SCANSOURCE INC, 10-K405, 1998-09-25

SCANSOURCE INC
10-K405, 1998-09-25
COMPUTERS & PERIPHERAL EQUIPMENT & SOFTWARE

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- --------------

Commission File Number: 1-12842

SCANSOURCE, INC.
(Exact name of registrant as specified in its charter)

SOUTH CAROLINA 57-0965380
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

6 LOGUE COURT, SUITE G 29165
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (864) 288-2432

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None.

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, no par value

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting stock of the Registrant held by non-
affiliates of the Registrant at September 22, 1998 was $80,916,000, as
computed by reference to the average bid and asked prices of such stock on such
date.

As of June 30, 1998, 5,353,310 shares of the Registrant's Common Stock, no par
value, were outstanding. The Registrant had no other classes of common equity
outstanding as of such date.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended June 30, 1998 are incorporated by reference into Parts II and IV of this
Form 10-K, and portions of the Registrant's Proxy Statement to be furnished in
connection with its 1998 Annual Meeting of Shareholders are incorporated by
reference into Part III of this Form 10-K.
<PAGE>

PART I

ITEM 1. BUSINESS.

ScanSource Inc., ("ScanSource" or the "Company") is a leading value-added
wholesale distributor of automatic identification ("Auto ID"), point of sale
("POS") and telephony products. These specialty technology products interface
with computer systems used to automate the collection, processing and
communication of information for commercial and industrial applications,
including retail sales, distribution, shipping, inventory control, materials
handling and warehouse management.

PRODUCTS AND MARKETS

The Company currently markets approximately 14,000 products from over 60
hardware and software vendors from its central warehouse in Memphis, Tennessee
to approximately 9,300 reseller customers.

Auto-ID technology incorporates the capabilities for electronic recognition
and data processing without the need for manual input and consists of a wide
range of products, including bar code printers and labeling devices, contact
wands, light pens, hand-held and fixed-mount laser scanners, portable data
collection devices, keyboard wedges, and magnetic stripe readers. As Auto-ID
technology has become more pervasive, applications have evolved from traditional
uses such as inventory control, materials handling, distribution, shipping, and
warehouse management to more advanced applications such as medical research. POS
technology consists of devices used for the capture, processing, analysis, and
dissemination of transaction data. POS product lines include computer-based
terminals, monitors, receipt printers, pole displays, cash drawers, keyboards,
peripheral equipment, and fully integrated processing units used primarily in
retail applications. Telephony products include business telephone systems
(PBXs, key systems, telephone handsets and cabling) and computer telephony
components used in voice, fax, data, voice recognition, call center management
and IP telephony applications.

INDUSTRY OVERVIEW

The distribution channels for specialty technology products generally consist
of manufacturers, wholesale distributors such as ScanSource, resellers, and end-
users. In recent years, these distribution channels have evolved through three
stages: (i) direct sales by manufacturers to end-users; (ii) single-tier
distribution in which manufacturers sell to resellers who, in turn, sell
directly to end-users; and (iii) two-tier, or wholesale distribution, in which
manufacturers sell to wholesale distributors, including ScanSource, who sell
only to resellers who, in turn, sell directly to end-users.

Currently, the wholesale distribution channel is highly fragmented, comprised
of several large national distributors and many smaller regional distributors.
Large national distributors are engaged primarily in conventional order
fulfillment and typically offer few value-added services, while small regional
distributors are limited in the scale and scope of their operations and
services.

Competition among an expanding number of manufacturers has caused product
prices to decrease and product applications to expand, which has resulted in an
increasing number of resellers entering the market in order to support a broader
base of potential end-users. As the number of resellers and end-users grows,
competition among manufacturers and within the reseller channel has intensified,
resulting in a less orderly market structure. As a result of the transition of
specialty technology products to open-systems (whereby a variety of
manufacturers' products can be configured together to create a system solution),
both manufacturers and resellers have become more dependent upon wholesale
distributors such as ScanSource for the organization and maintenance of an
efficient market structure.

In addition, manufacturers which face declining product prices and rising
costs of direct sales increasingly rely upon value-added wholesale distributors
for outsourcing certain support functions, such as product assortment, delivery,
inventory management, technical assistance, and marketing. At the same time,
shortened product life cycles and the introduction of new products and
applications have caused resellers increasingly to rely on wholesale
distributors for various inventory management, financing, technical support, and
related functions. The Company believes that as the reseller market grows and
becomes more fragmented, and as specialty technology products continue to
transition to open systems, the wholesale distribution channel in which the
Company operates will become increasingly more important.

2
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VENDORS

The Company's vendors include most of the leading Auto-ID and POS
manufacturers, including Axiohm, Cherry Electrical, Cognitive Solutions,
Datamax, Eltron, Epson America, IBM, Intermec, Ithaca Peripherals, Javelin,
Metrologic, MicroTouch Systems, MMF Cash Drawer, Monarch Marking Systems,
Percon, PSC, Spectra-Physics, StrandWare, Symbol Technologies, and Zebra
Technologies. The Company's key telephony vendors include Lucent Technologies,
Dialogic, Comdial, Vodavi, VocalTech, and Voice Technology Group.

The Company's merchandising director recruits vendors and manages important
aspects of its vendor relationships, such as purchasing arrangements,
cooperative marketing initiatives, vendor sales force relationships, product
training, and monitoring rebate programs and various contract terms and
conditions. The Company generally enters into non-exclusive distribution
agreements with vendors. These agreements typically provide the Company with
stock rotation and price protection provisions that may mitigate the risk of
loss from slow moving inventory, vendor price reductions, product updates or
obsolescence. Some of these distribution agreements contain minimum purchase
amounts in order to receive preferential prices. The distribution agreements are
generally terminable on 30 to 120 days' notice by either party.

CUSTOMERS

The Company's reseller customers currently include approximately 9,300 active
value-added reseller accounts ("VARS") located in the U.S. and Canada. No
single customer accounted for more than three percent of the Company's net sales
in fiscal 1998. The Company segments its significant reseller customers into two
broad categories:

Specialty Technology VARs. These resellers focus on selling specialty
technology products as a tailored software or integrated hardware solution for
their end-users' existing applications or incorporating specialty technology
products as part of customized technology solutions for their end-users. Primary
industries served by these resellers include manufacturing, distribution, health
care, pharmaceuticals, hospitality, convenience, grocery, and other retail
markets.

General or PC VARs. These resellers develop computer solutions for their end-
users' microcomputer needs. They typically have well-established relationships
with end-user management information system directors and are seeking additional
revenue and profit opportunities in related technology markets, such as Auto-ID,
POS, or telephony.

SALES AND MARKETING

The Company's sales force is comprised of 61 inside sales representatives
located in South Carolina, California, Georgia, Washington, New Jersey and
Canada. In order to build strong customer relationships, each active reseller
is assigned to a sales representative. Each sales representative negotiates
pricing directly with his assigned customers. The Company also employs several
product managers who are responsible for developing technical expertise within
broad product markets, evaluating competitive markets, and reviewing overall
product and service requirements of resellers. Each sales representative and
product manager receives comprehensive training with respect to the technical
characteristics of each vendor's products. This training is supplemented by
quarterly product seminars conducted by vendors' representatives and by weekly
meetings among all product managers, marketing and sales representatives.

The Company provides a range of marketing services which include: cooperative
advertising with vendors through trade publications and direct mail; a product
catalog which is published three times per year; periodic newsletters;
management of sales leads; trade shows with software companies and vendors;
direct mail; and sales promotions. In addition, the Company organizes and
operates its own "Solutions USA" trade show on a quarterly basis to recruit
prospective resellers and introduce new applications for the specialty
technology products it distributes. The Company frequently customizes its
marketing services for vendors and resellers.

VALUE-ADDED SERVICES

In addition to the basic order fulfillment and credit services that
conventional wholesale distributors typically provide to resellers, the Company
differentiates itself by providing an array of value-added services, including
the following:

3
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Pre-Sale Technical Support. Technical support personnel assist the reseller
with systems configuration as the order is placed. Pre-sale support also
includes testing products to ensure their compatibility with other products and
applications.

Post-Sale Technical Support. Technical support personnel also assist sales
representatives and customers in diagnosing and solving technical,
configuration, or compatibility issues which may arise after sale. Technical
support personnel will, if necessary, serve as a liaison or advocate between the
manufacturer and the reseller.

Bundling of Separate Product Assortments into Solution Kits. Product managers
and technical support personnel work together to select specific products that
are compatible and continually develop "solution kits" or bundles to better
meet the reseller's needs.

Professional Services Group. The Company's Professional Services Group assists
resellers with pen-based programming and radio-frequency data collection
applications, areas in which resellers need greater technical expertise. This
group offers needs-analysis, pre-sale equipment configuration, sales assistance,
site surveys, on-site installation, post-sale maintenance, software programming
(both utilities and applications), and project management.

OPERATIONS

Information System

The Company's information system is a highly scalable, centralized processing
system capable of supporting numerous operational functions including
purchasing, receiving, order processing, shipping, inventory management, and
accounting. Sales representatives rely on the information system for on-line,
real-time information on product pricing, inventory availability and
reservation, and order status. The Company's warehouse operations use bar code
technology for receiving and shipping, and automated UPS and FedEx systems for
freight processing and shipment tracking, each of which is integrated with the
Company's information system. The customer service and technical support
departments employ the system for documentation and faster processing of
customer product returns. To ensure that adequate inventory levels are
maintained, the Company's buyers depend on the system's purchasing and receiving
functions to track inventory on a continual basis.

Central Warehouse and Shipping

The Company's 81,000 square foot warehouse facility (of which it currently
uses approximately 50,000 square feet), located approximately four miles from
the FedEx hub facility in Memphis, Tennessee, serves the Company's United States
market. A single 20,000 square foot warehouse in Toronto serves the Company's
Canada market using Purolator as the primary freight carrier. The Company
believes that its centralized distribution creates several advantages,
including: (i) a reduced amount of "safety stock" inventory, which, in turn
reduces the Company's working capital borrowings; (ii) an increased turnover
rate by tighter control over inventory; (iii) maintenance of a consistent order-
fill rate; (iv) improved personnel productivity; (v) improved delivery time;
(vi) simplified purchasing and tracking; (vii) decreased demand for management
personnel; and (viii) flexibility to meet customer needs for systems
integration.

The Company's objective is to ship on the same day all orders received by 8:00
p.m. Eastern Time. Orders are currently processed in the central warehouse,
where bar code technology is utilized to minimize shipping errors. The Company
also has an automated package handling system used to send products from the
picking area to invoicing stations. Upon fulfillment of the order, the package
is immediately shipped to the reseller or "drop-shipped" to an end-user
specified by the reseller by FedEx or UPS overnight service. The Company charges
its customers local ground delivery rates for this service.

Credit Services

The Company routinely offers 20-day credit terms for qualified resellers. The
Company believes this policy eliminates the customer's need to establish
multiple credit relationships with a large number of manufacturers. In addition,
the Company arranges floor planning and lease financing for its resellers
through a number of credit institutions.

4
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COMPETITION

The markets in which the Company operates are highly competitive. Competition
is based primarily on factors such as price, product availability, speed and
accuracy of delivery, effectiveness of sales and marketing programs, credit
availability, ability to tailor specific solutions to customer needs, quality
and breadth of product lines and services, and availability of technical and
product information. The Company's competitors include regional and national
wholesale distributors, as well as hardware manufacturers (including most of the
Company's vendors) that sell directly to resellers and to end-users. In
addition, the Company competes with master resellers which sell to franchisees,
third-party dealers and end-users. Certain of the Company's current and
potential competitors have greater financial, technical, marketing, and other
resources than the Company and may be able to respond more quickly to new or
emerging technologies and changes in customer requirements. Such competition
could also result in price reductions, reduced margins, and loss of market share
by the Company.

EMPLOYEES

As of August 6 , 1998 the Company had 229 employees, none of whom was a member
of an industry trade union or collective bargaining unit. The Company considers
its employee relations to be good.

SERVICE MARKS

The Company conducts its business under the trademark and service mark
"ScanSource." The Company has been issued registrations for the mark
"ScanSource" in the United States and Canada. The Company is also pursuing
registrations of its trademarks and service marks "Catalyst" and "Catalyst
Telecom" in the United States and Canada. The Company does not believe that its
operations are dependent upon any of its trademarks or service marks. The
Company also sells products and provides services under various trademarks,
service marks, and trade names to which reference is made in this report that
are the property of owners other than the Company. Such owners have reserved all
rights with respect to their respective trademarks, service marks, and trade
names.

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain of the statements contained in this PART I, Item 1 (Business) and PART
II, Item 7 (Management's Discussion and Analysis of Financial Condition and
Results of Operations) of this Annual Report on Form 10-K that are not
historical facts are forward-looking statements subject to the safe harbor
created by the Private Securities Litigation Reform Act of 1995. The Company
cautions readers of this Annual Report on Form 10-K that a number of important
factors could cause the Company's activities and/or actual results in fiscal
1998 and beyond to differ materially from those expressed in any such forward-
looking statements. These factors include, without limitation, the Company's
dependence on vendors, product supply, senior management, centralized functions,
and third-party shippers, the Company's ability to compete successfully in a
highly competitive market and manage significant additions in personnel and
increases in working capital, the Company's entry into new products markets in
which it has no prior experience, the Company's susceptibility to quarterly
fluctuations in net sales and operations results, the Company's ability to
manage successfully price protection or stock rotation opportunities associated
with inventory value decreases, and other factors described in other reports and
documents filed by the Company with the Securities and Exchange Commission.

ITEM 2. PROPERTIES.

In June 1998, the Company purchased a 70,000 square foot building in
Greenville, South Carolina in which it had formerly leased 32,000 square feet
for its principal executive and sales office. The Company is continuing to
maintain such space as its principal executive and sales office and is leasing
the remainder of the building to third parties until additional space is
required for the Company's needs. The Company's 81,000 square foot distribution
center in Memphis, Tennessee is leased through November 2000 and its 20,000
square foot warehouse in Toronto, Canada is leased through January 31, 2003.
The Company also leases small sales offices of 6,800 square feet or less in each
of Tustin, California; Norcross, Georgia; Cranford, New Jersey; Bellingham,
Washington; and Vancouver and Toronto, Canada. Management believes the Company's
office and warehouse facilities are adequate to support its level of operations
at their current level and for the foreseeable future.

5
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ITEM 3. LEGAL PROCEEDINGS.

The Company is not a party to any legal proceedings it believes could have a
material adverse effect on its business, financial condition, or results of
operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

PART II

ITEM 5. Market For Registrant's Common Equity and Related Stockholder Matters.

The information called for by this Item is incorporated herein by reference
from the inside back cover page of the Registrant's Annual Report to
Shareholders for the fiscal year ended June 30, 1998.

ITEM 6. SELECTED FINANCIAL DATA.

The information called for by this Item is incorporated herein by reference
from page 8 of the Registrant's Annual Report to Shareholders for the fiscal
year ended June 30, 1998.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

The information called for by this Item is incorporated herein by reference
from pages 9 through 14 of the Registrant's Annual Report to Shareholders for
the fiscal year ended June 30, 1998.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information called for by this Item is incorporated herein by reference
from pages 13 through 14 of the Registrant's Annual Report to Shareholders for
the fiscal year ended June 30, 1998.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements listed in Item 14(a)1 of this Form 10-K are
incorporated herein by reference from pages 15 through 24 of the Registrant's
Annual Report to Shareholders for the fiscal year ended June 30, 1998. The
financial statement schedules listed in Item 14(a)2 of this Form 10-K are
included in this report on pages F-1 through F-2.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

PART III

Information called for by Part III (Items 10, 11, 12 and 13) of this report on
Form 10-K has been omitted as the Company intends to file with the Securities
and Exchange Commission not later than 120 days after the close of its fiscal
year ended June 30, 1998 a definitive Proxy Statement pursuant to Regulation 14A
promulgated under the Securities Exchange Act of 1934. Such information will be
set forth in such Proxy Statement and is incorporated herein by reference.

6
<PAGE>

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required by this item is incorporated herein by reference to
the Proxy Statement for the Company's 1998 Annual Meeting of Shareholders.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this item is incorporated herein by reference to
the Proxy Statement for the Company's 1998 Annual Meeting of Shareholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this item is incorporated herein by reference to
the Proxy Statement for the Company's 1998 Annual Meeting of Shareholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this item is incorporated herein by reference to
the Proxy Statement for the Company's 1998 Annual Meeting of Shareholders.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(A)(1) CONSOLIDATED FINANCIAL STATEMENTS: The following financial statements
of ScanSource, Inc. and Independent Auditors' Report are incorporated
herein by reference from the Registrant's Annual Report to Shareholders
for the fiscal year ended June 30, 1998:

Independent Auditors' Report

Consolidated Balance Sheets as of June 30, 1997 and 1998

Consolidated Statements of Income for the years ended June 30, 1996,
1997 and 1998

Consolidated Statements of Shareholders' Equity for the years ended
June 30, 1996, 1997 and 1998

Consolidated Statements of Cash Flows for the years ended June 30,
1996, 1997 and 1998

Notes to Consolidated Financial Statements

(A)(2) FINANCIAL STATEMENT SCHEDULE: The following financial statement
schedule of ScanSource, Inc. and Independent Auditors' Report for the
years ended June 30, 1996, 1997 and 1998 are presented on Page F-1 to
F-2.

Independent Auditors' Report
Schedule - Allowance for Doubtful Accounts Receivable

(A)(3) EXHIBITS: The Exhibits listed on the accompanying Index to Exhibits on
pages E-1 to E- 2 are filed as part of this report.

(B) REPORTS ON FORM 8-K

None.

7
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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

September 24, 1998

SCANSOURCE, INC.

By: /s/ STEVEN H. OWINGS
------------------------
Steven H. Owings
Chairman of the Board and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------- ------------------------- -----------------

/s/ STEVEN H. OWINGS Chairman of the Board and September 24, 1998
- ------------------------- Chief Executive Officer
Steven H. Owings

/s/ MICHAEL L. BAUR President and Director September 24, 1998
- -------------------------
Michael L. Baur

/s/ JEFFERY A. BRYSON Chief Financial Officer and September 24, 1998
- ------------------------- Treasurer (principal financial
Jeffery A. Bryson and accounting officer)

/s/ STEVEN R. FISCHER Director September 24, 1998
- -------------------------
Steven R. Fischer

/s/ JAMES G. FOODY Director September 24, 1998
- -------------------------
James G. Foody

8
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INDEPENDENT AUDITORS' REPORT
----------------------------

The Board of Directors
ScanSource, Inc.:

Under date of August 7, 1998, we reported on the consolidated balance sheets of
ScanSource, Inc. and subsidiaries as of June 30, 1997 and 1998, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years in the three-year period ended June 30, 1998, which are included
herein. In connection with our audits of the aforementioned financial
statements, we also audited the related accompanying financial statement
schedule listed in Item 14(a)2. The financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statement schedule based on our audits.

In our opinion, such schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

Greenville, South Carolina /s/KPMG Peat Marwick LLP
August 7, 1998

F-1
<PAGE>

SCANSOURCE, INC. AND SUBSIDIARIES

Allowance for Doubtful Accounts Receivable

(In thousands)

<TABLE>
<CAPTION>
Balance at Amounts Balance at
Beginning of Charged to End of
Description Year Bad Debt Expense Deduction Year
----------- ------------ ---------------- --------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts receivable:

Year ended June 30, 1996 $ 317 400 (180) 537
====== ===== ==== =====

Year ended June 30, 1997 $ 537 899 (209) 1,227
====== ===== ==== =====

Year ended June 30, 1998 $1,227 1,230 (412) 2,045
====== ===== ==== =====
</TABLE>

F-2
<PAGE>

INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Amended and Restated Articles of Incorporation of the
Registrant. (Incorporated by Reference to Exhibit 3.1 to
Registrant's Form SB-2 filed with the Commission on February
7, 1994, Registration No. 33-75026-A).

3.2 Bylaws of the Registrant (Incorporated by Reference to
Exhibit 3.2 to Registrant's Form SB-2 filed with the
Commission on February 7, 1994, Registration No. 33-75026-A).

4.1 Form of Common Stock Certificate (Incorporated by Reference
to Exhibit 4.1 to Registrant's Form SB-2 filed with the
Commission on February 7, 1994, Registration No. 33-75026-A).

10.9 Stock Option Agreement dated July 1, 1993 covering stock
options issued to Michael L. Baur. (Incorporated by Reference
to Exhibit 10.9 to the Registrant's Form SB-2 filed with the
Commission on February 7, 1994, Registration No. 33-75026-A).

10.10 1993 Incentive Stock Option Plan (As Amended) of the
Registrant and Form of Stock Option Agreement (Incorporated
by reference to Exhibit 10.10 to Registrant's Form S-1 filed
with the Commission on January 23, 1997, Registration No.
333-20231).

10.11 1994 Stock Option Plan for Outside Directors of the
Registrant and Form of Stock Option Agreement. (Incorporated
by Reference to Exhibit 10.11 to the Registrant's Form SB-2
filed with the Commission on February 7, 1994, Registration
No. 33-75026-A).

10.13 Stock Option Agreement dated December 30, 1993 covering stock
options issued to Irwin Lieber. (Incorporated by Reference to
Exhibit 10.13 to the Registrant's Form SB-2 filed with the
Commission on February 7, 1994, Registration No. 33-75026-A).

10.18 Agreement to Terminate Distribution Services dated June 24,
1994 between the Registrant and Gates/FA Distributing, Inc.
(Incorporated by Reference to Exhibit 99.1 to Registrant's
Form 8-K filed with the Commission on June 6, 1994).

10.21 Software License Agreement dated April 18, 1995 between the
Registrant and Technology Marketing Group, Inc. d/b/a
Globelle, including letter agreement dated November 22, 1995
between the parties with respect to stock options.
(Incorporated by reference to Exhibit 10.21 to the
Registrant's registration statement on Form S-3 filed with
the Commission on December 29, 1995, Registration No.
33-81043).

10.25* Agreement for Wholesale Financing (Security Agreement) dated
April 8, 1996 between the Registrant and IBM Credit
Corporation, including letter agreement dated April 17, 1996
between the parties.

10.26 Intercreditor Agreement dated April 8, 1996 among the
Registrant, IBM Credit Corporation, and Branch Banking and
Trust Company. (Incorporated by reference to Exhibit 10.26 to
the Registrant's Form S-1 filed with the Commission on
January 23, 1997, Registration No. 333-20231).

10.27 Loan and Security Agreement dated November 25, 1996 between
the Registrant and Branch Banking and Trust Company.
(Incorporated by reference to Exhibit 10.27 to the
Registrant's Form S-1 filed with the Commission on January
23, 1997, Registration No. 333-20231).

10.28 Employment Agreement dated as of January 1, 1997 between the
Registrant and Steven H. Owings. (Incorporated by reference
to Exhibit 10.28 to the Registrant's Form S-1 filed with the
Commission on January 23, 1997, Registration No. 333-20231).

10.29 Employment Agreement dated as of January 1, 1997 between the
Registrant and Michael L. Baur. (Incorporated by reference to
Exhibit 10.29 to the Registrant's Form S-1 filed with the
Commission on January 23, 1997, Registration No. 333-20231).

10.30 Employment Agreement dated as of January 1, 1997 between the
Registrant and Jeffery A. Bryson. (Incorporated by reference
to Exhibit 10.30 to the Registrant's Form S-1 filed with the
Commission on January 23, 1997, Registration No. 333-20231).

E-1
<PAGE>

EXHIBIT
NUMBER DESCRIPTION
------- -----------

10.32 Stock Option Agreement dated July 18, 1996 covering stock
options granted to James G. Foody. (Incorporated by reference
to Exhibit 10.32 to the Registrant's Form S-1 filed with the
Commission on January 23, 1997, Registration No. 333-20231).

10.33 Stock Option Agreement dated December 3, 1996 covering stock
options granted to Steven H. Owings. (Incorporated by
reference to Exhibit 10.33 to the Registrant's Form S-1 filed
with the Commission on January 23, 1997, Registration No.
333-20231).

10.34 Stock Option Agreement dated December 3, 1996 covering stock
options granted to Michael L. Baur. (Incorporated by
reference to Exhibit 10.34 to the Registrant's Form S-1 filed
with the Commission on January 23, 1997, Registration No.
333-20231).

10.35* Distribution Agreement dated October 1, 1994 between the
Registrant and Symbol Technologies, Inc.

10.36* Distribution Agreement dated January 1, 1996 between the
Registrant and IBM Corporation.

10.37 Stock Option Agreement dated January 17, 1997 covering
options granted to Steven H. Owings. (Incorporated by
reference to Exhibit 10.37 to the Registrant's Form S-1 filed
with the Commission on January 23, 1997, Registration No.
333-20231).

10.38 Stock Option Agreement dated January 17, 1997 covering
options granted to Michael L. Baur. (Incorporated by
reference to Exhibit 10.38 to the Registrant's Form S-1 filed
with the Commission on January 23, 1997, Registration No.
333-20231).

10.39 Stock Option Agreement dated January 17, 1997 covering
options granted to Jeffrey A. Bryson. (Incorporated by
reference to Exhibit 10.39 to the Registrant's Form S-1 filed
with the Commission on January 23, 1997, Registration No.
333-20231).

13* Portions of the Registrant's Annual Report to Shareholders
for the Fiscal Year Ended June 30, 1998.

27* Financial Data Schedule.
- ----------

* Filed herewith.

E-2

<PAGE>
Exhibit 10.25
-------------

[LETTERHEAD OF IBM CREDIT CORPORATION APPEARS HERE]

April 17, 1996

Mr. Michael Baur
Scansource, Inc.
6 Logue Court
Greenville, SC 29615

Dear Mr. Baur:

We are pleased to have you as part of the IBM Credit Corporation Remarketer
Financing Program. Your approved credit line is $7,000,000.00.

To facilitate the administration of the program, an IBM Credit Corporation ("IBM
Credit") Dealer Account Number (54319) has been established. Please use this
number in your future communications with us regarding this program.

The Remarketer Financing Program you have been approved for is the Scheduled
Payment Plan (SPP). With this program, you remit a single payment in 75 days.
Depending upon the date of each invoice, payments are due on the 5th, 15th and
25th of the month following your purchase. There are no financing charges
associated with this program for 75 days.

When the inventory financing program is made available to you, all new orders
will be processed by the franchisor under the inventory financing program.

IBM Credit is dedicated to providing the best possible customer service and
financing programs which meet the changing needs of our customers. Your input
is essential as we strive to remain your first choice for remarketer financing,
and we have found that our most valuable feedback comes immediately following a
completed transaction.

Accordingly, IBM Credit headquarters will be contacting you within the next
several days for your insight into "How we're doing". We would appreciate your
participation in this brief telephone survey which will allow you to share your
ideas and suggestions on how we could make your future business transactions
with us even easier.

IBM Credit sincerely appreciates this opportunity to provide a service to your
organization and we look forward to a mutually beneficial business relationship.
Please contact your Remarketer Financing Advisor, Joe Gibbons, at 800-678-6900
if you have questions.

Sincerely,

/s/ KATHY MITCHELL for
Denise Dixon
Contract Administrator

<PAGE>

Exhibit 10.35

SYMBOL TECHNOLOGIES, INC.
DISTRIBUTION AGREEMENT

As of October 1, 1994, Symbol Technologies, Inc., a Delaware
corporation having is principal place of business at 116 Wilbur Place,
Bohemia, NY 11716 ("Symbol"), and ScanSource, a South Carolina corporation
having its principal place of business at Greenville, South Carolina
("Distributor"), agree as follows:

1. APPOINTMENT. Symbol appoints Distributor an authorized distributor of
its Products within the United States and Puerto Rico (the "Territory"). Symbol
remains free to distribute its Products within the Territory through other
distributors or dealers. As used in this Agreement, "Products" means all
products offered for sale by Symbol generally as set forth and described in
Symbol's current price list. Products may be added to or deleted from the price
list by Symbol on sixty days prior written notice to Distributor.

2. RESPONSIBILITIES OF DISTRIBUTOR. Distributor will use its reasonable
best efforts to:

a. maintain a competent and aggressive sales force and otherwise promote
the sale, lease, or other distribution of the Products, TO RESELLERS
ONLY, within the Territory;

b. maintain a representative inventory of Products in reasonably
sufficient quantities to provide adequate and timely delivery to
Distributor's customers; and

c. participate in such training programs as may be offered by Symbol.

3. RESPONSIBILITIES OF SYMBOL. Symbol will use its reasonable best
efforts to:

a. furnish Distributor with current price and product information in
suitable electronic formats and with a reasonable supply of such
printed sales literature, books, catalogues, and the like as Symbol may
prepare and make available such training and technical and sales
support as may be necessary to assist Distributor in effectively
carrying out its activities under this Agreement;

b. advertise the Products throughout the Territory, inform the public that
Distributor is an authorized distributor of the Products, encourage
customers or potential customers potential customers for the Products
to order the same from its distributors (including Distributor), and
refer to its distributors (including Distributor) leads and
ordersinvolving quantities of Products normally handled by
distribution; and

c. establish and maintain quality control manufacturing, handling and
testing procedures, and such other programs as are necessary to ensure
that the Products, as manufactured and sold to Distributor are of the
highest quality and reliability, are in full compliance with all
applicable laws, standards, codes and regulations, are duly marked and
labeled and are suitable for resale or other distribution.

4. REPORTS AND AUDITS. Within fifteen business days after the end of
each month, Distributor will send to Symbol in a mutually agreeable format, (i)
a stock status report showing the month end on-hand quantities of Products by
device type and warehouse location and (ii) a point of sale report showing each
sale of the Products for the month by device type, selling location, customer
name and address, and sale price. No more than twice during any year, at
reasonable times and upon reasonable prior notice employees of Symbol may (i)
conduct a physical inventory of Products in any stocking location (or, in
automated facilities, observe cycle counts and related methodology) or (ii)
audit such business records, located at Distributor's corporate headquarters, as
pertain solely to the purchase of Products hereunder during any such year.

5. ORDERS; DELIVERY; RESCHEDULING; CANCELLATION

A. ORDERS Distributor will place written, telefaxed, or electronically
interchanged purchase orders with written confirmation within thirty
days, which will include the Products ordered, quantities requested,
delivery dates, prices, and shipping instructions (when necessary).
Symbol will acknowledge each order in writing, by telefax or electronic
interchange within ten business days of the receipt thereof and will
confirm the requested shipment date or specify an alternative shipment
date ("Acknowledged Shipment Date").
<PAGE>

B. SHIPPING All shipments are F.O.B. Symbol's point of manufacture.

C. RESCHEDULING AND CANCELLATION Distributor may, on at least thirty days
prior written notice, reschedule or cancel the Acknowledged Shipment
Date of any order without cost or penalty.

D. DISTRIBUTOR'S ACCEPTANCE Distributor's acceptance of an order will
occur upon its receipt of the Products, unless Distributor notifies
Symbol within thirty business days of such receipt that the products
are defective or do not conform to Symbol's applicable warranty, the
terms of this Agreement, or Distributor's order.

E. DOA'S Products received by Distributor that are defective on arrival
will be handled under standard procedures then currently in place for
DOA's and expedited replacement.

6. PRICES. The paces for Products will be as set forth in Symbol's Price
list in effect as of the date of this Agreement, subject to discounts equal to
Level "8" in the attached "Distributor Product and Discount Schedule". For
discount levels above Level 7, see attached Addendum. Prices are also subject
to change from such date forward upon at least sixty days prior written notice
from Symbol to Distributor.

A. PRICE INCREASES Prior to the effective date of a price increase,
Distributor may order Products for delivery within the term at the
prior (i.e., lower) price. Products shipped under orders submitted by
Distributor prior to the effective date of any price increase will be
shipped and invoiced at the price in effect at the time of order
placement, providing shipment occurs within 90 days.

B. PRICE DECREASES In the event Symbol decreases the price of any Product,
Distributor will receive a credit equal to the difference between the
price paid for the Product by Distributor (less any prior credits taken
by Distributor on such Product) and the new decreased price for the
Product multiplied by the quantity of such Product in Distributor's
inventory, or in transit to Distributor, on the effective date of the
decrease. Price protection will also apply to all Products returned to
Distributor by its customers within sixty days of the effective date.
Distributor will submit to Symbol within sixty business days following
the later of the effective dateof such price decrease or the date
Distributor actually receives notice thereof, a list of the Products
upon which such credit is due. All Products shipped after the effective
date of any price decrease will be shipped and invoiced at the price in
effect at the time of shipment.

C. SUPPLIER'S REPRESENTATION Symbol represents and warrants that its
practices and policies, including prices and discounts, comply with all
applicable laws.

D. TAXES AND OTHER CHARGES Distributor will pay any applicable sales or
use taxes pertaining to its purchase of the Products (and, if Products
are to be delivered to points outside the United States, the cost of
packing, duties, licenses, and fees) if Included as a separate item on
the invoices sent by Symbol to Distributor.

E. TERMS Terms of payment are two percent 20 net 45 days.

7. RETURN OF PRODUCT

A. QUARTERLY ROTATION Once in each quarter, Distributor may return to
Symbol for credit, a quantity of Products the value of which will not
exceed ten percent of the amount invoiced by Symbol to Distributor for
all Products purchased by Distributor during the previous quarter.
Credit issued for such returned Products will equal the price paid by
Distributor for such Products, less any prior credits taken thereon.
Such returns, which may be made from one or more stocking locations,
will be shipped F.O.B. Symbol's domestic facility, freight prepaid.
Distributor must obtain a return authorization from Symbol prior to
shipment. All Products returned must be in their original packaging or
unsold and in merchantable condition.

8. PRODUCT CHANGES

A. OBSOLESCENCE AND MODIFICATION Symbol reserves the right to discontinue
the manufacture or sale of, or otherwise render or treat as obsolete,
any or all of the Products (or to modify the design or manufacture of
any Product so as to preclude or limit Distributor's sales of such
Product) upon at least ninety days prior written notice to Distributor.
Distributor may, in its discretion, within sixty days of its receipt of
such notice, notify

2
<PAGE>

Symbol in writing of its intention to return any or all such Products
which remain in its inventory for a credit equal to the net price paid
by Distributor for such Products. The Products will be returned within
sixty days of the date of Distributor's receipt of Symbol's return
authorization.

B. INTRODUCTION OF NEW PRODUCTS Symbol will give Distributor at least
thirty days prior written notice of the introduction of any new
Products that preclude or materially limit Distributor from selling any
Products in its inventory and will work with Distributor to resell the
affected inventory. If, despite such efforts, affected Product still
remains in Distributor's inventory, Symbol will replace it with the new
Products within one hundred twenty days of the official public
announcement, or Symbol's first shipment, of such new Products,
whichever occurs first, for only the net cost difference, plus
shipping.

9. WARRANTY. The Products will be covered by Symbol's standard warranties,
copies of which are included in Product packaging, plus ninety days for resale
stocking.

10. COMPLIANCE WITH LAWS. Despite anything to the contrary contained in
Addendum I or elsewhere in this Agreement, Symbol will indemnify Distributor
against, and hold it harmless from, any cost, loss, damage, or liability
(including reasonable attorney's fees) arising from or related to Symbol's
conduct or the failure, or alleged failure, of the Products, as manufactured and
sold to Distributor to fully comply with all applicable Laws, standards, codes,
specifications, and regulations or to be suitable for resale or other
distribution by Distributor as contemplated by this Agreement. All warranty and
indemnification provisions of this Agreement will survive the termination
hereof.

11. INTELLECTUAL PROPERTY. Symbol will indemnify, defend and otherwise
hold harmless Distributor, its affiliates and its customers from all cost, loss,
damage, or liability arising from any proceeding or claim brought or asserted
against Distributor, its affiliates or its customers to the extent such
proceeding or claim is based on an allegation that the Products, any part
thereof, or their distribution or use infringe any patent, copyright, trademark,
trade secret, right in a mask work, or any similar claim, if Distributor
notifies Symbol of any such proceeding or claim promptly after it becomes known
and provides all the assistance and cooperation to Symbol that is reasonably
requested. Symbol will not be liable to Distributor under thisparagraph to the
extent that any claim is based on a use for which the Product or part was not
designed, or an alteration of the Product by Distributor or at its direction
which caused the infringement.

12. TERM AND TERMINATION

A. Term This Agreement is effective once signed by both parties and until
terminated in accordance with the provisions of this paragraph. Either
party may at any time terminate this Agreement without cause and far
its convenience by giving sixty days prior written notice to the other.
Symbol and Distributor represent that they have considered the making
of expenditures in preparing to perform under this Agreement. In that
regard, both parties acknowledge that neither party will in any way be
liable to the other for any loss, expense, or damage (including
special, consequential or incidental damages) by reason of any
termination of this Agreement without cause, excepting only the then
current value of equipment purchased or improvements made by either
party and dedicated to the Products or services of such other party.

B. EVENTS OF DEFAULT Any of the following is a default under this
Agreement:
i. the assignment of this Agreement by either party without the
prior written consent of the other party.

ii. either party's failure to cure any breach of this Agreement
within sixty days following written notice thereof from the
other (or, if not curable within sixty days, if the cure is not
commenced within that period and thereafter diligently
completed); and,

iii. the assignment by either party of its business for the benefit
of creditors, or the filing of a petition by either party under
Bankruptcy Code or any similar statute, or the filing of such a
petition against either of them which is not discharged or
stayed within sixty days, or the appointment of a receiver or
similar officer to take charge of either party's property, or
any other act indicative of bankruptcy or insolvency.

3
<PAGE>

C REMEDIES UPON DEFAULT In the event of either party's default, the other
party may terminate this Agreement for cause by written notice and/or
avail itself of any remedy available at law or equity.

d. RETURN OF INVENTORY In the event of any termination of this Agreement,
Symbol may, at its option, repurchase from Distributor any or all
unsold Products designated by Distributor from its inventory at the
price paid therefor by Distributor, less any prior credits taken by
Distributor on such Products. If Distributor terminates this Agreement
without cause, or Symbol terminates it with cause, the price will be
reduced by a five percent handling charge and Distributor will pay all
freight and shipping charges (which otherwise will be paid by Symbol).
In the event of any termination, Symbol will, at Distributor's request,
honor any Distributor purchase order then outstanding.

Symbol will only accept those Products which are in their original
unopened packaging or are undamaged and in merchantable condition. No
termination of this Agreement will affect any obligation of either
party to pay amounts due to the other hereunder.

13. MARKETING COMMUNICATION. To assist Distributor in advertising and
promoting the Products, Symbol will accrue into a cooperative marketing fund two
percent of the net sales dollars invoiced to and paid by Distributor each month,
to be used by Distributor for promotional efforts approved by both Distributor
and Symbol, provided such funds are used before expiration in accordance with
standard MAF policy. All such pre-approved activities will be reimbursed at one
hundred percent of actual (pro-rated) expenses incurred by Distributor.

14. NOTICES. Notices under this Agreement will be deemed given when
delivered by hand or deposited in the United States mail as certified mail,
postage prepaid, addressed to the president of either party at its then
principal place of business.

15. TRADEMARKS. This Agreement does not create, and neither party will
have any right in, or to the use of, any mark, name, style, or logo of the other
party. Distributor is, however, hereby granted a nonexclusive right to use
Symbol's marks, names, or logos to identify itself as an authorized distributor
of the Products and for advertising and promoting its services under this
Agreement.

16. CONFIDENTIAL INFORMATION. Each party will receive and maintain in
confidence all proprietary information, trade secrets or other know-how
belonging to the other (including but not limited to knowledge of manufacturing
or technical processes, financial and systems data, and customer information)
provided that any such information, secrets, or know-how is expressly designated
as being confidential, except and to the extent that disclosure is required by
law, regulation, or court order, or enters into the public domain through no
fault of the party obligated to maintain such confidentiality. Without limiting
the foregoing, all material and information made known to Symbol by Distributor
pursuant to paragraph 4 of this Agreement is hereby designated as confidential.

17. CREDITS. In the event Distributor is entitled to a credit from Symbol
which exceeds Distributor's obligation to Symbol at the time, Symbol will
promptly pay the amount of such excess to Distributor.

18. AUTHORIZATION NOT UNREASONABLY WITHHELD. Whenever any consent, action,
or authorization is required or requested of either party hereunder, it
will not be unreasonably withheld or delayed. Any required return
authorization will be granted within thirty days from the day it is
requested.

19. FORCE MAJEURE. Neither party will bear any liability to the other for
any failure or delay to the extent that it results from acts of God, labor
difficulties, inability to obtain materials, or any other cause beyond such
party's reasonable control.

20. RELATIONSHIP OF PARTIES. The parties are independent contractors,
each in full control of its business. Under no circumstances will either party
have the right or authority to act or make any commitment on behalf of or bind
the other or represent the other as its agent in any way.

21. PUBLICITY. This Agreement is confidential within the meaning of
paragraph 16. Except as required by law, no press release or other like
publicity regarding the relationship between Distributor and Symbol, this
Agreement, or its termination will be made without the other party's prior
approval.

22. SOFTWARE. Symbol warrants that it is the owner or licensee of all
software provided to Distributor under this Agreement (whether or not included
or embedded in any other Product) and has the authority to permit Distributor to
use or resell or sublicense the software to third parties. Distributor will not
resell or sublicense the software without the license

4
<PAGE>

agreement provided by Symbol for that purpose and will advise Symbol of any
known breach of the terms thereof.

23. GENERAL

A. ENTIRE AGREEMENT This Agreement supersedes all prior communications or
understandings between Distributor and Symbol and constitutes the
entire agreement between the parties with respect to the matters
covered herein. In the event of a conflict or inconsistency between
the terms of this Agreement and those of any order, quotation,
acknowledgment, or other communication from one party to the other,
the terms of this Agreement will be controlling.

FOR SYMBOL
Name J. Callahan
----------------------------------
Signature /s/ J. CALLAHAN
-----------------------------
Title Vice President
---------------------------------
Date 10/29/94
----------------------------------

B. AMENDMENT This Agreement cannot be changed in any way except by a writing
signed by the party against which the enforcement of the change is sought.

C. GOVERNING LAW This Agreement is made in, governed by, and will be construed
solely in accordance with, the internal laws of the State of New York. Any
action brought under or in connection with this Agreement must be
instituted in the state or federal forum covering the defending party's
principal place of business. In any such action, the prevailing party's
reasonable legal fees will be paid by the other party.

D. REFORMATION In the event any provision of this Agreement is held to be
invalid or unenforceable for any reason, such invalidity or
unenforceability will attach only to such provision and will not affect or
render invalid or unenforceable any other provision of this Agreement. Any
such provision may be reformed by a court of competent jurisdiction so as
to render the same valid or enforceable while most nearly effectuating the
intent of the parties.

E. ASSIGNMENT Neither party has the right to assign this Agreement in whole or
in part without the prior written consent of the other except to another
corporation wholly-owned by or under commoncontrol with it. For purposes
hereof, an assignment includes without limitation, a merger, sale of assets
or business, or other transfer of control by operation of law or otherwise.

Each party has entered this Agreement by having an authorized representative
sign below.

FOR DISTRIBUTOR
Name Steve Owings
--------------------------
Signature /s/ STEVE OWINGS
---------------------
Title CEO
-------------------------
Date Oct. 27, 1994
---------------------------

5
<PAGE>

ADDENDUM I

To Symbol Technologies, Inc. Distribution Agreement between
Symbol Technologies, Inc. ("Symbol") and ScanSource, Inc. ("ScanSource"),
dated October 1, 1994
---------------

__________________________________________________________________

This Addendum is attached and made an integral part of the above-referenced
agreement between the parties. All provisions and terms of the former remain in
effect, except as modified below:

I. PARAGRAPH 6 "PRICES":
--------------------

Distributor is entitled to Discount Level 8 in exchange for a commitment to
purchase and take delivery of at least $6,000,000 in Symbol products during the
term of the agreement. The discounts will be as set forth in the Distributor
Product and Discount Schedule for Level 7, plus one percent (1%) additional
discount for Category A, B and C products. Category D products remain at 25%.

Should Distributor, during the final four (4) months of 1995 purchase and
take delivery of Symbol products totalling at least $3,333,334 ($10,000,000
annual purchase rate), Symbol will grant a credit of two percent (2%) of net
purchases (made, invoiced and collected during the term of this agreement)
toward future purchases to Distributor, for use in 1996. MAF funds will not
apply to any purchases made suing the credit.

II. PARAGRAPH 7 "RETURN OF PRODUCT":
-------------------------------

The parties further agree that, for all Symbol products requested and
delivered to Distributor from Symbol Express inventory shall not be eligible for
stock rotation.

Agreed to this date by the parties

FOR SYMBOL: FOR SCANSOURCE:

FOR SYMBOL
Name J. Callahan Name Steve Owings
-------------------------- ---------------------------
Signature /s/ J. CALLAHAN Signature /s/ STEVE OWINGS
--------------------- ----------------------
Title Vice President Title CEO
------------------------- --------------------------
Date 10/29/94 Date Oct. 27, 1994
--------------------------- ---------------------------

6
<PAGE>

DISTRIBUTOR
-------------------------------------
PRODUCT AND DISCOUNT SCHEDULE
-------------------------------------
ATTACHMENT TO SYMBOL DISTRIBUTOR AGREEMENT

CATEGORY A: ALL HANDHELD BARCODE SCANNING PRODUCTS:
- ---------- --------------------------------------
LS2XXX, LS85XX, LS3XXX, LT17XX, HF2000
LSS24XX, LS9100, WK1780, WK2080

CATEGORY B: OTHER SCANNING PRODUCTS:*
- ---------- -----------------------
LL5XX, SL67XX, SL95XX, LS6XXX, PDF1000, PDF6000,
PL140, LL425 (SYSTEM), LS5000
PORTABLE TERMINALS
------------------
PDT31XX, PDT1475*, RFT15XX*, SDT*, PDT3300, LDT3805,
PRC3310, VRC3910, LRT3800, APS3395, DATAWANDS*

CATEGORY C: DATA MANAGEMENT PRODUCTS, PEN-BASED TERMINALS,
- ---------- ----------------------------------------------
ACCESSORIES, PERIPHERALS, & CABLES
----------------------------------
PPT4100, LS5100, LS5200, DM8XX, LL7XX, MS7X, WANDS, POWER SUPPLIES,
PS100X*, RF BASE STATIONS, NETWORK CONTROLLERS,
CRADLES, ADAPTORS, ACCESSORIES, SCAN STANDS, INTELLISTANDS,
SMART STANDS, TRANSCEIVERS, LL425 CABLE, TRAINING COURSES & VIDEOS
DEVELOPMENT SOFTWARE
--------------------
UBASIC, POWERGEN, LIBRARIES, PERFORM SOFTWARE, ETC.
LL500 USER DOCUMENTATION, SERIES 3000ADK

CATEGORY D: APPLICATION SOFTWARE & OEM PRODUCTS*
- ---------- -----------------------------------
ALL THIRD PARTY APPLICATIONS* Products designated with an asterisk
have a 90 day warranty to end user. All others are warranted for
one year.

- -----------------------------------------------------------------------------
DISTRIBUTOR DISCOUNT SCHEDULE
DISCOUNT FROM LIST PRICE (PERCENT)

DISC CERT. MINIMUM CREDIT ANNUAL PRODUCT CATEGORY
LEVEL LEVEL LIMIT REQUIRED VOLUME (000'S) A B C D
- ----- ------- -------------- -------------- - - - -

6 5C $105,000 2,000 - 3,999 59 49 39 25

7 6C $215,000 OVER 4,000 60 50 40 25

- 7C $21,5000 OVER 4,000 61 51 41 25

8 OVER 6,000 Negotiable
- -----------------------------------------------------------------------------

EXHIBIT D

7
<PAGE>

SYMBOL TECHNOLOGIES, INC.
VALUE ADDED RESELLER AGREEMENT

--------------------------------
Cooperative Marketing Partner
REFERRAL FEE PAYMENT SCHEDULE
--------------------------------

The following referral fee payment rates are in effect for qualifying conditions
set forth in paragraph 4 of the Value Added Reseller Agreement for VARS or in
the Cooperative Marketing Partner (CMP) Agreement for CMP's. Conditions for
earning such referral fees are set forth therein. Symbol reserves the right to
change all fees in Exhibit D without notice.

- --------------------------------------------------------------------------------
Discount provided Referral Fee Amount Earned as
to End-user by Symbol a % of Net Cost to End-user
--------------------- ---------------------------
------------------------------------------------------------------
0-10% 15
------------------------------------------------------------------
11-20% 12
------------------------------------------------------------------
21-30% 9
------------------------------------------------------------------
31-40% 6
------------------------------------------------------------------
41-50% 3
------------------------------------------------------------------
>50% Negotiable
- --------------------------------------------------------------------------------

<PAGE>

Exhibit 10.36

IBM BUSINESS PARTNER AGREEMENT [LOGO]

MANAGING INDUSTRY REMARKETER PROFILE

______________________________________________________
We welcome you as an IBM Business Partner.

This Profile covers the details of your authorization to market our Products to
Customers. Like you, we are committed to providing the highest quality Products
to the Customer. As our managing industry remarketer, please let us know if you
have any questions or problems with our Products.

By signing below, each of us agrees to the terms of the following (collectively
called the "Agreement"):

(a) this Profile;

(b) Remarketer General Terms (Z125-4800-07 05/95); and

This Agreement and its applicable Transaction Documents are the complete
agreement regarding this relationship, and replace any prior oral or written
communications between us. Once this Profile is signed, 1) any reproduction of
this Agreement or a Transaction Document made by reliable means (for example,
photocopy or facsimile) is considered an original and 2) all Products you order
and Services you perform under this Agreement are subject to it.

Revised Profile (yes/no): no Date received by IBM: 02/20/96

Agreed to: (IBM Business Partner name) Agreed to:
SCANSOURCE International Business Machines
Corporation
GREENVILLE, SC 29615

By /s/ Steven H. Owings By /s/ Terry Webb
------------------------------------- -------------------------------
Authorized signature Authorized signature

Name (type or print): Steven H. Owings Name (type or print): Terry Webb

Date 1/29/96 Date: 3/8/96

IBM Business Partner address: IBM Office address:
SCANSOURCE 4111 NORTHSIDE PARKWAY, LO8C3
ATLANTA, GA 30327-3098
6 LOGUE COURT, SUITE G
GREENVILLE, SC 29615

Page 1 of 5
<PAGE>

- --------------------------------------------------------------------------------
After signing please return a copy of this Profile to the local "IBM Office
address" shown above.
- --------------------------------------------------------------------------------
DETAILS OF OUR RELATIONSHIP

1. CONTRACT-PERIOD START DATE (MONTH/YEAR): 01/96 DURATION (MONTHS): 12
The start date is always the first day of a month. The start date does not
change with a revised Profile.

2. RELATIONSHIP APPROVAL/ACCEPTANCE OF ADDITIONAL TERMS:
For our approved relationship, each of us agrees to the terms of the
following Attachments by signing this Profile. Copies of those Attachments
are included. Please make sure you have them (and the Remarketer General
Terms) and notify us if any are missing.

APPROVED
AUTHORIZED RELATIONSHIP (YES/NO) ATTACHMENT

1) Managing Industry Remarketer yes Z125-4579-06 07/95 and
Z125-4805-09 07/95

Industry Remarketer Attachment: yes
Attachment for SureOne Point-of-Sale
Terminal (4614)
THE FOLLOWING OFFERING HAS ADDITIONAL
TERMS IN THE APPLICABLE ATTACHMENT.

1) Market Development Fund yes Z125-5215-00 03/94

3. NAME AND ADDRESS OF YOUR AGGREGATOR, IF APPLICABLE:
You may receive Products through this Aggregator. By selecting this
Aggregator, you agree that it (and not we) will provide the functions
identified in the Remarketer General Terms as the Aggregator's
responsibility.

N/A
---------------------------------------------------------------------------
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

4. PRODUCT APPROVAL:
The following Products are listed in either the Industry Remarketer
Exhibit, the Dealer Exhibit, the Software Remarketer Exhibit, or the
Managing Industry Remarketer- Schedule A. The terms of the applicable
Exhibit or Schedule A apply to the Products listed in it. Approval to
market the Products includes approval for you to acquire them for
development purposes.

APPROVED TO MARKET TO
RESELLERS(1) (YES/NO)

SYSTEM TYPES
1) IBM RISC System/6000 no
2) IBM 9402 no
3) IBM 9404 (2) no
4) IBM 9406 no
5) IBM 4694 and IBM 4695 Retail POS Products yes
6) IBM Network Integration no

Page 2 of 5
<PAGE>

SYSTEM UNITS (3) (4) yes
1) IBM PC
as workstations
2) IBM PC Server yes
as workstations
3) ThinkPad yes
as workstations

PRODUCT CATEGORIES
1) IBM Finance Products - Category J1 no
2) IBM Storage Products (5)

Category S1 Products (6) no
Category S2 Products (7) no
Category S3 Products (6) (7) no
Category S4 Products (6) no

(1) You may market only to resellers approved by us who 1) market Products
together with their value-added enhancement (which we have previously
approved) and 2) do not market to other resellers. When we approve you
for Products listed in the Industry Remarketer Exhibit, you are also
approved for their associated Programs and peripherals listed in the
Industry Remarketer and Dealer Exhibits. When we approve you to market
personal computer Products, you are also approved for their associated
Programs and peripherals listed in the Dealer Exhibit.
(2) The IBM 9404 Models 300, 310, 320 and 30S, which are only available as
model conversions, may be made available to you on an exception basis.
(3) May be available from an Aggregator.
(4) May only be used, in conjunction with your value added enhancement, as 1)
peripherals to IBM System Types, or 2) peripherals to point-of-sale
systems.
(5) Remarketers approved to market the IBM RISC System/6000 and the IBM AS/400
System Types, may market IBM Storage Products.
(6) Your resellers may remarket these Products without a value-added
enhancement.
(7) You are also approved for Category S1 Products.

EXCLUSIONS, IF APPLICABLE:
Although included by reference above, you are not approved for these individual
Products.

N/A
- ------------------------ --------------------- ----------------------

- ------------------------ --------------------- ----------------------

Page 3 of 5
<PAGE>

5. AUTHORIZED LOCATIONS:

TOTAL NUMBER OF AUTHORIZED LOCATIONS LISTED IN THIS PROFILE: 1

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Loc. ID Authorized Location (street address, city, state, ZIP code)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
83639 6 LOGUE COURT
GREENVILLE, SC 29615
- --------------------------------------------------------------------------------------------------------------------------
MINIMUM RENEWAL CRITERIA
---------------------------------------------------------------------------------------------------
Product Name Volumes/Revenue/Other
---------------------------------------------------------------------------------------------------
POS PRODUCTS
---------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------
MINIMUM NUMBER OF TRAINED PERSONNEL
---------------------------------------------------------------------------------------------------
Product/Course Name Mgmt Sales Prog Support Service
---------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------

<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Loc. ID Authorized Location (street address, city, state, ZIP code)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
MINIMUM RENEWAL CRITERIA
---------------------------------------------------------------------------------------------------
Product Name Volumes/Revenue/Other
---------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------

MINIMUM NUMBER OF TRAINED PERSONNEL
---------------------------------------------------------------------------------------------------
Product/Course Name Mgmt Sales Prog Support Service

---------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------
</TABLE>

Page 4 of 5
<PAGE>

--------------------------------------------------------------------------

6. YOUR COMMITMENT, IF APPLICABLE:

A) This section identifies by System Type (1): your Contract Period
System Revenue Commitment (2); its Applicable Discount Percentage (3);
and, the Minimum Revenue Attainment you are required to achieve at the
mid-point of your Contract Period, in order to maintain the current
discount percentage (4). At your request we will review your Revenue
Attainment, any time during the contract period to determine if you
qualify for a higher discount percentage.

At the mid-point of your contract period, IBM will review your Revenue
Attainment by System Type. If it is less than the amount specified in
column (4), your discount percentage will be adjusted downward one
level for the remainder of the contract period.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
(1) (2) (3) (4)
System Type System Revenue Applicable Discount Six Months'* Minimum
Commitment Percentage Revenue Attainment to
Maintain Current
Discount Percentage
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IBM RISC N/A Commercial - Machines NA Programs NA NA
Federal** - Machines NA Programs NA
System/6000
----------------------------------------------------------------------------------------------
</TABLE>

*12 Months if you have a 24-month Contract
**The discount which applies to sales to the Federal Government are listed in
the Industry Remarketer Federal Discount Schedule F.

B) This applies only to those Products listed in the Industry Remarketer
Exhibit which require a quantity commitment.

COMMITTED COMMITTED QUANTITY OF
CATEGORY PRODUCTS BY CATEGORY

__________________________________ ____________________________

7. ASSIGNMENT OF WARRANTY SERVICE RESPONSIBILITY, IF APPLICABLE:
You assign to us, or an IBM Premier Personal Computer Servicer, Warranty
Service responsibility for the following Dealer Exhibit Machines.

TYPE/MODEL TYPE/MODEL TYPE/MODEL TYPE/MODEL

______________ _________________ __________________ _________________

Unless you wish to make this assignment to us, please specify the name of the
IBM Premier Personal Computer Servicer:

_____________________________

8. ADDITIONAL TERMS:

The attached Transaction Document, "Schedule A," contains additional terms.
Please make sure you have it and notify us if it is missing.

Page 5 of 5
<PAGE>

ATTACHMENT TO IBM BUSINESS PARTNER AGREEMENT - REMARKETER

MANAGING INDUSTRY REMARKETER ATTACHMENT

ATTACHMENT FOR SUREONE POINT-OF-SALE TERMINAL (SUREONE)

The terms included in this Attachment amend the above agreement for the period
beginning January 1, 1996 and ending December 31, 1996.

Page 1
<PAGE>

IBM BUSINESS PARTNER AGREEMENT - REMARKETER

MANAGING INDUSTRY REMARKETER - ATTACHMENT

This Attachment for Machine Type 4614 Point-of-Sale Terminal (hereinafter
referred to as SureOne) is added to your-IBM Business Partner Agreement -
Remarketer.

The following terms and conditions apply to the acquisition and resale of the
IBM 4614 only and are in addition to those contained in the IBM Business Partner
Agreement - Remarketer.

RESPONSIBILITIES

SCANSOURCE (YOU)

1. You will assign a minimum of four (4) people who have business
development skills and are capable of: 1) recruiting and managing
Industry Remarketer Affiliates (IRAs); 2) developing and delivering
SureOne marketing materials to re-sellers; 3) preparing and analyzing
monthly marketing measurements; and 4) managing the ScanSource/IBM
relationship.

2. You will purchase and maintain demonstration equipment for the purpose
of IRA recruitment. In addition, this purchased demonstration
equipment will aggregate against your annual MIR revenue attainment.
You will identify to IBM any products You acquire for demonstration
purposes.

3. You will develop and provide IRA recruitment kits. These kits will
provide the necessary information to potential remarketers to generate
their interest in applying to the IBM IRA program.

4. You will develop and provide a direct mail product for the purpose of
creating end user demand in cooperation with independent software
vendors.

5. You will develop and provide IRA mailers or handouts featuring a
section on SureOne hardware. These mailers and handouts must be
capable of being customized later to include total hardware and
application software solution for SureOne.

6. You will develop and provide marketing materials sufficient to allow
IRAs to keep their name and the name of IBM in front of customers and
potential customers a minimum of four (4) times per year. You will
also provide four (4), 4-6 page background discussions on different
profit-producing aspects of SureOne (inventory control, etc.) along
with suggested cover letters.

7. You will develop and secure SureOne Product advertising in the "Retail
Systems Reseller" magazine for March, April and May of 1996.

Page 2
<PAGE>

8. You will be responsible for updating the ScanSource Catalog to
reflect SureOne products by March 1, 1996.

Marketing Development Funds (MDF) may be used to pay for all of the ScanSource
Responsibilities listed above with the exception of Item 1, and will be covered
under the MDF program as outlined in the MDE: Attachment to your IBM Business
Partner Agreement -Remarketer.

IBM

IBM will be responsible for creating a market presence for SureOne by
providing items such as the following:

1. General product/brand advertising

2. Product press announcement

3. Marketing video

4. Trade press seminar

5. End user direct marketing campaign

6. Product specification sheet

7. Trade press reprints

8. Early user application briefs

9. Product poster

IBM ORDERING REQUIREMENTS

1. Every order will be given a minimum scheduled ship date of ninety (90)
days prior to the expected scheduled delivery date.

2. You will place full shipping container orders with IBM with a minimum
order quantity of 336 units per shipping container.

3. You will place orders through IBM Partner Link

DELIVERY TO IRA

1. You will deliver product to SureOne IRAs within five (5) working days
from the date you accept an order form an IRA.

Page 3
<PAGE>

2. IBM will ship these products only to You - not the IRAs or their
customers.

WARRANTY SERVICE

Basic warranty service will be provided free of charge via Customer Carry-
ln-Repair (CCR - also known as Depot) by TSS. Each SureOne product shipped
will include a warranty registration form and a copy of its 12-month,
warranty terms and conditions. The warranty form must be completed by the
IRA and submitted to You for entitlement registration with IBM. You are
responsible for insuring warranty form completion by the IRAs and
subsequent submission to IBM.

RETURNS

Returns will not be accepted by IBM for SureOne Product

WITHDRAWN SUREONE PRODUCTS

Six months after IBM announces the withdrawal of a SureOne Product, You and
IBM will jointly conduct a physical inventory of the machines you have in
your possession. Once the inventory has been counted, we will engage an
independent appraiser to provide us with an Average Wholesale Value (AWV)
at the time of the appraisal. The AWV price will be used for the
liquidation of the jointly counted inventory.

If the AWV is less per machine than the amount You paid IBM, IBM will issue
You a credit for the difference for each machine in your possession as of
the date of our joint inventory.

FORECASTS

You will provide twelve (12) month rolling forecasts with monthly updates
on projected SureOne sales.

PRICE REDUCTION CREDIT PROVISIONS

Price Reduction Credits for SureOne Products will be as specified in the
Business Partner Agreement, Managing Industry Remarketer Attachment,
Schedule A, for Machine Types 4694 and 4695.

LEAD MANAGEMENT

You will contact the IRA within two (2) business days from the date IBM
provides You with an IRA contact name.

You will call the customer within ten (10) business days for satisfaction
and sales information.

ENDING OF ATTACHMENT

Page 4
<PAGE>

This Attachment ends on December 31, 1996. Either of us may terminate this
Attachment with or without cause upon one month's written notice. IBM may
terminate this Attachment at any time if You materially breach any of its
terms. Upon termination, You will return to IBM all marketing materials in
your possession relating to SureOne Products.

Page 5
<PAGE>

IBM BUSINESS PARTNER AGREEMENT

REMARKETER GENERAL TERMS

- --------------------------------------------------------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Section Title Page
<S> <C>
1. Definitions............................................. 2
2. Agreement Structure..................................... 3
3. Our Relationship........................................ 4
4. Marketing Funds and Promotional Offerings............... 7
5. Status Change........................................... 7
6. Export of Products...................................... 7
7. Federal Reporting Requirements.......................... 8
8. Ordering and Delivery................................... 8
9. Inventory Adjustments................................... 9
10. Prices and Price Changes................................ 10
11. Invoicing, Payment, and Taxes........................... 10
12. Title................................................... 11
13. Risk of Loss............................................ 12
14. Engineering Changes..................................... 12
15. Licensed Internal Code.................................. 12
16. Programs................................................ 13
17. Installation and Warranty............................... 13
18. Warranty Service........................................ 14
19. Marketing of IBM Maintenance Services................... 16
20. Patents and Copyrights.................................. 16
21. Liability............................................... 17
22. Trademarks.............................................. 18
23. No Property Rights...................................... 19
24. Changes to the Agreement Terms.......................... 19
25. Ending the Agreement.................................... 19
26. Waiver of Noncompliance................................. 20
27. Electronic Communications............................... 20
28. Geographic Scope........................................ 21
29. Governing Law........................................... 21
</TABLE>

Page 1 of 21
<PAGE>

IBM BUSINESS PARTNER AGREEMENT

REMARKETER GENERAL TERMS

- --------------------------------------------------------------------------------

1. DEFINITIONS

AGGREGATOR is our remarketer who we authorize to acquire Products from us
to supply to its Customers who are also our remarketers. In addition, we
may authorize a remarketer to supply our Products to others (for example,
our industry remarketers). An "Aggregator" is responsible for ordering,
delivery, invoicing, payment, taxes, price reductions and inventory
adjustments. In your Profile, we specify 1) the identity of your
"Aggregator," if any, or 2) if we approve you as an "Aggregator."

AUTHORIZED LOCATION is a site, controlled and operated by you, at which we
authorize you to perform your responsibilities under this Agreement. We
may specify in your Profile certain requirements to which you must adhere
at each Authorized Location (such as, minimum renewal criteria and minimum
number of trained personnel).

CUSTOMER is either an End User, or a reseller who does not market to other
resellers We specify in your Profile if we authorize you to provide
Products to End Users, resellers, or both.

CUSTOMER-SET-UP MACHINE is an IBM Machine that you (or your Customer) set
up according to our instructions.

END USER is anyone, unaffiliated with you (except if you are a qualified
educational institution), who acquires Products for its own use and not for
resale.

MACHINE is an IBM or non-IBM machine, its features, conversions, upgrades,
elements, accessories, cables, or any combination of them (provided by us
or your Aggregator) that we approve you to provide to your Customers.

PRODUCT is a Machine, Program, or Service.

PROGRAM is an IBM or non-IBM licensed program (provided by us or your
Aggregator) that we approve you to provide to your Customers. The term
"Program" does not include Licensed Internal Code.

SERVICE is assistance (for example, Product maintenance) that we approve
you to perform or market. The term "Service" includes use of a resource
(such as a network) that we approve you to provide to your Customers.

Page 2 of 21
<PAGE>

2. AGREEMENT STRUCTURE

The Remarketer General Terms apply to all our remarketers.

PROFILES

We specify the details of our relationship (for example, the type of
remarketer you are) in a document called a "Profile." Each of us agrees to
the terms of the Profile, the Remarketer General Terms, and the applicable
Attachments referred to in the Profile, (collectively called the
"Agreement"), by signing the Profile.

ATTACHMENTS

We describe additional terms that apply to our relationship in documents
called "Attachments." For example, we describe the additional terms that
apply specifically to dealers in an Attachment. Several Attachments may
apply to you. We specify in your Profile the Attachments that apply.

TRANSACTION DOCUMENTS

We will provide to you the appropriate "Transaction Documents" that confirm
the details of your order or provide additional information about our
relationship. The following are examples of Transaction Documents with
examples of the information they may contain:

1. invoices (item, quantity, price, and amount due);

2. addenda (trial period and trial Products); and

3. exhibits (eligible Products, warranty information, and other Product-
specific information). We may change the terms of an exhibit on
written notice.

CONFLICTING TERMS

If there is a conflict among the terms in the various documents, those of
an Attachment prevail over those of the Remarketer General Terms. The
terms of a Profile prevail over those of both of these documents. The
terms of a Transaction Document prevail over those of all the documents.

OUR ACCEPTANCE OF YOUR ORDER

A Product becomes subject to this Agreement when we accept your order by

1. sending you a Transaction Document; or

Page 3 of 21
<PAGE>

2. providing the Product to you.

ACCEPTANCE OF THE TERMS IN A TRANSACTION DOCUMENT

You accept the terms in a Transaction Document by doing any of the
following:

1. signing it;

2. accepting the Product described in the Transaction Document;

3. providing the Product to your Customer; or

4. making any payment for the Product.

3. OUR RELATIONSHIP

MUTUAL RESPONSIBILITIES

Each of us agrees that under this Agreement:

1. the Products we approve you to market are complex in nature and
require that you provide high quality support, both before and after
the sale, to ensure Customer satisfaction;

2. we offer a money-back guarantee to End Users for certain Products.
You agree to inform the Customer of the terms of this guarantee
before the applicable sale. For any such Product, you agree to 1)
accept its return within the time frame we specify, 2) refund the
full amount paid to you for it, and 3) dispose of it (including all
its components) as we specify. We will pay transportation charges
for return of the Product to us and will give you an appropriate
credit;

3. you are an independent contractor. Neither of us is a legal
representative or agent of the other. Neither of us is legally a
partner of the other (for example, neither of us is responsible for
debts incurred by the other), and you are not our employee or
franchisee;

4. each is free to enter into similar agreements with others, to market
competitive Products, and to conduct its business in whatever way it
chooses, provided there is no conflict with this Agreement. We may
increase or decrease the number of our remarketers, the types of
distribution channels, and the number of participants in such
channels;

5. each is free to establish its own prices and terms and neither of us
will discuss its customer prices and terms in the presence of the
other;

Page 5 of 21
<PAGE>

6. all information exchanged is nonconfidential. If either of us
requires the exchange of confidential information, it will be made
under a signed confidentiality agreement;

7. we will provide you with access to our information systems only in
support of your authorized marketing activities. Programs associated
with these systems are subject to the terms of their applicable
license agreements, except that you may not transfer them;

8. neither of us will bring a legal action against the other more than
two years after the cause of action arose; and

9. you may acquire an insignificant number of Products for your own
internal use.

YOUR OTHER RESPONSIBILITIES

You agree not to do any of the following:

1. assign, or otherwise transfer, this Agreement or your rights under
it, delegate your obligations, or appoint another reseller (including
a related company) - or agent to represent you or to market our
Products, without our prior written consent. Any attempt to do so is
void;

2. assume or create any obligations on our behalf, or make any
representations or warranties about us or our Products, other than
those we authorize; or

3. conduct your business in a way (for example, failure to maintain the
highest quality professionalism in all your dealings with Customers)
that adversely affects our reputation or goodwill.

You agree to:

1. sell only to End Users, unless otherwise specified in this Agreement,

2. be responsible for Customer satisfaction with our Products and all
your related activities, and participate in Customer-satisfaction
programs as we determine. For example, if we request, you agree to
provide us with the names and addresses of all End Users who have
acquired our Products from you;

3. actively and diligently promote our Products;

4. ensure that your compensation or incentive plans for your employees
who market our Products are not unfair to us in comparison with your
plans for competitive products you market;

Page 5 of 21
<PAGE>

5. meet, during the contract period, any minimum renewal criteria
specified in your Profile. These criteria are a measurement of the
performance expected of you (such as sales);

6. maintain trained personnel and comply with any certification
requirements;

7. provide us with relevant financial information about your business
enterprise on request;

8. furnish sales receipts to your Customers before or upon delivery of
Products. You agree to specify on the sales receipt your Customer's
name and address, the Machine type/model and serial number, installed
location, date of sale, any non-IBM alterations or attachments made,
and the Warranty Service provider;

9. provide us with any Customer documents we require, within 10 days of
the applicable transaction (for example, End User signing of our
license or maintenance agreement);

10. provide us with sales and inventory information for our Products on
request;

11. retain records by location of each Product transaction (for example,
a sale or credit) for five years and of each warranty claim for three
years. Records must include (as applicable) Machine type/model and
serial number, Authorized Location to which distributed, and Customer
name and address;

12. assist us in tracing and locating Products;

13. provide us with sufficient, free, and safe access to your facilities,
at a mutually-convenient time, for us to fulfill our obligations. If
you become aware of any unsafe conditions or hazardous materials to
which our personnel would be exposed at any of your facilities, you
agree to notify us promptly; and

14. comply with all laws and regulations (such as those governing
consumer transactions).

OUR REVIEW OF YOUR COMPLIANCE WITH THIS AGREEMENT

We may periodically review your performance under this Agreement. You
agree to provide us with relevant records on request. We have the right to
reproduce them, retain the copies, and audit your compliance with this
Agreement on your premises during your normal business hours. We may use
an independent auditor for this.

Page 6 of 21
<PAGE>

4. MARKETING FUNDS AND PROMOTIONAL OFFERINGS

You agree to use any marketing funds and promotional offerings according to
our guidelines. For Products you provide to resellers, you agree to
administer and disburse these funds or offerings in a proportional and
equitable manner. You also agree to keep records of such funds or
offerings for three years.

We may withhold or recover marketing funds and promotional offerings if you
breach any of the terms of this Agreement. Upon notice of termination, any
marketing funds and promotional offerings will no longer be available for
use by, or accrual to, you.

5. STATUS CHANGE

You agree to give us prompt written notice (unless precluded by law or
regulation) of any change, or anticipated change, in your financial
condition, business structure, or operating environment (for example, a
material change in equity ownership or management, closing or relocation of
an Authorized Location, or any change to information supplied in your
application). Such change or failure to give notice may result in
termination of this Agreement.

6. EXPORT OF PRODUCTS

You are not authorized to actively market Products outside the geographic
scope of this Agreement, and you agree not to use anyone else to do so.

If a Customer acquires a Product for export, our responsibilities under
this Agreement no longer apply to that Product. You agree to use your best
efforts to ensure that your Customer complies with United States export
laws and regulations, and any import requirements of the destination
country. Before the sale of a Product, you agree to prepare a support plan
for it and obtain your Customer's agreement to that plan. Within one month
of sale, you agree to provide us with the Customer's name and address,
Machine type/model and serial number, date of sale, and destination
country.

We exclude these Products from:

1. attainment of your minimum renewal criteria;

2. attainment of your committed quantities:

3. qualification for applicable promotional offerings and marketing
funds; and

4. qualification for any lower prices.

Page 7 of 21
<PAGE>

We may also reduce future supply allocations to you by the number of
exported Products.

The license agreement of certain Programs state the country in which the
license is valid. Such Programs may not be exported.

7. FEDERAL REPORTING REQUIREMENTS

To comply with Federal law, you agree not to employ or compensate any
individuals to perform activities under this Agreement (without our prior
written approval) who were, within the last two years:

1. members of the armed forces in a pay grade of 0-4 or higher; or

2. civilians employed by the Department of Defense with a pay rate equal
to, or greater than, the minimum rate for a grade GS-13.

You agree to provide us with any information that we need to comply with
this law.

8. ORDERING AND DELIVERY

You may order Products either from us or your Aggregator. We accept orders
for withdrawn Products subject to their availability.

On our request, you agree to make reasonable efforts to use our automated
order-entry system. You agree to pay all expenses associated with it.

We will mutually agree to a location to which we ship Products. We will
use reasonable efforts to meet your requested delivery dates for Products
you order from us. We select the method of transportation and pay
associated charges for Products we ship.

You agree to notify us within 20 days of receipt, of any discrepancies
between our shipping manifest and the Products received from us. We will
work with you to reconcile any differences.

CANCELLATION OF AN ORDER

You may cancel an order for a Product before we ship it. We may charge you
a cancellation charge. We determine this charge by multiplying the amount
we charge you for the Product by the cancellation-charge percent. We will
inform you in writing of that percent. The cancellation charge does not
apply to a Product if 1) we postpone its shipment for more than 15 days
from its estimated shipment date and 2) you cancel your order before
shipment.

Page 8 of 21
<PAGE>

We may not be able to honor a cancellation request received less than 10
business days before the Product's estimated shipment date. If you return
such Product, our inventory-adjustment terms apply.

DELAYED SHIPMENT OF A PRODUCT

Circumstances may arise where we delay the shipment of a Product due to our
inability to meet the original estimated shipment date. If this delay
causes the estimated shipment date to be after the end of your contract
period, the terms of this Agreement apply to that Product. It will be
treated as if you had acquired it during the contract period.

9. INVENTORY ADJUSTMENTS

For purposes of rebalancing your inventory, we will inform you in writing
which Products you may return to us for credit, their inventory-adjustment
categories, and any terms associated with these categories. We will issue
a credit to you when we accept the returned Product. You may use the
credit only after we issue it.

We may charge you a handling charge for returned Products. We determine
this charge by multiplying the inventory-adjustment credit amount for the
Product by the handling-charge percent. We will inform you n writing of
that percent. You agree to pay shipping charges for Products you return.
They must be in our original, undamaged packages (unopened for Machines),
and without any non-IBM labels.

Certain Products may be acquired only as Machines and Programs packaged
together as a solution. These Products must be returned with all their
components intact. However, we do not require the shipping container to be
unopened for some of these Products (for example, Selected Academic
Solutions), as we determine.

Returned Products must be unused and in new condition. You agree to ensure
that the Products are free of any legal obligations or restrictions that
prevent their return. We accept them only from locations to which we ship
Products.

We will reject any returned Product that does not comply with these terms
and send it back to you at your expense.

10. PRICES AND PRICE CHANGES

We will specify the prices for each Product and inform you of any changes.
Price increases do not apply to you if we receive your order before the
effective date of the increase. You receive the benefit of a price
decrease for Products we ship on or after the effective date.

Page 9 of 21
<PAGE>

PRICE-REDUCTION CREDITS

If we decrease the price for a Product, you may be eligible to receive a
price-reduction credit for eligible Products in your inventory. We will
specify the Product's price-reduction credit category and associated terms
in writing, and will inform you periodically of any changes. You may use
the credit only after we issue it.

ADDITIONAL CHARGES

Depending on the circumstances, additional charges may apply. For example,
if we perform a Service for you, we charge an additional amount. We will
notify you in advance if these charges apply.

FEE PAYMENTS

When you perform certain activities, such as those we may specify in
exhibits, we will pay you a fee.

11. INVOICING, PAYMENT, AND TAXES

Payment in full is due upon receipt of our invoice. You agree to pay as we
specify in the invoice. We may offset any amounts due you, or designated
for your use (for example, marketing funds or promotional offerings),
against amounts due us or any of our subsidiaries.

You agree to pay amounts equal to any applicable taxes resulting from any
transaction under this Agreement. This does not include taxes based on our
net income. You are responsible for personal property taxes for each
Product from the date we ship it to you or the End User.

You agree to provide us with valid reseller-exemption documentation for
each applicable taxing jurisdiction to which we ship Products. Otherwise,
we will charge you all applicable state and local taxes or duties. You
agree to notify us promptly if this documentation is revoked or modified.
You are liable for any claims or assessments that result from any taxing
jurisdiction refusing to recognize your exemption.

FAILURE TO PAY ANY AMOUNTS DUE

If your account becomes delinquent, you agree that we may do one or more of
the following:

Page 10 of 21
<PAGE>

1. impose a finance charge, up to the maximum permitted by law, on the
delinquent portion of the balance due;

2. require cash payment on or before delivery of any Products;

3. repossess any Products. If we do so, you agree to pay all expenses
associated with repossession and collection, including reasonable
attorney's fees. You agree to make the Products available to us at a
site that is mutually convenient;

4. terminate this Agreement; or

5. pursue any other remedy available at law.

In addition, if your account with any of our subsidiaries becomes
delinquent, we may invoke any of these options allowable by law.

12. TITLE

As an Aggregator, when you order a Machine from us, we do not transfer
title to you. As any other remarketer, when you order a Machine, we
transfer title to you when the Machine is shipped by us or your Aggregator.

Any prior transfer of title to a Machine to you is void from its inception
when 1) it is accepted as a returned Machine, or 2) the End User finances
it through the IBM Credit Corporation.

We do not transfer title to Programs.

PURCHASE MONEY SECURITY INTEREST

We reserve a purchase money security interest in a Machine, and you grant
us a purchase money security interest in your proceeds from the sale of,
and your accounts receivable for a Product, until we receive the amounts
due for a feature, conversion, or upgrade involving the removal of parts
that become our property, we reserve the security interest until we receive
the amounts due and the removed parts. You agree to sign an appropriate
document (for example, a "UCC-1") to permit us to perfect our purchase
money security interest.

END USER LEASE FINANCING

If an End User obtains a lease for a Machine for legitimate financing
purposes, you may transfer title to the Machine to the lessor. You may
finance End Users' Product acquisitions.

Page 11 of 21
<PAGE>

13. RISK OF LOSS

We bear the risk of loss for a Product until its initial delivery from us.

14. ENGINEERING CHANGES

You agree to allow us to install at a mutually-convenient location
mandatory engineering changes (such as those required for safety) on all
Machines in your inventory and to use your best efforts to enable us to
install such engineering changes on your Customers' Machines. Mandatory
engineering changes are installed at our expense and any removed parts
become our property.

During the warranty period, we manage and install engineering changes at:

1. your or your Customers' locations for Machines for which we provide
Warranty Service; and

2. your location for other Machines. Alternatively, we will provide you
with the parts (at no charge) and instructions to do the installation
yourself. We will reimburse you for your labor at a rate we specify.

15. LICENSED INTERNAL CODE

Certain Machines we specify (called "Specific Machines" use Licensed
Internal Code (called "Code"). The IBM Corporation owns copyrights in Code
and owns all copies of Code, including all copies made from them.

We will identify each Specific Machine in writing. We grant the rightful
possessor of a Specific Machine a license to use the Code (or any
replacement we provide) on or in conjunction with, only the Specific
Machine designated by serial number, for which the Code is provided. We
license the Code to only one rightful possessor at a time. You agree that
you are bound by the terms of the separate license agreement that we will
provide to you.

YOUR RESPONSIBILITIES

You agree to inform your Customer, and record on the sales receipt, that
the Machine you provide is a Specific Machine using Licensed Internal Code.
You agree to 1) provide the applicable license agreement to your Customer
before the sale and 2) ensure that the agreement is signed before a sale to
an End User.

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16. PROGRAMS

For certain Programs, we require End Users to sign our license agreements.
You agree to ensure those signatures are obtained and the appropriate
supplements are issued before those Programs are provided. All other
Programs (called "Program Packages") are licensed under the terms of the
agreements provided with them.

When you make authorized copies of Programs, you agree to reproduce the
copyright notice and any other legend of ownership on the copies. When we
provide you with service materials for Programs, you agree to copy and
distribute those materials to End Users.

You agree to refund the amount paid for

1. an IBM Program Package returned to you because the End User does not
accept the terms of the license (for example, by not opening the
media envelope or not using the Program). However, if such Program is
packaged together with other Programs or Machines as a solution, all
components must be returned. In this case, you agree to refund the
amount paid for all the components; and

2. any defective IBM Program returned to you under the terms of its
warranty.

In either case, you may return the IBM Product to us, at our expense, for
credit.

17. INSTALLATION AND WARRANTY

For a Machine to function properly, it must be installed in a suitable
physical environment. For a Machine we install, we will ensure that it is
in good working order and meets the criteria specified in its Official
Published Specifications before we consider it installed. We provide
instructions to enable the setup of Customer-set-up Machines. We are not
responsible for the installation of Programs or non-IBM Machines.

With each IBM Machine we ship, we include a copy of our statement of
limited warranty. We will provide a copy to you. You agree to make it
available to the End User for review before the sale. We provide non-IBM
Products on an "AS IS" basis. However, non-IBM manufacturers, suppliers, or
publishers may provide their own warranties to you.

DATE OF INSTALLATION

We calculate the expiration of an IBM Machine's warranty period from the
Machine's Date of installation.

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<PAGE>

The Date of Installation for a Machine we are responsible for installing is
the business day after the day 1) we install it or 2) we make it available
for installation, if you (or the End User) defer installation. Otherwise
(for example, if others install it or break its warranty seal), it is the
day we deliver the Machine to you (or the End User).

The Date of Installation for a Customer-set-up Machine:

1. that we ship to the End User (or to you for your own use), is the
fifth business day after the day the Machine is received;

2. that you ship, is the earlier of 1) the second business day after the
End User receives the Machine or 2) the day you or your Customer
place the Machine in use: or

3. is the same as the Date of Installation for a Machine that we
install, if the Customer-set-up Machine is being installed with, and
attached to, it.

If we authorize you to install Programs on a Machine at an Authorized
Location (and therefore you set up the Machine), we do not consider this as
the Date of Installation, as long as you promptly ship the Machine to the
End User.

You (or your Customer, if other than an End User) must record the Machine's
Date of Installation on the End User's sales receipt. You must also notify
us upon our request.

18. WARRANTY SERVICE

We will inform you in writing who is responsible for providing Warranty
Service for Machines. We do so by specifying the Warranty Service category
for each Machine.

WHEN WE ARE RESPONSIBLE FOR SERVICING MACHINES

When we are responsible for providing Warranty Service, we do so for the
IBM Machine during its warranty period at no charge to keep it in, or
restore it to good working order. In this case, you are not authorized to
perform Warranty Service. You agree to convey all (or the remaining
portion) of our warranty to your Customer.

WHEN YOU ARE RESPONSIBLE FOR SERVICING MACHINES

When you are responsible for providing Warranty Service, you agree to do
the following according to the Service support guidelines we provide:

1. maintain Warranty Service capability;

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<PAGE>

2. ensure that it is performed only by personnel trained to our
standards and consistent with our service terms and statement of
limited warranty;

3. provide it even for Machines that the End User did not acquire from
you; and

4. submit only valid warranty-reimbursement requests to us that are
within the specified time limits.

We will:

1. train you to provide Warranty Service. We provide training, at no
charge, for the minimum number of your Service personnel that we
require. Additional training may be provided for a fee;

2. provide you with necessary technical information; and

3. pay you for Warranty Service performed and exchange (or reimburse you
for) parts.

MAINTENANCE PARTS

We sell maintenance parts for use in providing Warranty Service and for
maintaining Machines. You may sell such parts to others for use in
maintaining Machines.

ASSIGNMENT OF WARRANTY SERVICE RESPONSIBILITY FOR MACHINES WITH ON-SITE
TYPE OF SERVICE

For a Machine that we designate as having on-site type of service
(performed at the Customer's location as opposed to the warranty provider's
service location), you may assign Warranty Service responsibility to us or
to anyone else authorized by us to provide it. You agree to:

1. ensure that the assignee accepts Warranty Service responsibility for
each Machine assigned to it;

2. provide a copy of the sales receipt to the assignee:

3. notify your Customer of the assignment; and

4. remain responsible for your Customer's satisfaction with that
Service.

If you assign Warranty Service responsibility for all units of a Machine
type to us, you are no longer required to be Warranty Service capable for
that Machine type.

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<PAGE>

When you accept Warranty Service responsibility from another of our
remarketers, you may not reassign that responsibility and are responsible
for Customer satisfaction with that Service.

WARRANTY SERVICE FOR NON-IBM PRODUCTS

For non-IBM Products that we do not warrant and other non-IBM equipment
that a Customer may reasonably believe is warranted by us, you agree to
inform your Customer in writing, before the sale, that we do not warrant
them. You also agree to inform your Customer 1) that the Products or
equipment are non-IBM, 2) of the applicable warranty (if any), and 3) of
the procedure to obtain any warranty service.

19. MARKETING OF IBM MAINTENANCE SERVICES FOR A FEE

When you have marketed a Machine you are approved to market, to an End
User, you may market our Maintenance Services on eligible machines in that
account and receive a fee from us for marketing the Maintenance Services on
those machines. We may specify additional terms in a relationship
Attachment (for example, an Industry Remarketer Attachment). We provide
Maintenance Services to the End User under the terms of our applicable
agreement, signed by the End User. You agree to provide us with any
required documents signed by you or the End User, as applicable, and inform
the End User of our service procedures.

We will not pay you the fee if the machine is already under our Maintenance
Services or if the Maintenance Services had been terminated on the machine
within the prior six months at the same account.

20. PATENTS AND COPYRIGHTS

For purposes of this section only the term Product includes Licensed
Internal Code and excludes Services.

If a third party claims that a Product we provide under this Agreement
infringes that party's patent or copyright, we will defend you against that
claim at our expense and pay all costs, damages, and attorney's fees that a
court finally awards, provided that you:

1. promptly notify us in writing of the claim; and

2. allow us to control, and cooperate with us in, the defense and any
related settlement negotiations.

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If such a claim is made or appears likely to be made, about a Product in
your inventory, you agree to permit us to either enable you to continue to
market and use the Product, or to modify or replace it. If we determine
that none of these alternatives is reasonably available, you agree to
return the Product to us on our written request. We will then give you an
appropriate credit, as we determine, which will be either 1) the price you
paid us for the Product (less any price-reduction credit) or 2) the
depreciated price.

This is our entire obligation to you regarding any claim of infringement.

CLAIMS FOR WHICH WE ARE NOT RESPONSIBLE

We have no obligation regarding any claim based on any of the following:

1. your modification of a Product, or a Program's use in other than its
specified operating, environment;

2. the combination, operation, or use of a Product with any product,
data, or apparatus that we did not provide; or

3. infringement by a non-IBM Product alone, as opposed to its
combination as part of a system of Products that we provide.

21. LIABILITY

Circumstances may arise where, because of a default or other liability, one
of us is entitled to recover damages from the other. In each such instance,
regardless of the basis on which damages can be claimed, the following
terms apply.

OUR LIABILITY

We are responsible for

1. payments referred to in our patent and copyright terms described
above:

2. bodily injury (including death), and damage to real property and
tangible personal property caused by our Products: and

3. the amount of any other actual- loss or damage. up to the greater of
$100,000 or the charges (if recurring, 12 months' charges apply) for
the Product that is the subject of the claim.

ITEMS FOR WHICH WE ARE NOT LIABLE

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Under no circumstances are we liable for any of the following:

1. third-party claims against you for losses or damages (other than
those under the first two items above);

2. loss of, or damage to, your records or data; or

3. economic consequential damages (including lost profits or savings) or
incidental damages, even if we are informed of their possibility.

YOUR LIABILITY

In addition to damages for which you are liable under law and the terms of
this Agreement, you will indemnify us for claims by others made against us
(particularly regarding statements, representations' or warranties not
authorized by us) arising out of your conduct under this Agreement or as a
result of your relations with anyone else.

22. TRADEMARKS

We will provide you with advertising guidelines for our togos, trade and
service marks, trade names, emblems, and titles (collectively called
"Trademarks"). We will notify you in writing of the title you are
authorized to use. You may also use the IBM Business Partner emblem
associated with that title. You may use the Trademarks only as described in
the guidelines and only in association with the Products we approve you to
market.

On our request, you agree to change or stop using any advertising or
promotional material that does not comply (as we determine) with our
guidelines or this Agreement. When this Agreement ends, you agree to
promptly stop using our Trademarks. If you do not, you agree to pay any
expenses and fees that we incur in getting you to stop.

You agree that any goodwill attaching to our Trademarks as a result of your
use of them belongs to us. You agree not to register or use any mark that
is confusingly similar to any of our Trademarks.

23. NO PROPERTY RIGHTS

Your rights under this Agreement are not property rights and therefore. you
cannot transfer them to anyone else or encumber them in any way. For
example, you may not sell your authorization to market our Products or your
right to use our Trademarks.

24. CHANGES TO THE AGREEMENT TERMS

In order to maintain flexibility in our relationships, we may change the
terms of this Agreement by giving you one month's written notice. However,
these changes are not

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retroactive. They apply as of the effective date we specify in the notice.
If you do not accept a change, you must inform us in writing before its
effective date. If you do so, any future change will not apply to you.
However, if you sign a revised Profile, then all prior changes become
effective.

Otherwise, for a change to be valid, both of us must sign it. Additional or
different terms in any order or written communication from you are void.

25. ENDING THE AGREEMENT

This Agreement ends when terminated or when the contract period ends.

You may terminate this Agreement, with or without cause, on one month's
written notice.

We may terminate this Agreement, with or without cause, on three months'
written notice. If the termination is for cause, we may (at our discretion)
allow you a reasonable opportunity to cure. If you fail to do so, the date
of termination is that specified in the notice. However, certain acts or
omissions are so serious as to warrant immediate termination. If you
repudiate this Agreement, materially breach any of its terms, or make any
material misrepresentation to us, we may terminate this Agreement at any
time, on written notice. Examples of a material breach are violation of our
status-change terms, violation of our trademark terms, submission of a
false warranty claim, unauthorized sale to a reseller, and failure to
maintain Customer satisfaction. You agree that our only obligation is to
provide the notice called for in this section and we are not liable for any
claims or losses if we do so.

At the end of this Agreement, you agree to:

1. pay for or return to us, at our discretion, any Products for which you
have not paid: and

2. allow us, at our discretion, to repurchase any other Products in your
possession or control at the price you paid us, less any credits
issued to you.

Products to be returned must be unused, in new condition, and in your
inventory (or in transit from us) on the day this Agreement ends. We will
inspect the Products and reserve the right to reject them. You agree to pay
ail shipping charges. Products returned to you under our money-back
guarantee terms may be used and we pay their shipping charges.

At the end of this Agreement, you must immediately pay us all amounts due.
We may offset any amounts due you against amounts due us or any of our
subsidiaries. Any terms of this Agreement, which by their nature extend
beyond the day this Agreement ends, remain in effect until fulfilled, and
apply to respective successors and assignees.

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We may permit you to continue to provide Products after this Agreement
ends. If we do so, you agree to provide those Products under the terms of
this Agreement.

26. WAIVER OF NONCOMPLIANCE

Failure by either of us to insist on strict performance or to exercise a
right when entitled, does not prevent us from doing so at a later time,
either in relation to that default or any subsequent one.

27. ELECTRONIC COMMUNICATIONS

Each of us may communicate with the other by electronic means. Therefore,
you agree to utilize electronic communications with us. if and as we
specify In such case, both of us agree to the following for all electronic
communications:

1. an identification code (called a "USERID") contained in an electronic
document is legally sufficient to verify the sender's identity and the
document's authenticity:

2. an electronic document that contains a USERID is a signed writing. and

3. an electronic document, or any computer printout of it, is an original
when maintained in the normal course if business.

ELECTRONIC DATA INTERCHANGE

We may provide Electronic Data Interchange (Called "EDI") Options to you
Electronic invoicing and electronic payment are examples of these Options.
When using EDI Options, each of us agrees:

1. when a bank is involved, to pay our respective bank charges and to
promptly notify the other of any changes to the bank payment process;
and

2. to promptly notify the other of any changes to the technology, process,
or information upon which the EDI transactions are based.

We will specify respective responsibilities for the EDI Option you choose.

28. GEOGRAPHIC SCOPE

All your rights and all our obligations are valid only in the United States
and Puerto Rico.

29. GOVERNING LAW

The laws of the State of New York govern this Agreement.

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IBM BUSINESS PARTNER AGREEMENT --REMARKETER
MANAGING INDUSTRY REMARKETER ATTACHMENT

__________________________________________________________
These terms are in addition (unless otherwise noted), to those of the Industry
Remarketer Attachment and prevail over them.

1. VALUE-ADDED ENHANCEMENT
These terms replace those of the Value-Added Enhancement section of the
Industry Remarketer Attachment.

You agree to market Products only to resellers we approve, who market those
Products together with their value-added enhancement (which we have
previously approved) to End Users (and not to other resellers). You may
also market Products to the reseller for their internal use. Such sales do
not count towards your Commitment attainment or minimum renewal criteria.
Resellers may provide, without their value added enhancement. 1) Products
for their internal use, 2) up to 25% of the personal computer system units,
including associated features and options, in each transaction, and 3)
certain Products we specify to you. In any case, you are still responsible
for all your obligations under this Agreement. You agree to collect from
the reseller (and provide to us) applicable documentation that we require
of resellers. We provide Product support to you tend not to End Users or
resellers). We reserve the right to withdraw any reseller's approval.

2. MARKETING OF PRODUCTS

These terms replace those of the Marketing of Products section of the
=====================================================================
Industry Remarketer Attachment.
===============================
You agree to:

1. market only to approved resellers and not to End Users:

2. provide Products to the reseller only after you receive confirmation
from us that we have received and accepted the signed Industry
Remarketer Affiliate Document of Understanding.

3. require the reseller to market our Products in a manner not contrary to
this Agreement;

4. ensure that the reseller is trained and capable of providing the
support required to maintain Customer satisfaction;

5. use your best efforts to ensure that for each Product the reseller
markets, the reseller maintains the required records (and obtains them
for us on request) and provides the

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applicable money-back guarantee, warranty information, license
agreement, and sales receipt;

6. notify us within one month when you terminate your relationship with a
reseller.

7. when you no longer have a relationship with a reseller, acquire and
maintain a copy of that reseller's records (including sales and credit
receipts): and

8. notify us within 10 days of the installation of Products.

You may acquire Products for your internal use at your discount at the time
we ship the Products. You agree not to remarket such Products for 24 months
from their Date of Installation. These Products do not count toward your
minimum renewal criteria or any Commitment.

DEALER EXHIBIT PRODUCTS
For Products listed in the Dealer Exhibit, you also agree to:

1. market, support (including set up and test), and service them only at
Authorized Locations; and

2. receive and place them (and their maintenance parts) in inventory only
at Authorized Locations or ship-to locations (and not at resellers' or
End Users' locations). Maintenance parts are only available for Machines
listed in the Dealer Exhibit and for Warranty Service Category B
Machines listed in the Industry Remarketer Exhibit.

3. RESELLER SUPPORT

You agree that you are responsible for providing support to your resellers
(and that we are not). At a minimum, you will provide the following to
your resellers:

1. Product configuration assistance;

2. verification of the operation of the Product:

3. Product installation assistance;

4. Product technical usage support:

5. information regarding the Product's technical function;

6. explanation of the functions and expected performance of the Product:

7. Product announcements. brochures. and promotional information:

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8. general Product administrative support; and

9. information regarding applicable courses we provide and the course
enrollment procedures.

You also agree to assist us, in a manner we specify, in the proportional
distribution of our offerings and services to your resellers.

You are responsible for your reseller satisfaction.

4. END USER SUPPORT

You must provide Warranty Service and Program Services to the End User, if
applicable. You are responsible for End User satisfaction. You must ensure
that the reseller does not display or market our Products in a retail store
or similar location. You must require the reseller to do the following:

1. provide facilities to demonstrate the enhancement;

2. select Products that best meet the End Users' needs;

3. ensure that a completed license agreement is signed by the End User,
where applicable, before a Program is distributed:

4. verify the operation, and explain the functions and expected
performance, of the Products and the enhancement to End Users;

5. provide support (such as documentation and technical assistance) for
the Products, the enhancement, and other products it requires;

6. inform the End Users, upon their request, of applicable courses that we
provide and how to enroll in them:

7. assist the End Users with the installation of Products; and

8. select, develop, procure, integrate, and install all elements of the
enhancement and any updates to it.

However, you must inform the End Users that you are ultimately responsible
for End User satisfaction.

5. DEVELOPMENT SYSTEMS AND DEMONSTRATION SYSTEMS

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These terms replace those of the Development Systems section of the
Industry Remarketer Attachment.

DEVELOPMENT SYSTEM PRODUCTS We may allow you to acquire Products for
resellers, primarily for their use in developing, testing, supporting, and
demonstrating their value added enhancement. We call these "Development
System" Products. We may also approve you to acquire Products for your
resellers for their exclusive use in developing, supporting and testing
their value-added enhancement. Such Products may not be used for
demonstration purposes.

We will provide applicable Warranty Services, and you will provide Program
Services and all other support for Development System Products used by the
resellers, even if they did not acquire them from you. Each reseller must
agree to comply with these terms (as applicable) as though it were
acquiring the Development System directly from us. If you or the reseller
does not comply with these terms we may refuse to provide you with
additional Development Systems at Development System discounts.

DEMONSTRATION SYSTEM PRODUCTS
We may allow you to acquire Products for your use primarily for
demonstration and testing purposes and for supporting your industry
remarketer affiliates. We call these "Demonstration System" Products.

DEVELOPMENT SYSTEM PRODUCTS AND DEMONSTRATION SYSTEM PRODUCTS
If the Development System or Demonstration System is a Machine for which
there is a field upgrade available, and you have acquired the maximum
number of Demonstration System Machines for your contract period, or if
your reseller has acquired the maximum number of Development System
Machines for a calendar year, you may acquire the field upgrade (but not a
replacement Machine) as a Development or Demonstration System, as
applicable. A Development or Demonstration System may not be resold, leased
or transferred for 12 months from the Date of Installation of the Product
(or its Machine upgrade).

For Programs, you must ensure that, when required, the applicable license
agreement is signed by the reseller and the completed supplement issued
before the Program is distributed. We make Programs, and their upgrades if
applicable, available to you at a 100% discount for use on an authorized
Development or Demonstration System. Certain Programs may require your
payment of a fee. We will specify such Programs and their fee.

For a Development or Demonstration System (other than Programs) we will
specify its applicable discount or price, as applicable. You may not
combine this offering with any other discount or allowance. A Development
or Demonstration System may not be resold, leased, or transferred for 12
months from its Date of Installation (or its Machine upgrade). You agree
not to resell, lease or transfer Programs you acquire under these terms.

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We specify, in the applicable Exhibit, 1) the maximum quantity of each
Development System Product you may acquire for your reseller in a calendar
year, 2) the maximum number of Demonstration System Products you may
acquire during your contract period.

Development or Demonstration System Products do not count toward your
minimum renewal criteria or any Commitment.

6. CHANGES IN EQUITY OWNERSHIP

Your managing industry remarketer authorization will immediately terminate
if your business structure changes such that 50% or more of your equity
ownership is held other than as specified in your application.

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IBM BUSINESS PARTNER AGREEMENT - REMARKETER
INDUSTRY REMARKETER ATTACHMENT

- -----------------------------------------
1. VALUE-ADDED ENHANCEMENT

You agree to market Products only with your value-added enhancement that we
approve as part of an integrated solution for End Users. Certain Products
we specify to you may not require a value-added enhancement. However, you
may provide up to 25% of the personal computer system units, including
associated features and options, in each transaction without such
enhancement. If we withdraw approval of any such enhancement we also
withdraw your authorization as our industry remarketer with regard to that
specific enhancement. You are responsible for your enhancement, (and we are
not).

You agree to market Products only to End Users for whom your enhancement is
the primary reason for acquiring Products (a sale without a required value-
added enhancement is an additional example of a material breach). Unless we
specify otherwise in writing, you will market only to such End Users who
intend ongoing use of that enhancement as a significant part of their
business operations. Your enhancement is not required to be the primary
reason for acquiring upgrades to systems you have installed with your
enhancement and where your enhancement is still in productive use. Upgrades
include peripherals, programs and processor upgrades. However, your
enhancement must be the primary reason for a processor upgrade requiring a
processor serial number change. You agree to assist the End Users to
achieve productive use of Products promptly after acquisition.

If we inform you in writing of a specific industry code, you agree to
market only to End Users within that code. We may provide certain
installation planning assistance. We provide Product support to you (and
not to End Users).

You agree to:

1. provide facilities to demonstrate your enhancement;

2. verify the operation. and explain the functions and expected
performance, of the Products and your enhancement to End Users;

3. provide support (such as documentation and technical assistance) for
the Products, your enhancement, and other products it requires; and

4. select, develop, procure integrate, and install all elements of your
enhancement and any updates to it.

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2. USE OF AGENTS

To assist you in the successful installation and your ongoing End User
support requirements for the Products you are approved to market as an
Industry Remarketer - Mid-Range, you may contract for the necessary skills
with IBM Authorized Business Partners, who may perform such activities
directly for your End User. However, you are responsible for your End
User's satisfaction with such installation and support activities. You
agree to indemnify IBM from any liability for the activities performed by
such parties. Additionally, you may select IBM to perform such activities.
In that event, IBM assumes customer satisfaction responsibilities for its
activities.

We may allow you to use an agent to represent you for other activities. If
so we will provide written guidelines to you.

3. MARKETING OF PRODUCTS

You agree to:

1. select Products that best meet the End Users' needs;

2. order Products in sufficient time to be shipped during the contract
period for them to count toward your minimum renewal criteria or any
Commitment:

3. receive Products (listed in the Industry Remarketer Exhibit) only at
Authorized Locations or ship-to locations (including End Users'
locations);

4. inform the End Users, upon their request, of applicable courses that we
provide and how to enroll in them;

5. assist the End Users with the installation of Products; and

6. if you are approved as an industry remarketer of mid-range computer
Products, notify us within 10 days of the installation of Products.

For Products listed in the Dealer Exhibit, you also agree to:

1. market, support (including setup and test) and service them only at
Authorized Locations or at End Users' locations; and

2. receive and place them (and their maintenance parts) in inventory only
at Authorized Locations or ship-to locations (and not at End Users'
locations). Maintenance parts are only available for Machines listed in
the Dealer Exhibit.

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For Products listed in the Dealer Exhibit which we announce as withdrawn
from marketing, you may market them to resellers and to End Users without
your value-added enhancement. However, you may not market withdrawn
certified Products to resellers.

When you market withdrawn Products to resellers you agree to:

1. distribute Products fairly.

2. require your resellers to retain the necessary records (such as sales
and credit receipts):

3. identify the resellers to us; and

4. notify the resellers in writing that such Products are made available
for marketing only in the United States and Puerto Rico.

4. ASSOCIATION WITH AN AGGREGATOR

If you acquire IBM Personal System Products from an Aggregator, your
Aggregator is authorized to set up and test those Products for you on your
request. If the setup includes preloaded IBM Programs, you must ensure that
the End User has agreed to the terms of the applicable license agreement
prior to the preload.

5. INTERNAL USE OF PRODUCTS

If we authorize you as an industry remarketer of mid-range computer
Products, we allow you to acquire certain of those Products which you are
approved to market, for your own internal use within your remarketing
operations only and not for any other use including End User productive
use, even if such use is managed within your business enterprise. Your
value-added enhancement is not required for such acquisitions. The Industry
Remarketer Exhibit includes further details.

You may acquire Products for your internal use at your discount level at
the time we ship the Products. You agree not to remarket such Products for
24 months from their Date of Installation. These Products do not count
toward your minimum renewal criteria or any Commitment.

6. PRICES AND PRICE CHANGES FOR INDUSTRY REMARKETER EXHIBIT PRODUCTS

The following terms apply for Products listed in the Industry Remarketer
Exhibit.

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<PAGE>

A price decrease is effective on the date specified in our notice to you.
We apply the associated discount to the decreased single-unit price for
Products not yet shipped, provided you accept any related changes in terms.
Otherwise, you may select 1) the decreased price without discount or 2) the
discounted price available to you before the decrease.

Prices increases do not apply to you if we receive your order prior to the
effective date of the increase and if we ship your order within six months
of the date we receive it.

We may increase a recurring charge at any time. However, the effective
date of the increase may not be less than 90 days from the date of our
notice to you, and will be effective on the first day of the applicable
invoice period specified in the notice.

DISCOUNTS

We provide a discount schedule for Products listed in the Industry
Remarketer Exhibit. Some discount schedules have deeper discounts available
when you agree to acquire, as applicable, 1) a specific quantity of
Products from a specific Product Category, or 2) a minimum revenue amount
as specified in the Exhibit. We call this your "Commitment". If you change
your Commitment, you may subject to a higher or lower discount, as
applicable. The discount applies only to Products acquired after the
effective date of your Commitment change.

To determine your discounted price, we apply the applicable discount to the
Products lowest single-unit price in effect between the date we receive
your order and our date of shipment, if such shipment is within six months
of our receipt of your order. For Products shipped beyond the six months
period, the discount is applied to the single-unit price in effect on our
date of shipment.

Unless we specify otherwise, discounts do not apply to Program upgrades,
accessories, or field-installed Machine features, conversions, or upgrades.

If during our review of your compliance with this Agreement, we find you
have materially breached the terms of our relationship, in addition to our
rights under law and the terms of this Agreement, for the applicable
transactions, you will refund the discount you received from us and
reimburse us for all administrative expenses associated with our compliance
review activity.

7. RE-WORK EXPENSE

If you alter, defer, or cancel an order for Products and we incur expenses
to re-work the Products, we will invoice you for the actual expenses
incurred. For orders cancelled after shipment, the re-work charge is in
addition to the inventory adjustment handling charge specified in the
Industry Remarketer Exhibit.

Page 4 of 11
<PAGE>

8. INSTALLATION OF MACHINE FEATURES, CONVERSIONS, AND UPGRADES

For Machines listed in the Industry Remarketer Exhibit, we may require that
Machine features, conversions, and upgrades be installed only on
designated, serial-numbered Machines. You represent that you have the
permission of the owner (if you are not the owner of the Machine) and any
lien holders to 1) install features, conversions, and upgrades and 2)
transfer removed parts to us.

Some of these transactions (called "Net-Priced" transactions) include
associated replacement parts. We provide these parts on an exchange basis.
All removed parts in a Net-Priced transaction become our property.
Replacement parts assume the service status of the parts they replace. For
a Net-Priced transaction, you or your Customer must allow us to install it
within 30 days of its delivery and to recover the removed parts. Otherwise,
we may terminate the transaction, and the feature, conversion, or upgrade
must be returned to us at your expense.

9. IBM INDUSTRY REMARKETER EXHIBIT PROGRAMS

You agree to have one license for each Program you provide to End Users,
that is listed in the Industry Remarketer Exhibit. A Program which we
provide to you at no charge and which is licensed for use with a
Development System fulfills this requirement. You are responsible for
copying and distributing the Programs you provide to End Users. On our
request, you agree to also distribute documentation.

You agree to:

1. ensure that, when required, the applicable license agreement is signed
by the End User and the completed supplement is issued (with a copy
sent to us) before you copy and distribute the Program. Failure to
provide us with the signed agreements promptly after they are signed is
a material breach of this Agreement and cause for its immediate
termination;

2. promptly notify us if you become aware of any violation (or threatened
violation) of the license terms, and give us reasonable assistance in
enforcing our rights;

3. promptly notify us if the End User provides you with any required
notices under the license.

4. provide the End User with all Program Services we make available to
you; and

5. copy and distribute to the End User any defect-correction information
and subsequent Program releases we provide.

page 5 of 11
<PAGE>

COPYING AIX PROGRAMS CONTAINING THIRD-PARTY CODE

If you are approved to market IBM RISC System/6000 AIX Programs containing
third-party code, you may neither 1) delegate your right to copy these
Programs nor 2) make copies that contain modifications you created from the
use of UNIX(R) or OSF/1(R) source code.

We do not grant you any rights to any trademarks of AT&T Technologies,
Inc., UNIX System Laboratories, Inc., or any of their affiliates.

You will not adopt a name for your product which is confusingly similar to
any trademark of AT&T Technologies, Inc., UNIX System Laboratories, Inc.,
or any of their affiliates.

You agree to:

1. maintain accurate records of the number of copies made;

2. provide us quarterly statements of the number of copies made in that
calendar quarter; and

3. annually, upon request, make all relevant records available for audit
by us, AT&T Technologies, Inc., UNIX System Laboratories, Inc., and
Open Software Foundation, Inc.(R)

PAYMENT

The following are the bases on which we may require the amount payable for
a Program to be paid:

1. one-time;

2. recurring (for example, a monthly license charge); or

3. a combination of both (for example, an initial charge and an annual
license charge).

We will specify the amount and basis for the particular Program.

Programs licensed to you on a recurring-charge basis are licensed for the
period indicated in our invoice. You may market such Programs only on the
same basis as licensed to you. You may not charge an End User a one-time
charge for a Program you license from us on a recurring-charge basis.
However, you may charge the End User whatever amount you wish for the
recurring charge.

(R) UNIX is a registered trademark of UNIX System Laboratories, Inc.

Page 6 of 11
<PAGE>

(R)OSF/1 and Open Software Foundation are registered trademarks of Open
Software Foundation, Inc.

10. DEVELOPMENT SYSTEMS

We may allow you to acquire Products for use primarily in developing,
testing. supporting, or demonstrating your value-added enhancement. We
call these Development System Products. We may also approve you to acquire
Products under these terms, for the exclusive use of development, support
and testing your value-added enhancement. Such Products may not be used for
demonstration purposes.

If you have a Development System Product that is a Machine for which there
is a field upgrade available, and you have acquired the maximum number of
Development System Products you may acquire for the contract period, you
may acquire the field upgrade (but not a replacement Machine) as a
Development System Product.

You agree not to resell, lease, or transfer a Development System Product
for 12 months from the Date of Installation of the Product (or its Machine
upgrade).

For a Development System Product listed in the Industry Remarketer Exhibit
(other than Programs), we will specify either a Development System price or
a Development System discount.

We make Programs, and their upgrades if applicable, available to you at a
100 percent discount, for use on an authorized Development System. Certain
Programs may require your payment of a fee. We will specify such Programs
and their fee. You agree not to resell, lease or transfer Programs you
acquire under these terms.

For a Development System Product listed in the Dealer Exhibit, we will
specify a Development System price.

We will specify, in the applicable Exhibit, the maximum quantity of each
Development System Product that you may acquire. If you are an industry
remarketer of mid-range computer Products, you must have a Development
System for each system type that you are approved to market.

We will provide applicable Warranty and Program Services for Development
System Products listed in the Industry Remarketer Exhibit. You are
responsible for these Services for Development System Products listed in
the Dealer Exhibit.

Development System Products do not count toward your minimum renewal
criteria or any Commitment. If you use a Development System Product in a
manner that does not comply with these terms, we may charge you the
difference between what you paid and the full price.

Page 7 of 11
<PAGE>

You may not combine this offering with any other discount or allowance.

11. PRELOAD OF PROGRAMS

For certain Machines specified in the applicable Exhibit, we will, on your
request, preload programs you select onto those on-order Machines.

We will:

1. send you a utility program and a kit containing blank tapes and
instructions so you can provide us with tapes containing the programs
selected for preload;

2. make production copies of the tapes you send us, use those copies to
load the Machine, and verify that the process is successfully
completed;

3. verify that the Machine is successfully delivered in a preloaded
condition: and

4. retain the tapes for at least three months following the shipment of
the last Machine for which preloading is ordered. You may request a
shorter retention period in writing. At the end of that period, we will
erase the programs from all tapes in our possession.

You agree to:

1. have a license for each IBM Program for which you order preloading;

2. ensure that the applicable license agreement is signed by the End User
and the completed supplement is issued (with a copy sent to us). You
must do this before we ship the Machine;

3. obtain approval from each owner of each non-IBM program you send us to
copy, to -

a. make as many copies as we may need to support the preload process,
and

b. reproduce, in each copy, only those copyright notices that appear
within the program;

4. provide us with programs and documentation according to the
instructions that accompany the kit we send to you. You agree to return
the entire kit and utility program;

5. provide us with tapes at least four weeks before the scheduled shipment
of the Machine for which you require preloading;

Page 8 of 11
<PAGE>

6. not send us any information that is confidential or proprietary to
anyone; and

7. pay any applicable charges for preloading. Any discount that applies
to the Machine also applies to preload charges.

12. TRIAL PRODUCTS

We may offer certain Products as "Trial Products." If you are approved for
a Trial Product, you may provide it to End Users for evaluation purposes,
or (if we agree) you may use it as part of a Development System. You may
either return or retain a Trial Product. If you do not wish to retain it,
you must notify us in writing before the end of the trial period.
Otherwise, we will consider the Product to be retained.

We will list in an Addendum the specifics of a trial, such as Trial period,
Trial Products, and, if applicable, the End User. We reserve the right to
withdraw a trial at any time.

If the End User is participating in the trial, you agree to ensure that we
receive the applicable agreement signed by you and the End User. You agree
to provide the End User with the necessary details of the trial.

We do not transfer title to Trial Products during the trial period. We
will service and support them, and bear the risk of loss (except for theft
or vandalism].

You agree:

1. to inform us of each Trial Product's location;

2. that the Product may not be moved to another location or altered,
without our prior written approval. However, you may attach a non-IBM
product or device to an IBM Machine without notice. You may not make
any alteration or attachment that creates a safety hazard or renders
maintenance of the Machine impractical;

3. to return, at the end of the trial period, all Products (including any
copies of Programs) not retained. The Products should be returned
unaltered and in the same condition as when delivered to you.
Alternatively, for Programs, you may destroy all copies; and

4. to furnish all labor for unpacking and packing.

If you retain a Trial Product, payment is due on the business day following
the last day of the trial period. For a Machine, we transfer title to you
and no longer bear the risk of loss as of that day. However, the warranty
period begins on the Date of Installation.

Page 9 of 11
<PAGE>

13. TRADE-IN MACHINES

We may specify certain Machines as eligible for trade-in. We will list in
an Addendum such items as the Machine you agree to purchase (called the
"Replacement Machine") and the Machine you agree to return to us (called
the "Replaced Machine"). When we accept a Replaced Machine, we give you
credit towards the purchase from us of other, eligible Machines. You
agree to ensure that the same End User who was using the Replaced Machine,
acquires the Replacement Machine. A Trial Machine may qualify as a
Replacement Machine.

For the Replaced Machine, you agree to:

1. restore an IBM Machine to its unaltered condition;

2. have it in operating condition on the day before it is available for
pickup;

3. furnish all labor for packing; and

4. ensure that title to it is free of any legal obligations or
restrictions on the day it is picked up, unless the IBM Credit
Corporation owns both the Replacement and Replaced Machines.

For the Replaced Machine, we will:

1. arrange for its pickup at your or the End User's location;

2. bear the risk of loss after it is picked up; and

3. pay normal transportation charges.

The credit we give is in addition to any other discount for which the
Replacement Machine may be eligible. The Replacement Machine counts toward
your Commitment, unless the Replaced Machine was previously counted toward
that Commitment. You agree to pay the full amount due for the Replacement
Machine. You may not reduce your payment in anticipation of receiving the
credit.

If both Machines in a trade-in are used as part of a Development System,
the Replaced Machine is not subject to Development System adjustment
charges.

14. MARKETING OF IBM SERVICES FOR A FEE

We approve you to market, and will pay you a fee, for eligible Services you
market 1) as our industry remarketer to End Users, or 2) as our managing
industry remarketer, to resellers. You, or if you are a managing industry
remarketer, your reseller, may market Services on

Page 10 of 11
<PAGE>

any eligible machine in an account when 1) the End User to which the
Service is marketed acquired your IBM approved value-added enhancement from
you, or if you are a managing industry remarketer, from your reseller, and
the enhancement is installed on one or more Machines you are approved to
market, regardless of who marketed the Machine to the End User, or 2) you,
or if you are a managing industry remarketer, your reseller, marketed a
Machine to the End User under an IBM Business Partner relationship which
did not require an IBM approved value-added enhancement.

Services may be marketed on eligible non-IBM machines regardless of whether
an IBM approved value- added enhancement is installed on a Machine in the
account.

We specify the eligible Sen/ices, and the percentages used to determine
your fee, in an Exhibit:

We will not pay you the fee if the machine is already under the Service or
if the Service had been terminated on the machine within the prior six
months at the same account.

Page 11 of 11
<PAGE>

IBM BUSINESS PARTNER AGREEMENT - REMARKETER
MARKET DEVELOPMENT FUND ATTACHMENT
- --------------------------------------------------------------------------------
These terms are in addition to those of the Industry Remarketer and Managing
Industry Remarketer Attachments. If there is a conflict among terms, the terms
of this Attachment will prevail. This Market Development Fund program will end
on December 1, 1994. We do not guarantee that it will be renewed or, if it is,
that it will be structured in the same way.

1. MUTUAL RESPONSIBILITIES

Each of us agrees to:

1. jointly develop a market development fund plan (specified in an
Addendum) for our RISC System/6000 Products; and

2. participate in quarterly reviews (for example, of marketing strategy
and market development activities).

2. OUR OTHER RESPONSIBILITIES

We will:

1. set up a market development fund to support your marketing of our RISC
System/6000 Products to resellers;

2. credit this fund with an amount which will be the greater of 1) 125
percent of your 1993 Product attainment multiplied by 1.5 percent, or
2) $30,000. Amounts we credit to the fund belong to us until we
disburse them for an approved market development activity. Therefore,
the fund and all amounts we credit to it belong to us. Any amounts
remaining in the market development fund after December 15, 1994, are
forfeited by you;

3. determine Your eligibility for disbursements from the fund:

4. reimburse you for preapproved expenses, for which you submit an
invoice and any other documentation that we may require. Reimbursement
amounts will not exceed your available market development fund
balance. We will provide reimbursements from the fund based on the
reimbursement percent we specify in the Addendum. If this percent is
less than 100, then you are responsible for the balance;

5. change the reimbursement percent solely at our discretion;

Page 1 of 2
<PAGE>

6. reimburse you, in the following quarter, for approved expenses which
we do not reimburse (due to an insufficient market development fund
balance) in the quarter you submitted them; and

7. periodically reconcile disbursements from the fund to amounts credited
to the fund.

3. YOUR OTHER RESPONSIBILITIES

You agree to:

1. perform the activities specified in the market development fund plan;

2. use disbursements from the tuna to market our RISC System/6000
Products to resellers, according to the guidelines we provide;

3. submit our reimbursement form on a quarterly basis, by the dates
specified in the Addendum. You also agree to submit invoices for
reimbursement from the fund (if applicable), as we specify: and

4. retain records (according to our guidelines) for three years of your
use of a disbursement and expenses associated with the fund.

4. ENDING THE ATTACHMENT

This Attachment ends the earlier of 1) its termination or 2) December 1,
1994. When this Attachment ends, any Addendum under it will also end.
Either of us may terminate this Attachment, with or without cause, on one
month's written notice. We may terminate this Attachment at any time if
you materially breach any of its terms.

Page 2 of 2
<PAGE>

IBM BUSINESS PARTNER AGREEMENT - REMARKETER
MANAGING INDUSTRY REMARKETER- SCHEDULE A
- ----------------------------------------

These terms are in addition to those of the Industry Remarketer and Dealer
Exhibits and prevail over them. We may change these terms by giving you written
notice. These discount schedules apply to specific Products as identified in
the IBM Industry Remarketer Exhibit (Z125-4096). Those RISC System/6000, AS/400,
IBM Point of Sale Products, and Network Integration Products identified with an
"A" in the MIR column of the Industry Remarketer Exhibit are available to you at
the discounts described below.

1. RISC SYSTEM/6000 AND AS/400 DISCOUNT SCHEDULES

A. RISC SYSTEM/6000 PRODUCTS
-------------------------

1) Included in Category A of the Industry Remarketer Exhibit;

Annual Revenue Discount Base
Entry-$9.99M 37%
$10.0-14.99M 38%
$15.0-19.99M 39%
$20M + 40%

Includes Field Installed Features and Model Conversions.

Includes Software and 1/0.

RISC System/6000 Software Group to Group Upgrades, where
available, are eligible for the same discount as the base license
they are upgrading.

2) Not included in the Industry Remarketer Exhibit.

. RISC System/6000 Machine Type 7020 Model 40P discount is 40%
(Dealer Exhibit terms and conditions).

. Managing Industry remarketers (MIRs) currently approved for
the IBM RISC System/6000 are authorized to market the IBM
7586 Model 43P Industrial Computer to their Industry
Remarketer Affiliates.

7586 Model 43P is subject to standard Industrial Computer
discounts. Contact an IBM representative for the applicable
discounts. The following remarketer information applies for
the 7586 Model 43P.
<PAGE>

- Price Reduction Category: 5
- Inventory Adjustment Category: 6
- Annual System Revenue Performance applies.
- The product is a customer setup machine.
- The product does not contain licensed internal code.

Please refer to IBM announcement letter, 595-104, dated
10/31/95, for complete terms and information on this
product.

. 7573 Model 001 and 7574 Model 001 Industrial Graphics
Displays.

These Products are eligible for the RISC System/6000
Products discount grid, listed in this Schedule, that
applies to Category A Products of the Industry Remarketer
Exhibit. The following Remarketer information applies for
these Products:

- Price Reduction Category: 5
- Inventory Adjustment Category: 6
- Annual System Revenue Performance applies
- The Product is a customer setup machine.
- The Product does not contain licensed internal code.

B. AS/400 PRODUCTS
---------------

INCLUDED IN CATEGORY B OF THE INDUSTRY REMARKETER EXHIBIT

Machine Type Discount

9401/P03 20%
9402 39% (9402 Model 236 new machine orders are available at
a 30% discount).
9404 37% (9404/3XX Models available on an exception basis
only)
9406 31%

. AS/400 Field Installed Features and Model Conversions for AS/400
Machine Types 9401/9402/9404/9406: 33%

. AS/400 Software and I/O Products: 35%

- Field Installed Features and Models Conversion for AS/400 I/O
Products: 35%
- ASI400 Software Group to Group Upgrades, where available, are
eligible for the same discount as the base license being upgraded.

Page 2 of 2
<PAGE>

C. EXCEPTIONS
----------

The following exclusions and maximums apply and prevail over the
Discount Schedules above:

CATEGORY A
----------

The discount for RISC System/6000 Machine Type 7248 (all models), as
well as Model Conversions for Machine Type 7248, is 40%.

Discount Caps

Maximum discount
5765-496 = 30%
5775-526 = 30%
5601-263 = 30% (Processor Category D5, 1-2 User Tier Only)
5621-027 = 10%
5765-083 = 20%
7010 = 40% (Models 140, 150, and 160 are available at a
single discount of 40% and may be marketed
independent of the standard Value-Added
Enhancement requirement. Orders for field
installed features and model upgrades are
available at the discounts described in the
Annual Revenue table of Schedule A.

CATEGORY A1 - Architecture and Engineering Series Programs and CAD/CAM
-----------
Programs

These licensed programs may only be marketed to those IBM Industry
Remarketer Affiliates who have been approved for those Products as
their Approved Value-Added Enhancement.

The following Licensed Programs are available at a 40% discount:

5696-054 5696-055 5696-057
5696-060 5696-061 5697-186

CATEGORY B
----------

The IBM 9337 is available at a 46% discount for new machine orders.
<PAGE>

CATEGORY B1
-----------

The following Licensed Programs are available at a 37% discount:

5696-024 5696-025 5696-026 5696-027 5696-029
5696-030 5696-034 5733-CLS 5733-CSB 5733-CSC
5733-CSR 5733-CSS 5733-CS5 5733-CS7 5733-CS9
5733-055 5733-056 5738-FNT 5738-FS1 5738-0S1

The following Licensed Programs are available at a 35% discount:

5696-006

The following Licensed Programs are available at a 28% discount:

5620-ABL

CATEGORY G1
-----------

7526, 7527 discount = 40%

CATEGORY M
----------

The following Licensed Programs are available at a 45% discount:

5696-237 5896-238 5696-239 5696-240 5696-347
5765-117 5765-118 5765-119 5765-121 5765-148
5765-152 5765-532 5765-533 5765-534 5765-537
5765-538 5765-540
The following Licensed Programs are available al a 35% discount:

5601-260 5696-108 5696-236 5765-316
The following Licensed Programs are available at a 30% discount:
5765-191 5765-192 5765-193 5765-263 5765-337
5765-338 5765-339 5765-340 5765-341 5765-342
5765-347 5765-348 5765 440 5765 441 5765-442
5765 443 5765-605 5765-606 5765-607
The following Licensed Programs are available at a 37% discount:

5765-527

CATEGORY X
----------

Products included in this category are available for marketing by both
AS/400 and RISC System/6000 Remarketers

Page 4 of 2
<PAGE>

The following Licensed Programs are available at a 37% discount:

5621-159 5622-275 5622-276

The following Licensed Programs are available at a 30% discount:

5798-RZB

D. PRINTERS FROM THE IBM PRINTING SYSTEMS COMPANY
----------------------------------------------

The printers from the IBM Printing Systems Company may be marketed without
the standard Value-Added Enhancement requirement, and are available via the
IBM Printing Systems Company Remarketer Exhibit, for reference purposes,
available Products are listed in Category L of the Industry Remarketer
Exhibit. These printers are available at a 30% discount, with the
following exceptions:

3930/03D, 03S = 35%
4232/302 = 35%
42471A00 = 40%
6252/P08, P12 = 35%
6400/004 = 39%
6408/A00 = 35%
6412/A00, CTO, CTA = 45%

E. DEALER EXHIBIT PRODUCTS
-----------------------

3476, 3486, 3487, 3488 maximum = 32%

F. IBM UNINTERRUPTIBLE POWER SUPPLY (UPS)
--------------------------------------

1) Discount Schedule for UPS Products.

CATEGORY MACHINE TYPE MODEL ELIGIBLE DISCOUNT

K5 9910 Bxx* 27%
Exx* 27%
B30, B50, EP5 21%
EP8, E80, U33 21%

MES orders for Machines in this Category are not eligible for a discount.

* Except for models specifically listed at a different discount.
<PAGE>

2) Discount Schedule for ail other UPS Products:

KVA CAPACITY MIR DISCOUNT
less than 3 KVA 27%
3 less than 18 KVA 18%
equals to greater than 18 KVA Quoted on request.

2. IBM STORAGE PRODUCTS

Products included in categories S1, S3, and S4 of the IR Exhibit may be
marketed by Industry Remarketer Affiliates independent of the standard
Value-Added Enhancement requirement.

Category S1 All Products = 40%
Category S2 3490/CXX, EXX = 35%
3494 = 35%
Category S3 7135 = 40%
Category S4 All Products = 35%
Category SS 5765-564 = 35%

MES orders are eligible for the same discount as the base machine,, unless
otherwise indicated.

3. IBM POINT OF SALE PRODUCTS

POINT OF SALE TERMINAL

Machine Type* Discount
4694 40%
4695 40%

Includes Field Installed features and ModeJ Conversions.

. IBM Point of Sale Products acquired under the terms of this Schedule
are subject to the following Inventory Adjustment and Price Reduction
Credit Provisions:

INVENTORY ADJUSTMENT PROVISIONS

Each quarter of your contract period, you must report your inventory of
approved IBM Products as of the last calendar day of the preceding quarter.
You must use a form provided by IBM and the completed inventory form must
be received by IBM no later than the 10th workday of the new quarter.
<PAGE>

The maximum number of units of a Product you may return in a given quarter
is equal to the number of units of such Product you reported as the final
inventory for the previous contract period quarter. You may return these
Products only once per contract period quarter. If Products being returned
are accompanied by an order for new Products in an amount equal to or
greater than the dollar value of the Products being returned, no Inventory
Adjustment Charge will apply. If Products are returned without an
accompanying order of equal or greater value, a 2% Inventory Adjustment
Charge will apply to all Products being returned.

PRICE REDUCTION CREDIT PROVISIONS

Price Reduction Credits are based on a nine (9) month look back and are
applicable to machine type/models and associated field installed features
and model conversions shipped from IBM as MES orders. In order to quality
for a Price Reduction Credit, the following criteria must be met:

- The Products must have been shipped by IBM during the 9-month period
immediately preceding the effective date of the decrease.
- The Products must be in the original unopened packaging.
- The Products Date of Installation must not have occurred as of the
effective date of the decrease.
- The Product was not ordered for Development System installation.

You must use a form provided by IBM to report that inventory in your
possession as of the effective date of the decrease and to certify the
above requirements. IBM may request copies of invoices, including any
credit invoices, issued to you by IBM for the Products you are requesting
credit on.

IBM Customer Agreement Licensed Programs do not qualify for Price Reduction
Credits.

4. IBM NETWORK INTEGRATION PRODUCTS

Products included in this section have unique certification requirements.
Please contact your IBM representative for details. Products included in
this section are available at the discounts described below. MES orders
for installed features and model conversions are available at the same
discount as the base machine type/model it is ordered for installation on.

CATEGORY D
Eligible
Type/Model Discount
8250/All 40%
8260/All 40%
8281 and 8282 40%

Page 7 of 2
<PAGE>

6611/120 35%
6811/125 35%
6611/145 42%
6611/175 42%

2210 31%
9741/001 40%

CATEGORY D1

Licensed Programs included in Category D1 are available at a 37% discount
with the following exceptions:

5648-016 35%
5765-368 31%

5. MANAGING INDUSTRY REMARKETER DEMONSTRATION SYSTEM

Managing Industry Remarketers may acquire the following quantities of
Demonstration System Products each contract period for use in supporting,
recruiting, and training their Industry Remarketer Affiliates.

Demonstration Products are made available to the MIR at the Development
System Discounts specified in the Industry Remarketer Exhibit.

Demonstration Products must be retained by the MIR for a minimum of twelve
months from the Date of Installation.

Refer to the Managing Industry Remarketer Attachment for additional terms.

PRODUCT QUANTITY AVAILABLE
------- ------------------

RISC System/6000 Processors 20
POWERparallel Processors (9076) 2
AS/400 Processors 2
- 9401/P03 10
* Network Integration Products 20
* Point of sale Products 20
** Storage Products 10

* MIRS may acquire the quantities indicated for each machine type they
are approved to market in these Categories.
<PAGE>

** MIRs may acquire up to 10 of the Products they are approved to market
in these Categories .

MIRs may acquire Products from the Complementary Categories in these
quantities that IBM has indicated in the maximum number of these Products
that will attach to their Demonstration System Processor Type.

6. FEDERAL DISCOUNTS

Managing Industry Remarketers authorized to market the RISC System/6000 or
Network Integration Products to Industry Remarketer Affiliates may acquire
Products for installation in a Federal account under the following discount
schedules. MIR specific revenue commitments and discounts are identified in
the individual MIR's Profile. Please contact your IBM representative for
details.

A. MANAGING INDUSTRY REMARKETER FEDERAL DISCOUNT SCHEDULE
------------------------------------------------------

1) RISC SYSTEM/6600 PRODUCTS
-------------------------

Discounts

Annual System
Revenue Performance* Hardware Software

Entry-$9,999,999 39% 37%
$10,000,000 - 40% 38%
$14,999,999 41% 39%
$15,000,000 - 42% 40%
$19,999,999
$20,000,000 and over

* This discount schedule is based on a single RISC System/6000
revenue commitment for Products acquired for both federal and
commercial installations.

a) (Z12S-4096) are eligible for the hardware discounts above.

b) The software Products in Category A are eligible for the
software discounts listed above.

c) Some Products listed in the Network Integration Products
Federal Discount Schedule below may also be eligible RISC
System/6000 Products. These Products may be acquired at the
discounts listed below by IBM Authorized MIRs approved to
market RISC System/6000 Products to Industry Remarketer
Affiliates.

Page 9 of 2
<PAGE>

d) All other authorized Products are available at the standard
MIR/IR published discounts.

2) NETWORK INTEGRATION PRODUCTS FEDERAL DISCOUNT SCHEDULE
------------------------------------------------------

Machine Type Description Discount
Category O Network Processor - Model 12x 40%
6611 Multiprotocol Intelligent Switching Hub 45%
8260 High Speed Inverse Multiplexor 47%
9741 Nways Multiprotocol Router 32%
2210 Nways Multiprotocol Concentrator 34%
2217 40%
Category D1 5648-016 Multiprotocol Network Program 25%
Category K1 9309 Rack Enclosure Expansion Unit
Category K2 3299 Multiplexor Hub

a) Hardware Products specifically listed above are eligible for discounts
listed above when sold to Federal End Users.

b) All additional Network Integration Products are eligible to IBM Authorized
Industry Remarketers approved to remarket Network Integration Products are
available at standard MIR/IR published discounts.

B. FEDERAL END USER DEFINITION
---------------------------

The following definition of "end user" applies when marketing to federal
Government accounts:

A) "Federal End User" includes federal government agencies or any other
entity listed in GSA Order ADM 4800.2D, including those entities
listed in Appendices A, B, and G of the Order, and any successor Order
which may be published by the GSA in the federal Register. The term
Federal End User also includes federal government cost reimbursement
prime contractors and management and operating contractors that
receive proper authorization under FAR Part 51 from federal agencies
to make federal purchases or acquisitions where licenses granted and
title to equipment vest in the federal government.

B) The IR may propose an integrated solution through a higher-tier
federal contractor in fulfillment of a specific government procurement
where title to the IBM equipment passes directly to the federal
government. In no event shall the IR permit transfer of title for any
IBM equipment purchased under this Agreement to other than the federal
government. Under no circumstances may the IR assign any of its
responsibilities under the IR Agreement to the Federal End User.

7. IBM SERVICES OFFERINGS
----------------------
MANAGING INDUSTRY REMARKETER
<PAGE>

<TABLE>
<CAPTION>
Service Offering DISCOUNT FEE PERCENT (1)
<S> <C> <C>
Maintenance
-----------
Maintenance Service N/A 25%
Corporate Service Offering(CSO) N/A 25%
Mid Range Service Offering (MRSO) N/A 25%
Entry Systems Service for Remarketers (ESSR) (2) (2)
Corporate Service Offering for Remarketers (CSO/R) (2) (2)

Continuing Support
------------------
Support Family Services
AS/400 20% 20%
AIX 20% 20%

Customized Operational Services
ESCON Migration Services 20% 20%
SiteManager 20% 20%

Project Support (3)
-------------------
Customized Operational services (4) 20% 20%

Customized Operational Services Equipment
Air Conditioners and Chillers 10% 20%
Surge Suppressors 30% 20%
Uninterruptible Power Supplies(UPS)
Less than 3 KVA 21% 20%
3 to 18 KVA 15% 20%
Greater than 18 KVA Upon Request 20%
Liebert DataPad* 25% 20%

Systems Integration N/A 6%
Application Design & Development N/A 6%

Other Services (Examples)
LAN Doctor Services, SmoothStart, Softinstall 20% 20%
</TABLE>

NOTES:
-----
(1) The fee percent is applied to the Servico's one-time or recurring
charge that IBM invoices the End User. For a recurring charge, we
apply the percent to 12 times the monthly charge.

(2) Eligible machines, discounts and periodic payment percentages are
contained in the Exhibit for Corporate Service Option (Z125-3928) and
Remarketer Exhibit for CSO
<PAGE>

Option (Z125 4170), and Remarketer Exhibit for Entry Systems Service
(Z125-4254), as applicable.

Payments are made quarterly for CSO and for ESS based upon the amount
of adjusted charges invoiced during the quarter period.

PAYMENT ADJUSTED
Percent Charges Invoiced

5% $ 0 - $12,499
10% 12,500 - 49,999
13% 50,000 - 124,999
15% 125,000 or greater

(3) Fees are paid on the total contract amount, including non-IBM
Products, but excluding services which you, or your reseller we
approve, perform as a subcontractor. Services offered by ISSC,
EduQuest, and Education and Training are excluded.

(4) The fee percent or discount is applied to the Service's charge,
excluding moving company charges.

* The following is a trademark of the indicated companies: DataPad
(Liebert)

<PAGE>

EXHIBIT 13

Form 10-K

The following portions of the ScanSource, Inc. 1998 Annual Report to
Shareholders have been incorporated by reference into the Form 10-K, of which
this exhibit is a part.

The following information is incorporated by reference into Item 5 of the Form
10-K.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is quoted on The Nasdaq National Market under the
symbol "SCSC." The following table sets forth, for the periods indicated, the
high and low closing prices of the Common Stock on The Nasdaq National Market.

HIGH LOW
------- -------
Fiscal Year 1997
First Quarter................................................... $14 $10 3/4
Second Quarter.................................................. $15 3/4 $13
Third Quarter................................................... $18 5/8 $14
Fourth Quarter.................................................. $15 $13 1/2
Fiscal Year 1998
First Quarter................................................... $17 1/2 $13 3/4
Second Quarter.................................................. $20 7/8 $17
Third Quarter................................................... $23 1/8 $18 1/2
Fourth Quarter.................................................. $21 3/8 $18 1/2

On September 15, 1998, there were approximately 63 shareholders of record of
Common Stock. Certain of these shareholders of record hold shares in nominee
or street name for other beneficial owners.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its Common Stock,
and it is currently the intention of the Board of Directors not to pay cash
dividends in the foreseeable future. The Company intends to retain earnings,
if any, to finance its operations.

1
<PAGE>

The following information is incorporated by reference into Item 6 of the Form
10-K.

SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data, which should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and related
Notes thereto included elsewhere herein. The following selected financial data
for each of the years in the five-year period ended June 30, 1998 have been
derived from the consolidated financial statements of the Company audited by
KPMG Peat Marwick LLP, independent certified public accountants. The audited
consolidated financial statements of the Company as of June 30, 1997 and 1998
and for each of the years in the three-year period ended June 30, 1998 are
included elsewhere herein.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30
-------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales......................... $16,089 $34,235 $56,383 $99,839 $182,795
Cost of goods sold................ 13,676 29,444 48,413 86,024 159,410
------- ------- ------- ------- --------
Gross profit..................... 2,413 4,791 7,970 13,815 23,385
Selling, general and administra-
tive expenses.................... 1,718 3,128 5,063 8,940 15,620
Amortization of intangibles....... 50 83 83 81 113
------- ------- ------- ------- --------
Total operating expenses......... 1,768 3,211 5,146 9,021 15,733
------- ------- ------- ------- --------
Operating income.................. 645 1,580 2,824 4,794 7,652
Gain from contract termination,
net.............................. -- 1,000 200 -- --
Cost of business combinations
(1).............................. -- -- -- -- (305)
Other income (expense), net (2)... (150) (72) 75 (465) 160
------- ------- ------- ------- --------
Total other income (expense)..... (150) 928 275 (465) (145)
------- ------- ------- ------- --------
Income before income taxes........ 495 2,508 3,099 4,329 7,507
Income taxes...................... 143 997 1,193 1,556 2,736
------- ------- ------- ------- --------
Net income (1)(3)................ $ 352 $ 1,511 $ 1,906 $ 2,773 $ 4,771
======= ======= ======= ======= ========
Basic net income per share........ $ 0.80 $ 0.70 $ 0.55 $ 0.80 $ 0.99
======= ======= ======= ======= ========
Basic weighted average shares out-
standing......................... 1,207 2,154 3,482 3,481 4,833
======= ======= ======= ======= ========
Diluted net income per share
(1)(3)........................... $ 0.23 $ 0.50 $ 0.50 $ 0.75 $ 0.95
======= ======= ======= ======= ========
Diluted weighted average shares
outstanding...................... 1,663 3,271 3,799 3,704 5,035
======= ======= ======= ======= ========
<CAPTION>
AS OF JUNE 30,
-------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................. $ 4,888 $ 6,530 $17,137 $20,496 $ 48,154
Total assets..................... 6,740 13,939 29,183 40,268 72,112
Total bank debt.................. -- 1,200 3,779 5,391 6,580
Total shareholders' equity....... 4,751 6,396 15,504 18,650 49,781
</TABLE>
- -------
(1) Excluding the effect of the cost of business combinations, the Company's
net income and net income per share for fiscal 1998 would have been
$4,960,000 and $0.99 per share, respectively.
(2) Includes net interest income (expense) and net other income (expense).
(3) Excluding the net effect of a one-time gain from a contract termination
payment by Gates/FA Distributing, Inc. and the net effect of an additional
warehouse relocation in May 1995, the Company's net income and net income
per share for fiscal 1995 and 1996 would have been $911,000 and 1,786,000
and $0.32 and $0.47, respectively.

2
<PAGE>

The following information is incorporated by reference into Item 7 of the Form
10-K.

MANAGEMENT'S DISCUSSION AND ANALYSIS FOR YEAR-END JUNE 30, 1998

The following discussion and analysis contains forward-looking statements
which involve risks and uncertainties. The Company's actual results could
differ materially from those anticipated in these forward-looking statements
as a result of certain factors. This discussion and analysis should be read in
conjunction with "Selected Financial Data" and the Financial Statements and
the Notes thereto included elsewhere in this Report.

OVERVIEW

The Company was incorporated in December 1992 and began its operations as a
distributor of Auto-ID (bar code) products, rapidly expanding into the
distribution of point-of-sale (POS) products. In February 1997, pursuant to
its contract with Lucent Technologies, the Company began distributing business
telephone (telephony) products (including PBXs, key systems, telephone hand
sets and voice mail) under the trade name of Catalyst Telecom.

In addition to its own marketing and development activities, the Company has
from time to time pursued strategic acquisitions in order to consolidate its
presence in its existing specialty technology markets and to enter into new
markets with characteristics similar and complementary to its business model.
The Company consolidated its position in the telephony market in September
1997 through the purchase of ProCom Supply Corporation, a small wholesale
telephone distributor which provided the Company with two new product lines
and a west coast sales office. The Company entered the computer telephony
market by the acquisition in February 1998 of The CTI Authority, Inc. ("CTI"),
a wholesale distributor of Internet and computer telephony products, including
the Dialogic product line. In January 1998, the Company entered the Canadian
market through its acquisition of a small POS distributor which had an
established presence and sales team in Vancouver and Toronto.

From fiscal 1994 to fiscal 1998, net sales increased at a compound annual
rate of 83.6% to $182.8 million, while over the same period operating income
increased at an 85.6% compound annual rate to $7.7 million. Growth in net
sales has been principally driven by competitive product pricing, selective
expansion of the Company's product line, intensive marketing efforts to the
reseller channel, and strategic acquisitions. Results have benefitted
significantly from expanded marketing efforts to recruit new reseller
customers and from the addition of significant new vendor relationships. Sales
in fiscal 1997 were enhanced by the January 1997 addition of Intermec's full
line of bar code products, and the contract with Lucent Technologies. In
fiscal 1998, sales in the Company's core business of Auto-ID/POS products
continued to increase across most of its vendor lines, while telephony sales
were expanded by growth in the Lucent line and the acquisition of CTI.

The Company's operating income growth has historically been driven by
increasing gross profit and disciplined control of operating expenses. The
Company's business strategy features a sophisticated information system,
streamlined management, and centralized distribution, enabling it to achieve
the economies of scale necessary for cost-effective order fulfillment. As the
Company's markets have grown, pricing pressures have been mitigated by
increased purchasing discounts earned through volume purchases from
manufacturers. From its inception, the Company has tightly managed its general
and administrative expenses by maintaining strong internal controls.
Historically, general and administrative expenses have decreased as a
percentage of net sales. However, this decline has been offset by costs
associated with new initiatives in marketing, including, in fiscal 1997, the
formation of a POS business development team and a Professional Services Group
to serve Auto-ID customers; and in fiscal 1998, the organization of a systems
integration department, investments in new product and service markets such as
telephones and Internet order fulfillment, and the expansion into new
geographic markets in Canada.

The Company's operating results for fiscal 1995 and 1996 were impacted by a
one-time net gain of $1.2 million resulting from a contract termination which
was recognized ratably over a one-year period ending in August 1995. The net
effect of this transaction was to increase net income by $600,000 in fiscal
1995 and by $120,000 in fiscal 1996. Excluding these amounts, net income and
net income per share for fiscal 1995 and 1996 would have been $911,000 and
$1.8 million and $0.32 and $0.47, respectively.

Net income for 1998 includes the effect of $305,000 of expenses related to
the acquisitions described above which occurred in September of 1997 and in
January and February of 1998. Without these expenses, net income and net
income per share for 1998 would have been $5.0 million and $0.99 per share,
respectively. Weighted average shares outstanding at June 30, 1998 were higher
by 1.3 million shares as a consequence of the Company's October 1997 public
offering of Common Stock and the Company's issuance of Common Stock in
connection with the two 1998 acquisitions accounted for as pooling-of-interest
transactions.

3
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS FOR YEAR-END JUNE 30, 1998

- -------------------------------------------------------------------------------

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain income and
expense items as a percentage of net sales:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30
----------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Net sales.................................. 100.0% 100.0% 100.0%
Cost of goods sold......................... 85.9 86.2 87.2
-------- -------- --------
Gross profit.............................. 14.1 13.8 12.8
Selling, general and administrative ex-
penses.................................... 9.0 8.9 8.5
Amortization of intangibles................ 0.1 0.1 0.1
-------- -------- --------
Total operating expenses.................. 9.1 9.0 8.6
-------- -------- --------
Operating income........................... 5.0 4.8 4.2
Gain from contract termination, net........ 0.4 -- --
Cost of business combinations.............. -- -- (0.2)
Other income (expense), net................ 0.1 (0.5) 0.1
-------- -------- --------
Total other income (expense).............. .5 (0.5) (0.1)
-------- -------- --------
Income before income taxes................. 5.5 4.3 4.1
Income taxes............................... 2.1 1.5 1.5
-------- -------- --------
Net income................................ 3.4 2.8 2.6
----------------------------
</TABLE>

COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1998, 1997, AND 1996

Net Sales. Net sales consist of sales of specialty technology products
billed to customers when shipped, net of sales discounts and returns. Net
sales increased by 83.1% to $182.8 million in fiscal 1998 from $99.8 million
in fiscal 1997, and by 77.1% from $56.4 million in fiscal 1996. Growth in net
sales resulted primarily from additions to the Company's sales force,
competitive product pricing, selective expansion of its product line, and
increased marketing efforts to the specialty technology resellers. Sales for
1996, 1997 and 1998 reflect the effect of pooling CTI's sales as described in
Note 2 of the Financial Statements included elsewhere in this Report.

Gross Profit. Cost of sales is comprised of purchase costs, net of early
payment, volume discounts, and product freight. Gross profit as a percentage
of net sales is affected by several factors including the mix of high margin
and low margin products and the proportion of large orders on which the
Company extends volume discounts to resellers. Gross profit increased by 69.3%
to $23.4 million from $13.8 million in fiscal 1997, and by 73.3% from $8.0
million in fiscal 1996. Gross profit as a percentage of net sales was 12.8% in
fiscal 1998, 13.8% in fiscal 1997 and 14.1% in fiscal 1996. The decrease in
gross profit as a percentage of net sales was a result of a change in the mix
of sales of more lower-margin products and volume discounts provided to
resellers on large orders.

Operating Expenses. Operating expenses include commissions paid to sales
representatives; compensation paid to marketing, technical, and administrative
personnel; the costs of marketing programs to reach resellers; telephone
expense; a provision for bad debt losses; costs associated with the start-up
of telephone distribution, the organization of a systems integration
department and the entry into the Canadian and Internet order fulfillment
markets; and amortization of intangibles. Fluctuations in operating expenses
as a percentage of net sales can result from the amount of value-added
services which accompany higher or lower gross margin sales; investments by
the Company in additional marketing programs and hiring additional technical
support personnel; and general and administrative efficiencies gained through
higher sales volumes and accompanying economies of scale.

Operating expenses increased by 74.4% to $15.7 million in fiscal 1998 from
$9.0 million in fiscal 1997, and increased by 75.3% from $5.1 million in
fiscal 1996. Operating expenses as a percentage of net sales declined to 8.6%
in fiscal 1998, from 9.0% in fiscal 1997 and 9.1% in fiscal 1996. The decrease
in operating expenses as a percentage of net sales resulted from efficiencies
gained through increased sales volumes and the fact that lower gross margin
sales generally require fewer value-added services and thus less operating
expense.

4
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS FOR YEAR-END JUNE 30, 1998

- -------------------------------------------------------------------------------

Operating Income. Operating income increased by 59.7% to $7.7 million in
fiscal 1998 from $4.8 million in fiscal 1997, and by 69.7 % from $2.8 million
in fiscal 1996, driven by the improvement in gross profit as described above.
Operating income as a percentage of net sales was 4.2% in fiscal 1998, 4.8% in
fiscal 1997 and 5.0% in fiscal 1996.

Total Other Income (Expense). Total other income (expense) consists of
interest income (expense), net, the cost of business combinations and a net
gain from a contract termination. Other income (expense) in fiscal 1998
consisted primarily of $305,000 of business combination expenses and net
interest income of $213,000, representing earnings from invested proceeds
resulting from the Company's sale of stock in October 1997 partially offset by
interest paid on the Company's revolving credit facility for the period of
July through September 1997 and May through June 1998. Net interest expense
for fiscal 1997 was $380,000 representing interest paid on borrowings under
the revolving credit facility.

Income Taxes. Income tax expense was $2.7 million, $1.6 million and $1.2
million, in fiscal 1998, 1997, and 1996, respectively, reflecting an effective
tax rate of 36.5%, 35.9% and 38.5%, respectively. Tax expense was provided at
rates ranging from 36-39% reflecting the effects of the Company combining
operating results with The CTI Authority, Inc. reducing the previously
reported effective rate for all fiscal years. The effective tax rate for
consolidated net income for periods following July 1, 1998 is expected to be
37%.

Net Income. Net income increased by 72% to $4.8 million in fiscal 1998 from
$2.8 million in fiscal 1997, and by 45.5% from $1.9 million in fiscal 1996.
Net income as a percentage of net sales was 2.6% for fiscal 1998, 2.8% for
fiscal 1997 and 3.4% for fiscal 1996. Without the effect of the 1996 contract
termination payment, 1996 net income would have been $1.7 million or 3.1% of
net sales. Without the effect of $305,000 of acquisition expenses, 1998 net
income would have been $5.0 million or 2.7% of net sales.

QUARTERLY RESULTS

The following tables set forth certain unaudited quarterly financial data
and such data expressed as a percentage of net sales. The information has been
derived from unaudited financial statements that, in the opinion of
management, reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such quarterly information.
The operating results for any quarter are not necessarily indicative of the
results to be expected for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------
FISCAL 1997 FISCAL 1998
--------------------------------------- --------------------------------------
SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30
1996 1996 1997 1997 1997 1997 1998 1998
--------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $ 20,972 $ 23,556 $ 25,098 $ 30,213 $ 37,933 $ 41,677 $ 46,538 $56,647
Cost of goods sold...... 17,985 20,278 21,544 26,217 33,360 36,149 40,289 49,612
-------- -------- -------- -------- -------- -------- -------- -------
Gross profit........... 2,987 3,278 3,554 3,996 4,573 5,528 6,249 7,035
Selling, general and ad-
ministrative expenses.. 1,901 2,103 2,311 2,625 2,958 3,750 4,328 4,584
Amortization of intangi-
bles................... 20 21 20 20 20 30 30 33
-------- -------- -------- -------- -------- -------- -------- -------
Total operating ex-
penses................ 1,921 2,124 2,331 2,645 2,978 3,780 4,358 4,617
-------- -------- -------- -------- -------- -------- -------- -------
Operating income........ 1,066 1,154 1,223 1,351 1,595 1,748 1,891 2,418
Cost of business combi-
nations................ -- -- -- -- -- -- (305) --
Other income (expense),
net.................... (72) (97) (164) (132) (133) 210 109 (26)
-------- -------- -------- -------- -------- -------- -------- -------
Total other income (ex-
pense)................ (72) (97) (164) (132) (133) 210 (196) (26)
-------- -------- -------- -------- -------- -------- -------- -------
Income before income
taxes.................. 994 1,057 1,059 1,219 1,462 1,958 1,695 2,392
Income taxes............ 353 392 376 435 535 728 563 909
-------- -------- -------- -------- -------- -------- -------- -------
Net income............. $ 641 $ 665 $ 683 $ 784 $ 927 $ 1,230 $ 1,132 $ 1,483
======== ======== ======== ======== ======== ======== ======== =======
Basic net income per
share.................. $ 0.18 $ 0.19 $ 0.20 $ 0.22 $ 0.27 $ 0.25 $ 0.21 $ 0.28
======== ======== ======== ======== ======== ======== ======== =======
Basic weighted average
shares outstanding..... 3,480 3,485 3,487 3,485 3,489 4,904 5,321 5,351
======== ======== ======== ======== ======== ======== ======== =======
Diluted net income per
share.................. $ 0.17 $ 0.18 $ 0.18 $ 0.21 $ 0.25 $ 0.24 $ 0.20 $ 0.26
======== ======== ======== ======== ======== ======== ======== =======
Diluted weighted avg.
shares outstanding..... 3,701 3,723 3,710 3,671 3,722 5,209 5,587 5,623
------------------------------------------------------------------------------
</TABLE>

5
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS FOR YEAR-END JUNE 30, 1998

- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------
FISCAL 1997 FISCAL 1998
------------------------------------ ------------------------------------
SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30
1996 1996 1997 1997 1997 1997 1998 1998
--------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold...... 85.8 86.1 85.8 86.8 87.9 86.7 86.6 87.6
----- ----- ----- ----- ----- ----- ----- -----
Gross profit........... 14.2 13.9 14.2 13.2 12.1 13.3 13.4 12.4
Selling, general and ad-
ministrative expenses.. 9.0 8.9 9.2 8.7 7.8 9.0 9.3 8.1
Amortization of intangi-
bles................... 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1
----- ----- ----- ----- ----- ----- ----- -----
Total operating ex-
penses................ 9.1 9.0 9.3 8.8 7.9 9.1 9.4 8.2
----- ----- ----- ----- ----- ----- ----- -----
Operating income........ 5.1 4.9 4.9 4.4 4.2 4.2 4.0 4.2
Cost of business combi-
nations................ -- -- -- -- -- -- (0.6) --
Other income (expense),
net.................... (0.4) (0.4) (0.7) (0.4) (0.4) 0.5 0.2 0.0
----- ----- ----- ----- ----- ----- ----- -----
Total other income (ex-
pense)................ (0.4) (0.4) (0.7) (0.4) (0.4) 0.5 (0.4) 0.0
----- ----- ----- ----- ----- ----- ----- -----
Income before income
taxes.................. 4.7 4.5 4.2 4.0 3.8 4.7 3.6 4.2
Income taxes............ 1.7 1.7 1.5 1.4 1.4 1.7 1.2 1.6
----- ----- ----- ----- ----- ----- ----- -----
Net income............. 3.0 2.8 2.7 2.6 2.4 3.0 2.4 2.6
----------------------------------------------------------------------
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

The Company financed its initial operating requirements and growth through
private financings totaling $500,000. In March 1994, the Company completed an
initial public offering of units consisting of Common Stock and warrants,
which provided the Company with net proceeds of approximately $4.6 million. In
September 1995, the Company received net proceeds of approximately $6.3
million from Common Stock issued upon the exercise of warrants. In October
1997, the Company completed a secondary public offering of Common Stock which
provided the Company proceeds of approximately $26.2 million.

In November 1996, the Company entered into a revolving credit facility with
a bank which allowed for borrowings of up to $15.0 million at an interest rate
equal to the 30-day LIBOR rate plus a rate varying from 2.00% to 2.65% tied to
the Company's debt-to-net worth ratio ranging from 1:1 to 2:1. The borrowing
base available under the credit facility is limited to 80% of eligible
accounts receivable and 40% of eligible inventory. At June 30, 1998, the
effective interest rate on the facility was 7.66%, and the outstanding balance
was $4.9 million on a borrowing base which exceeded $15 million, leaving $10.1
million of credit availability. The Company has a commitment from the bank,
which the Company intends to exercise, to renew the credit facility for
amounts up to $35 million to October 2001 under terms similar to the existing
agreement.

On June 26, 1998, the Company purchased its corporate headquarters building
for a purchase price of approximately $3,346,000, of which $2,761,000 was
allocated to the building and $585,000 was allocated to land. The Company
funded the purchase price with borrowings of $1,627,000 under its revolving
credit facility and the assumption of a $1,719,000 nonrecourse 9.19% fixed-
rate loan with a remaining term at June 30, 1998 of 8.25 years. The loan is
collateralized by the land and building acquired. The Company had formerly
leased, and is continuing to use, approximately 45% of the 70,000 square feet
in the building as its principal executive and sales office. The Company is
leasing the remainder of the building to third parties until such space is
required for the Company's needs. Included in the expected benefits to the
Company from the purchase of the building are the retention of leasehold
improvements with a cost of approximately $703,000 (which are now included in
the cost of the building for balance sheet purposes) as well as the expected
savings of the costs of moving to a larger location which would otherwise have
been necessary within the next 18 months.

For the fiscal year ended June 30, 1998, operating activities used cash in
the amount of $21.0 million. For this period, cash was used to fund a $14.9
million increase in receivables and a $7.5 million increase in inventory and a
$3.1 million decrease in accounts payable. For fiscal 1997, net cash in the
amount of $137,000 was provided by operating activities.

6
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS FOR YEAR-END JUNE 30, 1998

- -------------------------------------------------------------------------------

For the fiscal year ended June 30, 1998, cash used in investing activities
of $4.7 million included $1.9 million for capital expenditures, $1.6 million
for purchase of the Company's headquarters building and $1.1 million paid in a
business combination. Cash used in investing activities for fiscal 1997 was
$1.1 million for capital expenditures.

For the fiscal year ended June 30, 1998, cash provided by financing
activities was $25.3 million, resulting primarily from the sale of $26.2
million of Common Stock in an October 1997 public offering and $1.1 million in
net repayments under the line of credit. Cash provided by financing activities
for fiscal 1997 was $1.3 million, primarily from line of credit borrowings.

The Company believes that cash flows from operations, its bank revolving
credit facility and vendor financing will be sufficient to meet its cash
requirements for at least the next 24 months.

BACKLOG

The Company does not consider backlog to be material to its business.
Virtually all orders are filled within 24 hours of receipt.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS No. 131"). SFAS No. 131 requires that an enterprise disclose certain
information about operating segments and is effective for financial statements
for periods beginning after December 15, 1997. The Company is currently
assessing the effects of SFAS No. 131 on its financial statement disclosure.

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). SFAS No. 133 requires that an enterprise recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. SFAS No. 133 is effective for all
fiscal quarters and all fiscal years beginning after June 15, 1999. The
Company is currently assessing the effects of SFAS No. 133 on its financial
position.

YEAR 2000

It is possible that the Company's currently installed computer systems,
software products or other business systems, or those of the Company's vendors
or resellers, working either alone or in conjunction with other software or
systems, will not accept input of, store, manipulate and output dates in the
years 1999, 2000 or thereafter without error or interruption (commonly known
as the "Year 2000" problem). The Company has conducted a review of its
computer systems, including its primary business software, and believes that
such software is Year 2000 compliant. The Company is also querying its vendors
and resellers as to their progress in identifying and addressing problems that
their computer systems may face in correctly processing date information as
the year 2000 approaches and is reached. There can be no assurance that the
Company's systems will address all such Year 2000 problems, that its current
and ongoing efforts will identify all such problems in its own computer
systems or those of its vendors or resellers in advance of their occurrence,
or that the Company will be able to successfully remedy any problems that are
discovered. The expenses of the Company's efforts to identify and address such
problems have not been material. However, the expenses or liabilities to which
the Company may become subject as a result of any such problems that may arise
could have a material adverse effect on the Company's business, financial
condition, and results of operations. In addition, the purchasing patterns of
existing and potential customers may be affected by Year 2000 problems, which
could cause fluctuations in the Company's sales volumes. Maintenance or
modification costs have been and will continue to be expensed as incurred.

The following information is incorporated by reference into Item 7A of the
Form 10-K.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company is exposed to changes in financial market conditions in the
normal course of its business as a result of its selective use of bank debt as
well as transacting in Canadian currency in connection with its Canadian
operations.

7
<PAGE>

- -------------------------------------------------------------------------------

The Company is exposed to changes in interest rates primarily as a result of
its borrowing activities, which includes a revolving credit facility with a
bank used to maintain liquidity and fund the Company's business operations.
The nature and amount of the Company's debt may vary as a result of future
business requirements, market conditions and other factors. The definitive
extent of the Company's interest rate risk is not quantifiable or predictable
because of the variability of future interest rates and business financing
requirements, but the Company does not believe such risk is material. The
Company does not currently use derivative instruments to adjust the Company's
interest rate risk profile.

The table below presents principal amounts and related weighted average
rates by year of maturity for the Company's debt obligations at June 30, 1998:

<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 THEREAFTER TOTAL FAIR VALUE
(IN THOUSANDS) ---- ----- ---- ---- ---- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Line of credit.......... -- 4,861 -- -- -- -- 4.861 4,861
Average interest rate
(variable)............. -- 7.66% -- -- -- -- 7.66%
Long-term debt.......... 22 24 26 29 31 1,587 1,719 1,870
Average interest rate
(fixed)................ 9.19% 9.19% 9.19% 9.19% 9.19% 9.19% 9.19%
</TABLE>

The Company is exposed to changes in foreign exchange rates in connection
with its Canadian operations. It is the Company's policy to enter into foreign
currency transactions only to the extent considered necessary to support its
Canadian operations. The amount of the Company's cash deposits denominated in
Canadian currency has not been, and is not expected to be, material.
Furthermore, the Company has no capital expenditure or other purchase
commitments denominated in any foreign currency. The Company does not utilize
forward exchange contracts, currency options or other traditional hedging
vehicles to adjust the Company's foreign exchange rate risk profile. The
Company does not enter into foreign currency transactions for speculative
purposes.

The Company does not utilize financial instruments for trading or other
speculative purposes, nor does it utilize leveraged financial instruments. On
the basis of the fair value of the Company's market sensitive instruments at
June 30, 1998, the Company does not consider the potential near-term losses in
future earnings, fair values and cash flows from reasonable possible near-term
changes in interest rates and exchange rates to be material.

FORWARD LOOKING STATEMENTS

Certain of the statements contained in this report to shareholders as well
as in the Company's other filings with the Securities and Exchange Commission
that are not historical facts are forward-looking statements subject to the
safe harbor created by the Private Securities Litigation Reform Act of 1995.
The Company cautions readers of this report that a number of important factors
could cause the Company's activities and/or actual results in fiscal 1998 and
beyond to differ materially from those expressed in any such forward-looking
statements. These factors include, without limitation, the Company's
dependence on vendors, product supply, senior management, centralized
functions, and third-party shippers, the Company's ability to compete
successfully in a highly competitive market and manage significant additions
in personnel and increases in working capital, the Company's entry into new
products markets in which it has no prior experience, the Company's
susceptibility to quarterly fluctuations in net sales and operations results,
the Company's ability to manage successfully price protection or stock
rotation opportunities associated with inventory value decreases, and other
factors described in other reports and documents filed by the Company with the
Securities and Exchange Commission.

The following information has been incorporated by reference into Item 8 of the
Form 10-K.

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET & INCOME STATEMENT FOR THE PERIOD ENDED JUNE 30, 1998.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 88
<SECURITIES> 0
<RECEIVABLES> 28,198
<ALLOWANCES> 2,045
<INVENTORY> 31,444
<CURRENT-ASSETS> 63,903
<PP&E> 8,024
<DEPRECIATION> 1,533
<TOTAL-ASSETS> 72,112
<CURRENT-LIABILITIES> 15,749
<BONDS> 0
0
0
<COMMON> 38,710
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 72,112
<SALES> 182,795
<TOTAL-REVENUES> 182,795
<CGS> 159,410
<TOTAL-COSTS> 15,733
<OTHER-EXPENSES> 113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,507
<INCOME-TAX> 2,736
<INCOME-CONTINUING> 4,771
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,771
<EPS-PRIMARY> .99
<EPS-DILUTED> .95

</TABLE>