Supply & Manufacture Agreement

Exhibit 10.18 *** Confidential portions of this document have been redacted and separately filed with the Commission. HSS EMITTER AND SYSTEM SUPPLY AND MANUFACTURE AGREEMENT This Supply (" Agreement" ) is made and entered into effective this 18th day of July, 2001 (" Effective Date" ) by and between American Technology Corporation, a Delaware corporation, with its offices at 13114 Evening Creek Dr. S., San Diego, CA 92128 (" ATC" ), and Horizon Sports Technologies, Inc., a California corporation, with its offices at 8985 Crestar Pointe, San Diego, CA 92121 (" HST" ). In this Agreement, ATC and HST may be referred to individually as a " Party" and collectively as the " Parties" . RECITALS WHEREAS: A. ATC is engaged in the discovery, development, and improvement of systems, devices, and technologies related to sound reproduction, including loudspeaker devices for various applications. B. ATC has developed or acquired and is the owner of certain inventions relating to systems which cause the generation of desired acoustic frequencies by means of non-linear propagation from frequencies which are higher than the desired frequency, and is the owner of certain patent rights as set forth on Exhibit A attached to this Agreement, and inventions covered thereby (" Patent Rights" ), as well as trade secrets and other confidential and proprietary information, including, but not limited to data, designs, diagrams, drawings, reports, supplier lists, specifications, memoranda, and the like, in whatever form, concerning such inventions and related methods, processes, systems and devices, all relating to a sound reproduction system known as HyperSonic TM Sound (HSS TM ) (" Know-How" ). HSS technology is ATC' s proprietary ultrasonic sound generation technology, devices and methods, including, but not limited to: " Parametric Loudspeakers," which shall mean any speaker or device that indirectly generates lower frequency tones from high frequency tones; and, to power modulation devices; and further includes but is not limited to the inventions included in the Patent Rights, and related Know-How, and HSS technology includes other data, items, methods, processes and know-how, which are related to systems which cause the generation of desired acoustic frequencies by means of non-linear propagation from frequencies which are higher than the desired frequency, including, but not limited to, the Patent Rights and Know-How, (collectively " HSS Technology" ). C. ATC has adopted and used or acquired, and is the owner of, certain trademarks, as well as any trademark registrations and applications therefor, used with HSS Technology, including, but not limited to HSS TM , HyperSonic TM Sound throughout the world, as set forth on Exhibit B (" HSS Trademarks" ). HST Supply Agreement Page 1

*** Confidential portions of this document have been redacted and separately filed with the Commission.

D. ATC desires a stable, cost-effective, and high-volume manufacturing source for its patent-pending piezoelectric film ultrasonic emitter device (" ATC Emitter" ) which is included in the HSS Technology, and is an integral component of systems incorporating HSS Technology. HSS Technology used in or enabling the design, building, and manufacture of the ATC Emitter shall be herein more particularly known as " ATC Emitter Technology" . ATC also desires a stable, cost-effective, high-volume manufacturing source for completed systems incorporating HSS Technology, including but not limited to amplifiers, packaging, DSP circuitry, power supplies, audio playback boards, etc. (" HSS Systems" ), which are to be sold or resold to ATC customers or other entities which ATC has licensed with respect to relevant portions of HSS Technology (" Other HSS Licensees" ) in both retail and wholesale markets. ATC Emitters, HSS Systems, or any combination of the two shall be referred to herein as " HSS Products." ATC desires HST to become a manufacturing source for HSS Products. E. HST has extensive experience in design and manufacturing technologies, and has acquired or is the owner of inventions and know-how relating to certain manufacturing technologies (" HST Technology" ), and the parties believe that this experience, knowledge, and HST Technology will be useful in the design and manufacture of ATC Emitters and HSS Systems, which will use or incorporate HSS Technology, and HSS Products incorporating such ATC Emitters and/or HSS systems. F. HST desires to be a primary manufacturer of HSS Products, and believes it can supply the reasonable requirements of ATC for HSS Products, including reasonable increases in such requirements. COVENANTS AND CONDITIONS NOW, THEREFORE, in consideration of the foregoing recitals and the covenants and conditions as set forth herein, the parties agree as follows: 1. LICENSE a. All Patent Rights, Know-How, ATC Trademarks, HSS Technology, and ATC' s Emitter Technology are owned exclusively by ATC and no license with respect to them or any other intellectual property of ATC is granted to HST, except for the limited and specific purpose of making HSS Products for ATC in accordance with this Agreement and otherwise performing its obligations hereunder. b. No license with respect to any right of HST in HST Technology, or any other intellectual property developed solely by HST, is granted to ATC, except for the limited and specific purpose of carrying out the terms and conditions of this Agreement and otherwise performing its obligations hereunder. c. Upon the request of HST, ATC and HST shall negotiate in good faith a separate agreement regarding a grant of a license from ATC to HST to make, have made, use, manufacture, and sell products which use or incorporate HSS Technology under its own brand HST Supply Agreement Page 2

*** Confidential portions of this document have been redacted and separately filed with the Commission.

name HST, or other brand name approved by ATC, [***] in recognition of HST' s work in helping to advance ATC Emitter Technology and HSS Systems manufacturing know-how, should that prove to be the case. 2. RIGHT TO MANUFACTURE a. Subject to termination as defined in paragraphs 13 and 27, HST shall have an exclusive right to manufacture HSS Products for ATC which ATC will sell at retail or wholesale. HST shall manufacture HSS Products in accordance with the reasonable quality and quantity requirements of ATC during the term of this Agreement. b. ATC retains the right to license Other HSS Licensees to manufacture and sell HSS Products under the Other HSS Licensees' own brand names. c. HST shall be an authorized, non-exclusive manufacturer of HSS Products for Other HSS Licensees after the initial term of this Agreement. ATC shall inform each such Other HSS Licensee in writing, with a copy of such notice to HST, that HST is an ATC authorized manufacturer for HSS Products. [***] 3. SCOPE OF WORK: a. ATC will provide to HST all required documentation and technical support required for technology transfer of HSS Technology related to the HSS Products, to enable HST to identify manufacturing techniques, processes, and determine costs. b. HST will provide ATC with ideas for design modifications, on an ongoing basis, to reduce manufacturing costs, improve ruggedness and reliability, improve stability, or any other concepts to improve the manufacturability or performance of the HSS Products. c. HST will provide design drawings, concept drawings, specifications, and other reasonably required documentation to ATC on a continuing basis, and shall, upon appropriate notice, allow ATC personnel access to relevant portions of HST facilities, in order for ATC to monitor the quality of the HSS Products and monitor the HST manufacturing processes for the HSS Products. d. HST will maintain and make available to ATC all purchasing, inspection, production, quality, shipping, and other required documentation upon request in order for ATC to accurately assess the suitability of the HST manufacturing processes for the HSS Products. 4. PVDF FILM SUPPLY a. [***] 5. PRODUCTION TOOLING a. [***] HST Supply Agreement Page 3

*** Confidential portions of this document have been redacted and separately filed with the Commission.

b. [***] 6. COSTS AND LINE SHUTDOWNS a. [***] b. [***] c. [***] 7. RESPONSIBILITIES The following is a partial list of identified HST responsibilities. It is included for clarification only and does not represent all the responsibilities of HST to perform under this agreement. However, HST shall do at least the following: ullet [***] ullet [***] ullet [***] ullet [***] ullet Meet production schedules and quality targets ullet Provide factory infrastructure (shipping, accounting, etc.) ullet Purchase components and raw materials as required ullet [***] ullet Procurement of, [***] initial and ongoing UL factory registration, inspections, and compliance ullet Provide serial number traceability ullet [***] ullet Production cost reduction over time ullet [***] ullet Contract with all its employees officers and agents to keep the HSS Technology not in the public domain confidential, and otherwise take all reasonable precautions to prevent unauthorized access to, and use of, HSS Technology ullet Take such further reasonable steps to safeguard HSS Technology not in the public domain from unauthorized transfer to any third party by any of HST' s officers, directors, employees, agents, and contractors, as may be reasonably be required under circumstances appearing, particularly with regard to manufacturing outside the U.S. ullet Develop a formal manufacturing and process control plan ullet Inspect, test, or otherwise validate that components and materials meet specifications The following is a partial list of identified ATC responsibilities. It is included for clarification only and does not represent all the responsibilities of ATC to perform under this agreement. However, ATC shall do at least the following: ullet Provide overall design of HSS systems and packaging HST Supply Agreement Page 4

*** Confidential portions of this document have been redacted and separately filed with the Commission.

ullet Provide engineering documentation/configuration management requirements ullet [***] ullet Procurement of, [***] initial product agency approvals & updates (UL, FCC, FDA, etc) ullet Provide receiving inspection criteria for components, etc. ullet [***] ullet Develop factory process inspection criteria ullet Provide technical support and failure analysis ullet [***] ullet [***] ullet [***] The following is a partial list of identified joint responsibilities. It is included for clarification only and does not represent all the joint responsibilities of HST and ATC to perform under this agreement. However, both parties shall jointly do at least the following: ullet [***] ullet [***] 8. FIRST PRODUCTION AND PRODUCT DOCUMENTATION a. It is understood that expediency in the performance of the parties under this Agreement is of critical importance to the success of ATC and its HSS technology and time is of the essence of this Agreement. b. [***] c. Prior to the start of production, ATC shall provide to HST complete product documentation required to reorder all parts and materials, perform incoming inspections, manufacture ATC Emitters, perform final HSS Product assembly, control product quality and consistency, and package, store, and ship finished HSS Products. 9. DISTRIBUTION RESTRICTIONS a. [***] b. [***] HST shall take particular care to see that such technology is not transferred by reason of any act of HST, its directors, officers, employees, agents, and contractors, to such entity in the field of audio reproduction, nor to any company in competition with ATC or engaged in the production of any technology competitive to HSS, or any company engaged in the manufacturing, sale, or distribution of parametric loudspeaker systems. However, HST is not prohibited in any way from selling, distributing, or otherwise providing its HST Technology to any third party company for use in applications not involving [***] . 10. CONFIDENTIAL INFORMATION HST Supply Agreement Page 5

*** Confidential portions of this document have been redacted and separately filed with the Commission.

a. It is recognized that during the term of this agreement and any renewal term, the parties will disclose, exchange and/or be given access to information, in whatever form, of the other, which is not in the public domain, and which is or may be sensitive, proprietary, or simply not generally known, and with respect to which the party disclosing the information desires that it remain confidential and not pass into the public domain. Such information includes, but is not limited to, business and financial information, customer and supplier names and lists of such names, trade secrets, know-how, technical and business data, drawings, devices, methods, processes, formulae, specifications, information regarding business and market strategy, and the like, and also including, but not limited to, the HSS Technology and HST Technology set forth above not in the public domain, and other information identified or reasonably identifiable as sensitive or confidential (" Confidential Information" ). b. Each of the parties shall take reasonable steps to assure that Confidential Information of the other party remains confidential and does not pass to any third party to the detriment of the other party. The Confidential Information of each of the parties shall remain the property of the disclosing party, and the parties shall each receive and maintain the confidentiality of the other and shall not make any use thereof in whole or in part except for the purposes of this agreement. [***] any Confidential Information and/or instrumentality incorporating or displaying Confidential Information, given by one party to the other shall otherwise be kept in strict confidence by the receiving party, and shall be disclosed only to those persons and entities having a need to know in performing the duties imposed by this Agreement and who have entered into an agreement with the receiving party to keep such Confidential Information in strict confidence. Such agreements with third parties shall contain confidentiality provisions providing, at the least, protections and obligations of confidentiality commensurate with the protections and obligations set forth in this Agreement. c. Confidential Information shall not include information which was previously in the public domain, or which passes into the public domain by a means other than a violation of this Agreement, or information which was known to the receiving party, as shown by reliable evidence, prior to receiving the information and with respect to which a breach of the duties or obligations of this Agreement would not otherwise reasonably be found by subsequent disclosure. 11. INTELLECTUAL PROPERTY a. [***] * [***] * [***] * [***] b. [***] c. [***] HST Supply Agreement Page 6

*** Confidential portions of this document have been redacted and separately filed with the Commission.

d. [***] e. The parties shall have and/or enter into appropriate agreements with their officers, directors, employees, agents, and contractors to effect the terms of this Agreement, including, but not limited to, obligating them to assign all rights in inventions and intellectual property, including but not limited to patent rights, developed or acquired by them which relate to the respective business endeavors of the parties, and to keep all Confidential Information in confidence. f. Improvements 1. Regardless of how ownership may be determined between the parties, if a party shall develop any improvement relating to the performance or manufacture of the HSS Products or otherwise constitutes and improvement relating to the HSS Technology (" Improvement" ), the party having made the Improvement shall promptly disclose such Imp ...