listed in the Addresses Schedule
or

      (ii) in writing on company letterhead by an authorized representative of
DISTRIBUTOR at the address(es) indicated in the Addresses Schedule.

(c) Communications are deemed given:

      (i) if by posting by MS on the ECE, on the first day of the calendar month
following posting of such communication;

      (ii) if by facsimile transmission or email, on the day the facsimile or
email was transmitted; or

      (iii) if in writing, on the day (A) deposited in the U.S.A. mails, postage
prepaid, certified or registered, return receipt requested, provided
DISTRIBUTOR's address for notices is located in the U.S.A.; or (B) sent by air
express courier, charges prepaid.

(d) DISTRIBUTOR shall keep all information required in the Addresses Schedule
complete and current. Within ten (10) days of any change of any individual,
address or other information required in the Addresses Schedule, DISTRIBUTOR
shall notify MS of such change as set forth in Section 19(b).

(e) DISTRIBUTOR must check the ECE for updated information at least twice each
month, on or after 12:01 a.m. Pacific Time zone, U.S.A., on the 15th
(fifteenth) and on the last calendar day of each month.

(f) Information posted on the ECE may change without additional notice until the
effective date of such information. MS may correct errors in information posted
on the ECE or update posted documents after the beginning of a month by sending
notice to DISTRIBUTOR.

20. CHOICE OF LAW; JURISDICTION AND VENUE; ATTORNEYS' FEES.

(a) This Agreement, and all related matters shall be governed by and interpreted
under the laws of the State of Washington, without

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*  Confidential Treatment Requested

<PAGE>

regard to its conflict of law rules. Venue over all disputes arising under this
Agreement and all related matters shall be exclusively in the federal courts
within the State of Washington or the federal courts within the State of
New York, or in the event there is no federal subject matter jurisdiction,
exclusively in the state courts of the State of Washington. Each party
irrevocably consents to the exercise of personal jurisdiction by any of those
courts and acknowledges and agrees that the court will apply Washington law.
Notwithstanding the foregoing, MS may pursue injunctive relief against
DISTRIBUTOR in any forum in order to protect intellectual property rights.
Process may be served on either party as authorized by applicable law or court
rule. In the event injunctive relief is pursued in a forum other than those
specified herein, MS shall provide prior notice thereof to DISTRIBUTOR;
provided, however, that no notice shall be required if MS has reasonably
determined that the provision of prior notice will prevent it from reasonably
protecting its intellectual property. The United Nations Convention on Contracts
for the International Sale of Goods does not apply to this Agreement.

(b) If either party employs attorneys to enforce any rights arising out of or
relating to this Agreement, the primarily prevailing party shall be entitled to
recover its reasonable attorneys's fees, costs and other expenses.

21. GOVERNMENT REGULATIONS.

(a) DISTRIBUTOR acknowledges that Licensed Product is subject to U.S. and
European Union export jurisdiction. DISTRIBUTOR agrees to comply with all
applicable international and national laws that apply to these Licensed
Products, including the U.S. Export Administration Regulations, as well as
end-user, end-use, and destination restrictions issued by U.S. and other
governments. For additional information, see *

(b) All Licensed Product provided to the U.S. Government pursuant to
solicitations issued on or after December 1, 1995 is provided with the
commercial license rights and restrictions described elsewhere herein. All
Licensed Product provided to the U.S. Government pursuant to solicitations
issued prior to December 1, 1995 is provided with "Restricted Rights" as
provided in FAR, 48 CFR 52.227-14 (JUNE 1987) or DFAR, 48 CFR 252.227-7013 (OCT
1988), as applicable. The reseller is responsible for ensuring Licensed Product
is marked with the "Restricted Rights Notice" or "Restricted Rights Legend," as
required. All rights not expressly granted are reserved.

22. GENERAL

(a) This Agreement does not constitute an offer by MS and it shall not be
effective until signed by both DISTRIBUTOR and MS. Upon execution by both
DISTRIBUTOR and MS, this Agreement, together with its schedules, shall
constitute the entire agreement between them and merges all prior and
contemporaneous communications. Except as otherwise expressly provided herein,
this Agreement shall not be modified except by a written agreement signed on
behalf of DISTRIBUTOR and MS by their respective duly authorized
representatives. Any statement appearing as a restrictive endorsement on a check
or other document which purports to modify a right, obligation or liability of
either party shall be of no force and effect.

(b) The parties confirm and agree that neither the existence nor the terms of
this Agreement or any previous versions of either shall be construed as (i)
creating a partnership, joint venture or agency relationship or as granting a
franchise, or (ii) altering or otherwise affecting the surviving rights or
obligations of either party under such previous version(s) (if any).

(c) If any provision of this Agreement shall be held by a court of competent
jurisdiction to be illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall not affect the remaining provisions and
license for remaining Licensed Product(s), as applicable, which shall remain in
full force and effect, provided that the allocation of risks described herein is
given effect to the fullest extent possible.

(d) No waiver of any breach of any provision of the Agreement or shall
constitute a waiver of any prior, concurrent or subsequent, breach and no waiver
shall be effective unless made in a writing signed by an authorized
representative of the waiving party.

(e) As used in this Agreement, "writing" or "written" means a non-electronic
record or a facsimile, and (ii) "days" means calendar days unless provided
otherwise in the applicable provision. The headings and titles of the provisions
of this Agreement are intended for convenience only and shall not affect the
construction or interpretation of any provision.

(f) If as a result of fire, casualty, an act occasioned exclusively by forces of
nature, riot, terrorist act, war, labor dispute, material changes in applicable
law or regulation, or decree of any court (each individually referred to as a
"Force Majeure Event"), either of the parties shall be unable to perform its
obligations under the Agreement, provided the party subject to the Force Majeure
Event provides notice thereof to the other party within a commercially
reasonable amount of time, such inability shall not constitute a breach of the
Agreement, and such obligations shall be performed as soon as the cause of the
inability ceases or is removed. In no event shall the damage to, or destruction
or disappearance of, COAs on account of a Force Majeure Event relieve
DISTRIBUTOR of its payment obligations in connection therewith.

23. TERMINATION OF PRIOR AGREEMENT RIGHTS.

If DISTRIBUTOR is currently licensed to distribute the Licensed Product under a
valid agreement with MS ("Prior Agreement"), then as of the Effective Date of
this Agreement:

(a) DISTRIBUTOR's license to order and distribute the Licensed Product under the
Prior Agreement shall cease; and

(b) DISTRIBUTOR shall report and pay for the Licensed Product under the terms
and conditions of this Agreement.

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*  Confidential Treatment Requested
<PAGE>

                       PERFORMANCE REBATE PROGRAM SCHEDULE

MS may offer a performance rebate program ("Rebate Program") to encourage its
distributors to promote and expand sales of Licensed Product(s). To accomplish
this objective, MS may periodically offer DISTRIBUTOR the opportunity to earn
rebates by successfully achieving certain objectives described below.

1. ADDITIONAL DEFINITIONS

(a)   "Eligible Licensed Products" means those Licensed Products designated by
MS in the RPA for a Period.

(b)   "Period" means a calendar quarter, or such other duration as MS may
provide in the RPA.

(c)   "RPA" means a Rebate Program Attachment applicable to a Period as may be
revised from time to time by MS. A sample RPA is attached to this Schedule.

All other terms shall have the meanings set forth in the Agreement.

2. OBJECTIVES

(a)   In one or more Periods, MS may offer DISTRIBUTOR the opportunity to earn
rebate amounts by successfully achieving certain objectives ("Objectives")
described in this Schedule. MS is not obligated to offer a rebate in any Period
during the term of the Agreement.

(b)   MS may select Objectives like the ones listed below. Objectives will be
for one (1) Period and will be determined based upon MS business considerations
and communicated via an RPA.

      -     Licensed Product sales support

      -     Field Application Engineer/System Engineer support

      -     Provision of additional sales-out data (e.g., optional fields,
            previous periods)

      -     Increase in the unit sales of Eligible Licensed Product(s)

      -     Training and certification activities

3. REBATE AMOUNT

      MS will designate in the applicable RPA a rebate amount ("Rebate Amount")
      for applicable Objectives selected for a Period in which a rebate is
      offered.

4. COMMUNICATION OF OBJECTIVES AND REBATE AMOUNTS

      Objectives and Rebate Amounts for a Period, if any, will be communicated
      by MS via e-mail or the ECE by the first business day of the first
      calendar month of the applicable Period. Objectives and Rebate Amounts
      shall be communicated in an RPA as attached to this Schedule, which may be
      revised from time to time by MS. An RPA will be communicated only for
      Periods in which a rebate is offered.

5. QUALIFICATION FOR REBATE AMOUNT

(a)   Subject to the eligibility requirements described below, MS shall pay the
      Rebate Amount to DISTRIBUTOR for successful achievement of the Objectives
      for the applicable Period. Rebate attainment shall be based on information
      from DISTRIBUTOR's monthly royalty report and/or sales-out reports or
      other proof of compliance as specified by MS. MS shall make the final
      binding determination whether DISTRIBUTOR has satisfactorily accomplished
      the Objectives for the applicable Period after receipt of all compliant
      reporting. MS shall give notice to DISTRIBUTOR of the Rebate Amount earned
      in the applicable Period, if any, not later than seventy-five (75) days
      after the end of the Period.

(b)   DISTRIBUTOR shall be eligible to receive the Rebate Amounts only if (i)
      DISTRIBUTOR is in strict compliance with the Agreement during the
      applicable Period (ii) DISTRIBUTOR has an Agreement in effect for the
      entire Period, and (iii) DISTRIBUTOR meets the rebate pre-requisites, if
      any, set forth in the applicable RPA.

(c)   Reporting compliance is based on either the Sales-Out and Royalty
      Reporting Guidelines and template in the Sales Out and Royalty Reporting
      Guidelines and/or other guidelines as specified by MS.

      All criteria must be met each reporting Period for reporting to be
      considered compliant. If all reports meet all current compliance
      requirements as defined above, DISTRIBUTOR will receive payment of the
      Rebate Amount earned. If DISTRIBUTOR has complied during a portion of the
      reporting Period, a payment ratio may be applied to the Rebate Amount as
      described in the RPA. However, if DISTRIBUTOR is partially compliant in
      any given month, that month will be treated as non-compliant.

                                       13

                                  CONFIDENTIAL

Microsoft OEM Distribution Agreement for Software Products for Embedded Systems,
# * dated October 1, 2004 between MS and B SQUARE CORPORATION

<PAGE>

6. PAYMENT OF REBATE AMOUNT(S)

(a)   The Rebate Amount(s) earned by DISTRIBUTOR shall be awarded at MS' option
      as (i) credits that may be used to offset then-current or future royalties
      which accrue pursuant to the Agreement (or a successor agreement to the
      Agreement) or (ii) in the form of a check sent to DISTRIBUTOR in care of
      the MS Embedded Administrator Contact name and address indicated on the
      Addresses Schedule to the Agreement. Such amounts shall be awarded not
      later than seventy-five (75) days after the end of the Period in which the
      Rebate Amount was earned. If the Agreement is terminated or expires after
      completion of a full Period in which a rebate was offered, and no
      successor agreement is entered into between DISTRIBUTOR and MS, then MS
      shall refund to DISTRIBUTOR the Rebate Amount earned, less deductions for
      any outstanding amounts or obligations due to MS under the Agreement.

(b)   DISTRIBUTOR shall be solely responsible for payment of taxes, duties,
      fees, excises or tariffs imposed on any discounts, credits or payments
      made by MS to DISTRIBUTOR pursuant to this Rebate Program, provided
      however, MS may withhold and pay to tax authorities such amounts as may be
      required under applicable state or federal law on discounts, credits or
      payments made by MS to DISTRIBUTOR.

                                       14

                                  CONFIDENTIAL

Microsoft OEM Distribution Agreement for Software Products for Embedded Systems,
# * dated October 1, 2004 between MS and B SQUARE CORPORATION

*  Confidential Treatment Requested
<PAGE>

                                    [SAMPLE]

             ATTACHMENT TO THE PERFORMANCE REBATE PROGRAM SCHEDULE

        FOR (FILL IN NUMBER BY CALENDAR YEAR AND QUARTER: E.G. 2003 Q1)

                           PERFORMANCE REBATE PROGRAM

DISTRIBUTOR:
AGREEMENT NUMBER: *
PERIOD:

This letter is the Rebate Program Attachment under the Microsoft OEM
Distribution Agreement for Software Products for Embedded Systems (the
"Agreement") between your company and MS for the period listed above. MS will
pay Rebate Amounts based on the percentages below per the Performance Rebate
Program Schedule for DISTRIBUTOR's attainment of the following Objective(s) as
set forth below. All capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Agreement.

In order to be eligible for the full amount of the rebate for the following
Objective(s), DISTRIBUTOR shall provide compliant reporting of required
sales-out data (as identified in the Sales-Out and Royalty Reporting
Guidelines) for the Period (i.e., on-time, accurate, and in accordance with the
Sales-Out and Royalty Reporting Guidelines). In addition, DISTRIBUTOR shall have
maintained current payment status for invoices due during the Period. If
DISTRIBUTOR is determined non-compliant as to its reporting and/or payment
obligations during the Period, but DISTRIBUTOR has complied with a portion of
its reporting and/or payment obligations during the Period, a ratio will be
applied to the overall rebate amount available upon attainment of the following
Objective(s). For example, if DISTRIBUTOR has complied with its reporting
obligations for two (2) months and its payment obligations for three (3) months
during the Period, DISTRIBUTOR will receive 5/6 (83%) of the entire rebate
amount for attaining the following Objective(s) that would have been earned if
DISTRIBUTOR had been fully compliant.

OBJECTIVE 1: DISTRIBUTOR meets or exceeds the combined toolkit unit sales goal
as determined by MS for all versions of the following Licensed Products:
Platform Builder Toolkits, Platform Builder with Visual Studio.NET, Target
Designer Toolkits, and Target Designer with Visual Studio.NET. Unit sales will
be measured through Sales-Out Reporting from shipments starting_________________
through and ending _____________.

<TABLE>
<CAPTION>
                            Products                                                    Goal              Rebate if achieved
---------------------------------------------------------------------               -----------           ------------------
<S>                                                                                 <C>                   <C>
Platform Builder Toolkits, Platform Builder with Visual Studio.NET,                 > = (X) units                 1.0%
Target Designer Toolkits, Target Designer with Visual Studio.NET
                                (all versions)

Platform Builder Toolkits, Platform Builder with Visual Studio.NET,                 < = (X) units                 0.0%
Target Designer Toolkits, Target Designer with Visual Studio.NET
                                (all versions)
</TABLE>

OBJECTIVE 2: During the Period, hold seminars for OEM Customers designed to
provide technical education regarding, and/or create demand for, Licensed
Products.

      Rebate Amount: up to ___ of the total amount of royalties paid by
      DISTRIBUTOR to MS for (i) runtimes and toolkits collectively, "Embedded
      Licensed Products" distributed under the Agreement during the Period.

<TABLE>
<CAPTION>
Number of Qualifying Awareness Seminars Held by DISTRIBUTOR                            Rebate if achieved
-----------------------------------------------------------                            ------------------
<S>                                                                                    <C>
-----------------------------------------------------------                            ------------------
-----------------------------------------------------------                            ------------------
</TABLE>

                                       15

                                  CONFIDENTIAL

Microsoft OEM Distribution Agreement for Software Products for Embedded Systems,
# * dated October 1, 2004 between MS and B SQUARE CORPORATION

*  Confidential Treatment Requested
<PAGE>

                           USE OF MS OEM ONLINE AND MS
                        EMBEDDED COMMUNICATIONS EXTRANET
                                    SCHEDULE

MOO and the ECE are sometimes each referred to herein as a "Site" or
collectively as the "Sites," With respect to this Agreement and DISTRIBUTOR's
use of Site, DISTRIBUTOR agrees to the following terms and conditions, and shall
cause its DISTRIBUTOR Administrator(s) and Users to use the Sites in compliance
with this Schedule and the terms of use or other conditions or instructions
posted on the Sites:

(a) As used in this Schedule, the term "User" means an officer, employee,
consultant or other person or agent of DISTRIBUTOR who has, or who creates the
appearance of having, been duly authorized by DISTRIBUTOR to use the applicable
Site on behalf of DISTRIBUTOR. The term "DISTRIBUTOR Administrator(s)" means the
User(s) designated by DISTRIBUTOR in the Address Schedule of this Agreement
until such time as MS has received not less than forty-eight (48) hours notice
from DISTRIBUTOR through the * or * email aliases for MOO and the ECE
respectively that DISTRIBUTOR has made a change to any authority previously
established by DISTRIBUTOR in connection with such designation.

(b) DISTRIBUTOR Administrator(s) shall be solely responsible for establising,
maintaining and terminating all access and authorities for Users, including
(without limitation) creating or arranging for all passwords, private encryption
keys or other identifiers utilized connection with a Site security or
DISTRIBUTOR security (collectively, "DISTRIBUTOR Password Information"), and
shall keep all DISTRIBUTOR Password Information secure from unauthorized access.
On behalf of DISTRIBUTOR, DISTRIBUTOR Administrator(s) shall, and shall cause
and instruct Users to: (i) protect DISTRIBUTOR Password Information as
confidential information and not disclose any part of it to any person or entity
outside of DISTRIBUTOR or to any person inside of DISTRIBUTOR without a need to
know; (ii) save their respective DISTRIBUTOR Password Information in an
appropriate, secure manner and place that will prevent unauthorized use; and
(iii) only take actions at a Site that the DISTRIBUTOR Administrator or User,
respectively, is authorized by DISTRIBUTOR to take. MS may provide guidelines
from time to time in connection with DISTRIBUTOR's use of ECE. DISTRIBUTOR shall
designate at least one (1) but no more than two (2) Administrator(s).

(c) MS reserves the right to suspend or terminate authorities, or to suspend or
block access to all or any part of a Site or information, upon electronic notice
(indicating the reason for such action) to the DISTRIBUTOR Administrator(s)
email address; provided, however, that no notice shall be required if MS has
determined that there is possible harm or threat of harm to MS, a Site or
others. If prior notice is not provided, MS shall provide DISTRIBUTOR with
subsequent notice within a reasonable time unless the provision thereof might
continue a possible harm or threat of harm, or impede or compromise any
investigation into the same.

(d) DISTRIBUTOR agrees that neither MS nor any of its agents shall have any
liability for any failure to provide a level of security greater than that
generally afforded by the use of (i) client side digital certificates at *-bit
cipher strength for user workstation authenticaton in connection with MOO, or
(ii) Windows Integrated Security and SSL *-bit encryption in connection with the
ECE. DISTRIBUTOR and its Users shall not cause any harm to a Site.

(e) DISTRIBUTOR EXPRESSLY ACKNOWLEDGES AND AGREES THAT:

         (i) EACH SITE IS PROVIDED AS IS, AND THAT THE WARRANTY DISCLAIMERS,
DAMAGE EXCLUSIONS AND LIMITATIONS OF REMEDIES IN THIS AGREEMENT ALL APPLY TO
EACH SITE AND TO THEIR INFORMATION, FUNCTIONALITY, SERVICES AND AVAILABILITY OR
LACK THEREOF; AND

         (ii) DISTRIBUTOR WILL NOT RELY ON OR TREAT ANY SITE INFORMATION AS AN
EXPRESS WARRANTY.

(f) MS reserves the right to change or discontinue all or any portion of the MOO
Site at any time. Users may make a copy of MOO information to document
DISTRIBUTOR transactions and/or contracts or to retain information MS is
required to provide. MS agrees to retain not less than two (2) years of
DISTRIBUTOR MOO online transactional record availability through the standard
MOO user interface and not less than two (2) years of retrievable offline MOO
transaction record archival (e.g., electronic media) following expiration of
online avalability. Except for the foregoing records, MS has no duty to retain
or make available Site information or records for DISTRIBUTOR'S later access.

It is understood that DISTRIBUTOR will not be required to use the MOO Site if
(1) MS suspends or blocks access or otherwise disables all or any part of the
MOO Site or any Tool; or (2) the MOO Site or any Tool are not accessible or are
not functioning correctly, and such problems are not resolved by MS within
seventy-two (72) hours of DISTRIBUTOR providing notice to MS describing such
problem. In the event of the foregoing, MS will provide DISTRIBUTOR with a
reasonable alternative means for reporting transactions, and DISTRIBUTOR shall
be deemed in compliance with the Agreement (and will not be penalized for delays
in reporting) so long as DISTRIBUTOR complies with the alternative reporting
structure in a prompt manner. (g) The Sites are not open to the public and their
respective functionality and all information on them shall be treated as
confidential information under Section 17 of this Agreement.

(h) (i) DISTRIBUTOR agrees to access and use MOO for all transactions and
purposes contemplated by MOO until the date that is the earliest of the date
that: (A) MS ceases to provide MOO to similarly situated embedded distributors,
or (B) the date DISTRIBUTOR has satisfied all of its rights and obligations
under all License Agreements.

    (ii) Subject to applicable law, all action taken by the DISTRIBUTOR
Administrator(s) or any other User at or in relation to a Site shall be
attributed to and legally bind DISTRIBUTOR if (A) DISTRIBUTOR Administrator(s)
or any other User(s) has supplied on the applicable Site or otherwise in
relation to a Site session, DISTRIBUTOR Password Information; or (B) DISTRIBUTOR
or Users have failed to keep DISTRIBUTOR Password Information secure and the
failure caused or contributed to creation of an appearance that actions taken in
connection with the applicable Site were being taken by, or on behalf of,
DISTRIBUTOR; or (C) DISTRIBUTOR has otherwise approved, allowed or accepted
benefit or use of the applicable Site by a person purporting to be its agent.

                                       16

                                  CONFIDENTIAL

Microsoft OEM Distribution Agreement for Software Products for Embedded Systems,
# * dated October 1, 2004 between MS and B SQUARE CORPORATION

*  Confidential Treatment Requested
<PAGE>

Notwithstanding the foregoing, if DISTRIBUTOR Password information is used to
cause harm or damage to DISTRIBUTOR or MS by a person who obtained it by means
that could not have been precluded by DISTRIBUTOR after complying with Section
(b) of this Schedule, then acts taken with DISTRIBUTOR Password Information so
obtained will not be attributed to DISTRIBUTOR because of this Section (h)(ii)
of this Schedule, but may be attributed to MS, DISTRIBUTOR or others under
principles of equity or law pertinent to the act in question.

(i) Privacy and Data Protection.

      (i) For the purposes of this section, "Personal Information" means any
information provided by MS or collected or processed for MS by DISTRIBUTOR in
connection with this Agreement (i) that identifies or can be used to identify,
contact, or locate the person to whom such information pertains, or (ii) from
which identification or contact information of an individual person can be
derived. Personal Information includes, but is not limited to: name, address,
phone number, fax number, email address, social security number or other
government-issued identifier, and credit card information. Additionally, to the
extent any other information (such as, but not necessarily limited to, a
personal profile, unique identifier, biometric information, and/or IP address)
is associated or combined with Personal Information, then such information also
will be considered Personal Information.

      (ii) Any Personal Information collected, processed or accessed by
DISTRIBUTOR in the performance of services in accordance with this Agreement
shall be limited to that which is strictly necessary to perform such services or
to fulfill any legal requirements.

      (iii) DISTRIBUTOR shall use such Personal Information only as necessary to
perform the services in accordance with this Agreement and not for any other
purpose whatsoever, DISTRIBUTOR shall maintain such Personal Information in
strict confidence in accordance with the provisions of Section 17 hereof.
DISTRIBUTOR will not share any Personal Information that is collected, processed
or accessed by DISTRIBUTOR with any third parties for any reason except as
otherwise authorized by MS in writing. If DISTRIBUTOR is served with a court
order compelling disclosure of any Personal Information or with notice of
proceedings for such an order, DISTRIBUTOR will oppose the order, will notify MS
of such order or notice, and will provide MS the opportunity to intervene before
DISTRIBUTOR files any response to the order or notice.

      (iv) DISTRIBUTOR will take reasonable steps to protect any Personal
Information in DISTRIBUTOR's possession from unauthorized use, access,
disclosure, alteration or destruction. Security measures shall include access
controls, encryption or other means, where appropriate. DISTRIBUTOR must
immediately notify MS of any known security breach that may result in the
unauthorized use, access, disclosure, alteration or destruction of Personal
Information. DISTRIBUTOR agrees to conduct an audit on at least an annual basis
to evaluate the security of Personal Information in DISTRIBUTOR's possession and
to verify that the terms of this Agreement with respect to Personal Information
are being followed. The results of such audit shall be made available to MS on
request.

      (v)Upon request from MS, DISTRIBUTOR shall provide MS with any or all
Personal Information in DISTRIBUTOR's possession. Upon termination or expiration
of this Agreement, or upon expiration of the Limited Purpose Extension,
DISTRIBUTOR shall within ten (10) days thereafter, at MS's sole discretion
either (i) provide MS with all documents and materials (including any and all
copies) containing Personal Information, together with all other materials and
property of MS, which are in its possession or under its control or (ii) destroy
all such specified documents and materials (including any and all copies in any
and all formats) and provide MS with a certificate of destruction signed by an
officer of DISTRIBUTOR.

                                       17

                                  CONFIDENTIAL

Microsoft OEM Distribution Agreement for Software Products for Embedded Systems,
# * dated October 1, 2004 between MS and B SQUARE CORPORATION

*  Confidential Treatment Requested<PAGE>

                                                                   EXHIBIT 10(a)

                         MONTHLY SERVICER'S CERTIFICATE

                              CONSUMERS FUNDING LLC
                $468,592,000 SECURITIZATION BONDS, SERIES 2001-1

    Pursuant to Section 3.05 of the Servicing Agreement dated as of November
     8, 2001 (the "Consumers Servicing Agreement") between Consumers Energy
                   Company, as Servicer and Consumers Funding
          LLC, as Issuer, the Servicer does hereby certify as follows:

Capitalized terms used in the Monthly Servicer's Certificate (the "Monthly
Certificate") have their respective meanings as set forth in the Servicing
Agreement. References herein to certain sections and subsections are references
to the respective sections of the Servicing Agreement.

                        Current BILLING MONTH: July 2004

<TABLE>
<CAPTION>
CURRENT BILLING MONTH 7/2/2004 - 8/2/2004                   COLLECTION CURVE 100%
<S>                                                          <C>                    <C>
 STANDARD BILLING FOR PRIOR BILLING MONTH

Residential Total Billed                                     $100,760,800
Residential SECURITIZATION CHARGE (SC) Billed                $  1,257,816           1.248%

Commercial Total Billed                                      $ 80,241,009
Commercial SECURITIZATION CHARGE (SC) Billed                 $  1,424,462           1.775%

Industrial Total Billed                                      $ 54,276,701
Industrial SECURITIZATION CHARGE (SC) Billed                 $  1,500,135           2.764%

YTD NET WRITE-OFFS AS A % OF BILLED REVENUE
Non-Residential Customer Net Write-offs                             0.130%
Residential Customer Net Write-offs                                 0.350%
Total Net Write-offs                                                0.220%

 AGGREGATE SC COLLECTIONS

TOTAL SC REMITTED FOR BILLING MONTH
Residential Class SC Collected                               $  1,304,490
Commercial Class SC Collected                                $  1,363,341
Industrial Class SC Collected                                $  1,315,360

Total SC Collected                                           $  3,983,191

 Aggregate SC Remittances for July 2004 BILLING MONTH        $  3,983,191
 Aggregate SC Remittances for August 2004 BILLING MONTH      $          0
 Aggregate SC Remittances for September 2004 BILLING MONTH   $          0
 TOTAL CURRENT SC REMITTANCES                                $  3,983,191
</TABLE>

                                                                     Page 1 of 3

<PAGE>

<TABLE>
<CAPTION>
CURRENT BILLING MONTH 7/2/2004 - 8/2/2004                  COLLECTION CURVE 100%
<S>                                                           <C>
CALCULATED SC COLLECTED AMOUNT RESIDENTIAL

A-1 Residential SC Collected                                     $1,242,839
A-3 Residential T.O.D. SC Collected                              $    3,733
A-4 Alternate Residence SC Collected                             $   31,068
A-5 Residential Farm/Life Support SC Collected                   $   26,850

TOTAL RESIDENTIAL SC COLLECTED                                   $1,304,490

COMMERCIAL

B-1 General Primary   (041) SC Collected                         $   28,340
B-General Secondary   (010) SC Collected                         $  244,316
C- General Secondary   (011) SC Collected                        $  484,971
D-General Primary   (018) SC Collected                           $  294,970
F-Primary High Load Factor   (032) SC Collected                  $   45,779
GH-General Service Heating   (013) SC Collected                  $    3,301
H- Water Heating Service   (014) SC Collected                    $      637
L-1 General Energy-Only Street Lighting SC Collected             $    1,625
L-2 General Service (Cust Owned) St Light SC Collected           $    1,541
L-3 General Service (Co Owned) St Light SC Collected             $    7,950
L-4 General Service Outdoor Lighting Commercial SC Collected     $    1,046
PS-1 General Secondary Public Pumping SC Collected               $    7,076
PS-2 General Primary Public Pumping SC Collected                 $    8,039
PS-3 General Optional Primary Public Pumping SC Collected        $   33,617
R-1 General Secondary Resale SC Collected                        $       88
R-2 General Secondary Resale SC Collected                        $      890
R-3 General Primary Resale SC Collected                          $   28,723
ROA-P Retail Open Access Primary (110) SC Collected              $  119,804
ROA-S Retail Open Access Secondary Com SC Collected              $   35,694
SC - Special Contract Commercial SC Collected                    $    2,224
SPEC Grand Rapids Special Contract SC Collected                  $    2,332
UR-General Unmetered SC Collected                                $   10,378

TOTAL COMMERCIAL SC COLLECTED                                    $1,363,341

INDUSTRIAL

B-1 General Primary   (042) SC Collected                         $   20,901
B-General Secondary   (020) SC Collected                         $   33,795
C- General Secondary   (021) SC Collected                        $   67,155
CG-Cogeneration/Small Power Production Purchase SC Collected     $   17,552
D-General Primary   (028) SC Collected                           $  467,123
F-Primary High Load Factor   (033) SC Collected                  $   70,217
GH-General Service Heating   (023) SC Collected                  $       25
GMD General Motors SC Collected                                  $   61,271
GMF General Motors SC Collected                                  $  118,235
GMF-1 General Motors SC Collected                                $   12,093
GMJ-1 General Motors SC Collected                                $    8,042
</TABLE>

                                                                     Page 2 of 3

<PAGE>

<TABLE>
<CAPTION>
CURRENT BILLING MONTH 7/2/2004 - 8/2/2004                                                    COLLECTION CURVE 100%
<S>                                                                                          <C>
H- Water Heating Service   (024) SC Collected                                                $        0
I-General Primary Interruptible   (034) SC Collected                                         $      160
J-1 General Alternative Electric Metal Melting SC Collected                                  $   21,837
J-General Primary Electric Furnace   (037) SC Collected                                      $    8,891
L-4 General Service Outdoor Lighting Industrial SC Collected                                 $       65
R-3 General Primary Resale (027) SC Collected                                                $       60
ROA-P Retail Open Access Primary (111) SC Collected                                          $  310,460
ROA-S Retail Open Access Secondary Ind SC Collected                                          $    6,218
SC - Special Contract Industrial SC Collected                                                $   91,260

TOTAL INDUSTRIAL SC COLLECTED                                                                $1,315,360

TOTAL SC COLLECTED                                                                           $3,983,191
</TABLE>

Executed as of this 10th day of August 2004.

                                                 CONSUMERS ENERGY COMPANY
                                                 AS SERVICER

                                                          /s/ Glenn P. Barba
                                                 -------------------------------
                                                 Glenn P. Barba, Vice President,
                                                 Controller and Chief
                                                 Accounting Officer

CC:      Consumers Funding LLC
         One Energy Plaza
         Jackson, Mi 49201

                                                                     Page 3 of 3

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