Joint Development Agreement

The Registrant has requested confidential treatment of portions of this Agreement. Those portions have been redacted from the Agreement.


JOINT DEVELOPMENT AGREEMENT


THIS AGREEMENT is entered into as of this 4 day of December, 1997, between ECRIX CORPORATION (hereinafter "Ecrix"), having a place of business at 5500 Central Avenue, Boulder, Colorado 80301 U.S.A., and AIWA CO., LTD. (hereinafter "AIWA"), having a place of business at 2-11, Ikenohata 1-chome, Taito-ku, Tokyo, Japan.


I. BACKGROUND


AIWA has development and manufacturing expertise in low cost, helical scan/DDS tape drives and autoloaders, and an established marketing presence and significant procurement and manufacturing resources in Asia. Ecrix has advanced, leading edge electronic design expertise in advanced and proprietary variable speed architecture technology and in low cost helical scan tape drives, specifically in the areas of electronic architecture and data formats, as well as significant marketing and sales expertise in low cost tape drives, primarily in the United States.


AIWA and Ecrix desire to create a mutually beneficial, long-term, cooperative strategic partnering relationship for the development, manufacture and distribution of computer products utilizing each party's expertise. This Agreement sets forth the terms and conditions for the first project of that cooperative strategic partnering relationship, which is the development, manufacture and distribution of the 8mm E-1 tape drive.


II. DEFINITIONS


A. "Product" shall mean the 8mm "E-1" tape drive, as described on the product description attached as Exhibit A and as will be more fully described in the Product Specification to be developed under this Agreement.


B. "AIWA" shall include any corporation, business organization or other legal entity which AIWA owns or controls, directly or indirectly, an interest of at least fifty percent (50%) of the voting stock.


C. "Ecrix" shall include any corporation, business organization or other legal entity which Ecrix owns or controls, directly or indirectly, an interest of at least fifty percent (50%) of the voting stock.


III. RESPONSIBILITIES OF AIWA AND ECRIX


AIWA and Ecrix shall be responsible for the following activities in connection with the development and manufacturing of the Product:


A. Developing the initial specifications for the Product (the "Product Specification"), which shall be subject to the mutual agreement of both parties and shall be attached to and become part of this agreement as Exhibit B. Modifications to the


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Product Specification may be made at any time with the mutual agreement of the parties, and shall be attached to and become part of this Agreement.


B. Developing the initial milestone schedule for completion of the tasks set forth in this Section III, Section IV and in Section V (the "Milestone Schedule"), which shall be subject to the mutual agreement of both parties, and shall be attached to and become part of this Agreement as Exhibit C. Modifications to the milestone schedule may be made at any time with the mutual agreement of the parties, and shall be attached to and become part of this Agreement.


IV. RESPONSIBILITIES OF ECRIX. Ecrix shall be responsible for the following activities in connection with the development and manufacturing of the Product in accordance with the Product Specification and the Milestone Schedule:


A. Electronics design;


B. Packaging specifications;


C. Media specifications and qualification;


D. ASIC specifications and qualification;


E. Functional test tools and initial test fixtures.


V. RESPONSIBILITIES OF AIWA


AIWA shall be responsible for the following activities in connection with the development and manufacturing of the Product in accordance with the Product Specification and the Milestone Schedule.


A. Mechanism design.


B. Mechanism specification and qualification.


C. Packaging design.


D. A reliable testing program for the mechanism design for the Product.


E. A reliable quality control program for the manufacture of the Product.


VI. COST TARGETS; PRICES


A. Both parties acknowledge the importance of achieving the lowest possible product cost and both parties agree to use their best efforts to meet and improve on the cost targets set forth below:


1. Bill of materials cost of direct materials components comprising the electronics assembly: [Confidential Information Redacted];


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2. Bill of materials cost of direct materials components comprising the drum and mechanism assembly and enclosure: [Confidential Information Redacted]; and


3. Reasonable mark-up on the price to Ecrix for Product units: estimated at [Confidential Information Redacted] of the total direct materials component cost (which mark-up includes an amount for profit, assembly, testing, overhead and amortization of development, tooling and other start-up costs).


B. The parties acknowledge that, after production has begun, improvements in design, production, procurement and assembly are expected to be identified and implemented. The parties agree to negotiate in good faith for both Product cost reductions and appropriate sharing of the benefits from all Product cost reductions.


C. The table below lists quantities for ES, SS, and KSS units and the responsibilities of each party in connection with those units.


Ecrix AIWA Electronics Mechanism Asmy & Test


ES 50 25 Ecrix AIWA Ecrix SS 70 50 Ecrix AIWA AIWA/Ecrix KSS 90 60 AIWA AIWA AIWA


AIWA and Ecrix will provide the ES and SS sub-assemblies and finished units in the quantities listed above to each other at no cost. Ecrix will pay AIWA two times the regular production Product prices determined in accordance with this Agreement for the quantity of KSS units listed above.


D. In the event of a high volume contract from a single OEM customer, the parties agree to negotiate an appropriate price reduction to the unit price to Ecrix as will be more fully described in the Manufacturing and Supply Agreement described below.


VII. DEVELOPMENT AND TOOLING COSTS; TAXES


A. Ecrix shall be responsible and pay for all its costs associated with the development activities described in IV above.


B. AIWA shall be responsible and pay for all costs associated with the development activities described in V above. AIWA shall amortize such costs in a manner that minimizes the impact of such costs on the Product sales price to Ecrix as set forth in VI.A.3 above.


C. Responsibility for the development of future products and related costs shall be as mutually agreed between the parties in keeping with the spirit of the parties' cooperative working relationship.


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D. All taxes imposed as a result of the existence of this Agreement, or the performance of the parties hereunder, shall be borne and paid by the party required to do so by applicable law.


VIII. PAYMENT TERMS


A. Ecrix shall pay AIWA for Product units in U.S. dollars. In the event the exchange rate of the U.S. Dollar against the Japanese Yen fluctuates so that the exchange rate at the time of a transaction between the parties differs by [Confidential Information Redacted] (under or above) from the exchange rate as of the day of the initial commercial shipment of Products, such difference shall be shared equally between the parties and the exchange rate for such transaction shall be the rate of the initial shipment plus or minus half of such difference. Both parties will use their best efforts to reduce Yen/Dollar exchange fluctuation risks, including shifting of manufacturing lo ...