Manufacturing Agreement

MANUFACTURING AGREEMENT
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This Manufacturing Agreement (the "Manufacturing Agreement") is entered into as of January 9, 1996 by and between Shintom Co., Ltd. and Talk Corporation, Japanese corporations (collectively referred to as the "Manufacturer"), and Go-Video, Inc., a Delaware corporation (the "Company").


RECITALS:


A. The Manufacturer is in the business of manufacturing and selling various consumer electronics products, including video cassette recorders ("VCRs").


B. The Company desires to purchase from the Manufacturer and the Manufacturer desires to manufacture and sell to the Company Dual-Deck VCRs (the "Products").


C. The Company and Manufacturer possess proprietary Trade Secrets, Know How, and Technical Information, and the Company possesses Trademarks and Patents related to the Products.


D. The parties hereto mutually desire to contract for the manufacture and sale of the Products on the terms and conditions set forth below.


NOW, THEREFORE, for and in consideration of their respective covenants and agreements contained herein, the parties hereto agree as follows:


1. Definitions. In addition to the various defined terms set forth in this Manufacturing Agreement, the following terms shall have the following meanings throughout:


1.1 "Affiliate" of a party shall mean any individual or entity directly or indirectly controlled by controlling or under common control with the party.


1.2 "Confidential Information" shall mean the Technical Information, Trade Secrets, and all other information, oral and written, about each party, each party's business, or the Products that either party has disclosed to the other party in confidence in connection with this Manufacturing Agreement. Information shall not be considered "Confidential Information" to the extent that the disclosing party can clearly demonstrate the information (i) is publicly and openly known and in the public domain through no fault of the receiving party and without a breach of this Manufacturing Agreement, (ii) was already in the possession of the receiving party prior to any disclosure by the receiving party and without any restriction on the use or disclosure of the information, (iii) is or has lawfully been disclosed to the receiving party by a third party without any obligation of confidentiality, or (iv) is required to be disclosed by law.


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1.3 "Know How" shall mean the information, data, and experience of each party relating to the development, design, manufacture, promotion, marketing and sale of the Products.


1.4 "Patents" shall mean the patents owned by the Company now or at any time during the term hereof relating to the Products and any extensions or improvements thereto, including United States Patent Nos. 4,768,110 and 5,124,807.


1.5 "Technical Information" shall mean any information of either party including Know How, whether or not patented, which relates to the design, engineering, manufacture or use of the Products as well as quality control and cost accounting data relating thereto, which is now owned or acquired or has been developed or discovered, or is hereinafter owned, acquired, developed, or discovered by either party and which is in a form that is able to be transferred.


1.6 "Trademarks" shall mean those trade names and trademarks described in Schedule 1.


1.7 "Trade Secrets" shall mean Technical Information which is treated as secret and confidential by either party which derives independent or actual value from not being generally known to other persons.


2. Manufacture of the Products. Subject to the terms and conditions set forth herein, the Manufacturer agrees, on a non-exclusive basis, to manufacture, assemble, and package the Products for and sell the Products to the Company. The Manufacturer shall manufacture the Products exclusively for the Company and neither it nor its Affiliates shall manufacture, assemble, or sell the Products to any entity other than the Company for a period of eighteen (18) months following the termination of this Manufacturing Agreement. The Company shall not be prohibited from contracting with additional manufacturers for the manufacture, assembly, and packaging of the Products. The Manufacturer shall have right to have its affiliates manufacture the Products; provided, however, that Manufacturer shall continue to be obligated to perform pursuant to this Agreement.


3. License Agreement. The Company agrees to discuss, within ninety (90) days of the date hereof, the terms and conditions of a separate license agreement pursuant to which, if agreement is reached, the Manufacturer may be granted the right to sell the Products in Japan.


4. Product Standards. The Manufacturer shall manufacture, assemble, handle, package, and ship the Products, strictly in conformity with the Finished Product Specifications and Quality Assurance Standards (the "Specifications and Standards"), which are attached hereto as Exhibit A and made part of this Manufacturing Agreement. The Company shall develop and deliver to the Manufacturer design criteria for the Products and shall disclose to the Manufacturer all Technical Information which is necessary for the Manufacturer to manufacture the Products in accordance with the Specifications and Standards. The Manufacturer agrees to


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employ its best workmanship in the manufacture of the Products. The Company may at any time make changes or improvements in the Specifications and Standards and request that Manufacturer incorporate such changes or improvements. The Manufacturer shall within fifteen (15) business days of receipt of a request to revise the Specifications and Standards, confirm the effect of such changes on the (i) cost (increase or decrease) and (ii) production schedule (including when such changes could be implemented) of manufacturing the Products (a "Statement of Effect"). The Company shall then determine whether or not it desires to make such changes in the Specifications and Standards by sending notice to the Manufacturer within fifteen (15) business days of receipt of the Statement of Effect. Any increase or decrease in cost related to such changes or improvements shall then be reflected in the Price.


5. Price. The Company shall purchase from the Manufacturer Products at a mutually acceptable price per unit set forth in Schedule 2, which may be amended by agreement of the parties in writing. The price shall cover all labor, set-up, manufacturing overhead, machine maintenance, quality assurance, warehousing, shipping (as provided in Section 9), insurance, royalties, and general and administrative costs, and all profit for the Manufacturer.


6. Quantities. The Manufacturer shall manufacture and supply the Products only in response to written purchase orders delivered by the Company to the Manufacturer, and confirmed in writing by the Manufacturer. By the 15th of each month, the Company shall provide to Manufacturer (i) a firm purchase order for the month three months subsequent to that date (i.e., a purchase order for April by the fifteenth of January) (a "Firm Order"), (ii) a firm estimate for each of the two (2) months following the month relating to a Firm Order (a "Firm Estimate"), and (iii) a monthly estimate for the twelve (12) months from such date (a "Yearly Estimate"). For any three (3) month period relating to a Firm Estimate, the Company shall be required to purchase between 20% below and 20% above the amount of the Firm Estimate. If the Company purchases 20% less of the Firm Estimate for such period, the Manufacturer and the Company shall negotiate an appropriate resolution. If the parties cannot agree to such a resolution within sixty (60) days, the Company shall pay the Manufacturer compensation equal to the Manufacturer's committed costs plus ten percent (10%) for the deficient orders. The Yearly Estimates are for planning purposes only and shall not represent any commitment on the part of the Company to purchase Products as estimated. The Company intends in good faith to purchase a minimum quantity of * units within the first year of the Agreement. Twelve (12) months from the beginning of Product shipment, the two parties shall discuss and confirm annual quantity for the coming year.


7. Term. This Agreement shall commence as of the date first listed above and shall continue in force for an initial term of two (2) years unless terminated in accordance with the terms of this Agreement. The Agreement shall be automatically renewed for additional successive one (1) year periods on each anniversary date if (i) the Company has purchased from the Manufacturer a minimum of * units over the last twelve (12) month period, and (ii) neither party has given at least twelve (12) months notice of its intention to terminate the Agreement. Following initial production, the Manufacturer shall be entitled to terminate the Agreement if


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the Company does not provide the Manufacturer any firm purchase orders for six (6) consecutive months.


8. Payment. The Company shall pay for the Products by an irrevocable letter of credit at sight either for each monthly order or for a whole quarter by revolving credit at least two (2) weeks before shipment. The Manufacturer agrees to discuss, within six (6) months of the date hereof, other payment terms, including payment by wire transfer.


9. Shipment. The price for all Products ordered pursuant to this Agreement shall include shipping, handling, insurance, and all other cartage charges to the vessel at the Singaporean port. All customs duties will be paid by the Company as the importer of record. Any export fees or other costs imposed by agencies of the Singaporean or Indonesian governments, provinces or municipalities, will be paid by the Manufacturer. The sale of all Products shall be made F.O.B. the Singaporean port, where title to the Products and risk of loss shall pass to the Company.


10. Epidemic Failures. In the event of an Epidemic Failure in connection with the Products, upon return of the defective Products to the Manufacturer, the Manufacturer, at its option, shall replace them with nondefective Products or shall refund the purchase price to the Company plus expenses of transportation and applicable export taxes. The Manufacturer also has the right at its option, to send repairmen to repair the defective Products or to pay the Company a fee for arranging for the local repair of such defective Products. Such replacement or refund shall be the limit of Manufacturer's liability in the event of an Epidemic Failure. An Epidemic Failure shall be deemed to have occurred when, due to defects in material or workmanship, of an identical nature more than 5% of the total units of a particular production run (with the same manufacturing code) is proven defective within fifteen (15) months from delivery to the Company. All design related defects are the responsibility of the Company.


11. Insurance. The Manufacturer shall maintain throughout the term of this Agreement, with insurers of internationally recognized stature, insurance in an amount of up to $6,000,000 (U.S.) covering all product liability type claims relating to the Products. The Manufacturer agrees to add the Company as an additional insured to such insurance. On the Company's request, the Manufacturer shall furnish the Company with evidence of Manufacturer's compliance with the requirements set forth in this Section 11.


12. Toolings. The Manufacturer shall make tools which shall be necessary to manufacture the Products. All such tools shall be the sole property of the Company and shall not be used for any purpose other than those set forth in this Agreement. The Manufacturer shall use reasonable care in maintaining and safekeeping such tools and shall maintain and update, throughout the term of this Agreement, an itemized listing of the particular tools and their then current location. The Manufacturer shall be responsible for any damage or loss to all such tools. The Company shall pay the costs of such tooling as set forth in Schedule 3.


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13. Spare Parts. The Manufacturer shall provide to the Company, for a period of up to and including seven (7) years following the final production of any model of Product, (i) a complete listing of all spare parts required for operation of the Products and (ii) a current price listing for such spare parts. The Manufacturer also agrees to provide on a timely basis all spare parts ordered by the Company during such period. The Manufacturer further agrees that the sum of prices for spare parts components ...