Manufacturing And Related Services Agreement

2005

UNIVERSAL INTERNATIONAL MUSIC B.V.

and

UNIVERSAL MANUFACTURING & LOGISTICS GMBH

(to be renamed [EDC GERMANY GMBH])

MANUFACTURING AND RELATED SERVICES AGREEMENT*


*A portion of this document is confidential and has been omitted in accordance with Rule 24b-2 under the Securities and Exchange Act of 1934. Such omitted confidential material is marked herein as follows: [*****].


1.0 Overview : This Manufacturing and Related Services Agreement (" Agreement" ) is dated May 31, 2005 and is between Universal International Music, B.V., a company incorporated in The Netherlands with registered office at Gerrit van der Veenlaan 4, 3743 DN Baarn, The Netherlands and registered number 31018439 (" Customer" ) and Universal Manufacturing & Logistics GmbH, a company incorporated in Germany with registered office at Emil Berlinerstrasse 13, 30851 Langenhagen, Germany and registered number HRB52670 (as such party may be renamed, (" Supplier" )), referred to collectively as the parties (" Parties" ) and describes the terms and conditions concerning the purchase and supply of CDs, DVDs and related services in Europe. 2.0 Definitions : Definitions are set out in Schedule 2.0 of the Agreement. 3.0 Term :

3.1 Subject to the termination provisions of this Agreement, this Agreement shall remain in force from the Effective Date until May 31, 2015 (the " Term" ). 3.2 At least 180 days prior to the expiration of the Term senior management of the Parties shall meet in good faith to discuss an extension to the Term.

4.0 Purchase Obligation :

4.1 In each year of the Term and subject to the exclusions set forth in this Section 4.1, Customer shall purchase, and shall cause all members of the Universal Music Group to purchase, 100% of its and their respective Manufacturing Requirements from Supplier, excluding (i) any Manufacturing Requirements which such Universal Music Group member is permitted to purchase from a third party under Sections 6.8, 6.10 or 9.3 of this Agreement or Section 9.3 of the International Distribution Agreement; (ii) the quantities set forth on Schedule 4.1(ii) as long as and to the extent that they are contractually committed to the third parties set forth on Schedule 4.1(ii) under valid written agreements existing as of the Effective Date; (iii) the quantities to protect service levels in France and the United Kingdom as set forth in Schedule 4.1(iii); (iv) orders for Special Projects; (v) IMS Service orders; and (vi) any Manufacturing Requirements of a party who becomes a Universal Music Group member by acquisition after the Effective Date, but only to the extent and for the period that such Manufacturing Requirements are contractually committed to a third party as of the date of signing of the relevant acquisition agreement. It being understood by the Parties that if any of the agreements referenced on Schedule 4.1(ii) are terminated, the number of CDs excluded from the Manufacturing Requirements under the provisions of Section 4.1(ii) (" Excluded CDs" ) shall be reduced by the Manufacturing Requirements applicable to such agreement.

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4.2 Customer will provide Supplier with purchase orders and input materials in accordance with the requirements outlined in Article 6.0. 4.3 Intentionally deleted. 4.4 Subject to the limitations set forth in Section 4.1, Customer agrees that it will not permit any of the Manufacturing Requirements of any member of the Universal Music Group to be exercised by, or transferred to another entity outside of the Universal Music Group without also assigning, in whole or in part, this Agreement so that any transferred Manufacturing Requirements continue to be subject to this Agreement; provided however, that if Customer sells a Label to an entity outside of the Universal Music Group, Customer' s sole obligation shall be to ensure that Supplier has access to the Manufacturing Requirements of such Label after such sale for the remaining term of this Agreement as Incremental Volume under provisions parallel to those in Section 10.6. Nothing contained in this Section is intended to limit Vivendi Universal S.A. or any of its operations that are not part of or are acquired separately from the Universal Music Group or, (subject to the limitations in Section 18), to limit the sale of the equity of, or of all or substantially all of the assets of a Universal Music Group member; provided such operations or sale are subject to the assignment obligations described in this Section 4.4. 4.5 Notwithstanding anything contained in this Agreement to the contrary and except as expressly provided in Sections 4.1 and 4.4, Customer shall have no obligation to conduct its business in a manner that maximizes its demand for Manufacturing Services to be requested from Supplier or minimizes the risks that such Manufacturing Services shall not be required by Customer, including, without limitation, any obligation to extend or renew any agreements with third parties. Supplier acknowledges that there are no minimum requirements associated with this Agreement. 4.6 Customer shall purchase, and shall cause all members of the Universal Music Group to purchase, [*****]% of its or their respective New Formats Manufacturing Requirements from Supplier, to the extent that Supplier supplies such services. Supplier shall use commercially reasonable endeavors to supply all such services to Customer. Pricing for New Formats Manufacturing Services will be determined pursuant to Sections 10.11 and 10.12. Customer and Supplier shall agree in good faith on all other relevant terms (e.g. specifications, turnaround times) for such New Formats Manufacturing Requirements, as set forth in Section 10.11.

5.0 Supplier Supply Obligations :

5.1 Supplier and Customer will meet not less frequently than quarterly for planning purposes and to review, implement as necessary and approve matters as required under this Agreement, including, [*****]. Once each [*****], Supplier will discuss its Technical Plan with Customer.

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5.2 Supplier will supply the Manufacturing Services set out in Schedule 10.1 in accordance with the requirements outlined in Article 6.0. These Manufacturing Services will at a minimum meet the quality specifications in use by Supplier immediately prior to the Effective Date, as outlined in Article 8.0. In the event that Customer requests that Supplier supply any Manufacturing Services which are not set forth on Schedule 10.1 the Parties shall use the procedures set forth in Sections 10.5, 10.11, 10.12 and 10.13 to resolve the pricing of such requests. 5.3 Supplier may not refuse a Customer request to provide a Manufacturing Service not set forth on Schedule 10.1 provided (i) Customer and Supplier have followed the procedures described in Sections 10.5, 10.11, 10.12 and 10.13 and (ii) the requested Manufacturing Service is normally and customarily provided by manufacturers in businesses substantially equivalent to Supplier' s business at the time of Customer' s request. 5.4 Supplier shall have the right to subcontract up to [*****]% of any particular Manufacturing Services in each [*****] (with no rollover of any unused subcontracting capacity) provided to Customer hereunder to the third-party manufacturers and service providers listed on Schedule 5.4 hereto, provided, however, if the remaining [*****]% of the Manufacturing Services requested by Customer or any member of the Universal Music Group exceeds 100% of Supplier' s capacity to provide such Manufacturing Services, then Supplier may subcontract in excess of [*****]% of the Manufacturing Services provided to Customer so long as the percentage of subcontracted Manufacturing Services provided to Customer is no more than the percentage of subcontracted services provided to any other customer of similar services. Notwithstanding the foregoing, Supplier may subcontract a greater percentage of Manufacturing Services for Customer than it does for (a) other customers with respect to Spot Market Orders, or (b) other customers who purchase less than [*****]%, on an [*****] basis, of Universal Music Group' s Manufacturing Requirements. Supplier may propose to Customer an amended Schedule 5.4, adding or deleting subcontractors at any time, and from time to time, provided that such amendment shall not be effective unless and until Customer approves such amendment, which approval shall not be unreasonably withheld or delayed. Customer shall have the right to add or delete previously approved subcontractors at any time and from time to time provided that, in the case of deletions, (i) Customer' s deletion is not unreasonable; (ii) Customer consults with Supplier prior to the deletion; (iii) Customer provides Supplier with at least [*****] days prior written notice of the deletion; (iv) Customer permits Supplier, notwithstanding such deletion, to continue to use such subcontractor to fulfill any volume commitments to such subcontractor existing as of the date of receipt of such notice of deletion, provided however, that such volume commitments to subcontractors cannot be longer than [*****] months without Customer' s prior approval; and (v) after the deletion, a commercially reasonable number of approved subcontractors, and in any event no less than the lower of (A) the number of subcontractors qualified to perform the Manufacturing Services subcontracted, or (B) [*****], remain listed on Schedule 5.4 and any amendments thereto.

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5.4.1 Any order subcontracted by Supplier shall remain subject to the terms of this Agreement. Supplier shall inform Customer of any order subcontracted within two Business Days of subcontracting any order. 5.4.2 All Supplier' s agreements with subcontractors performing services for Customer will provide that Customer will have the right to inspect such subcontractor' s facilities upon reasonable advance written notice to Supplier, during normal subcontractor hours of operation, without interference to subcontractor' s operations, and subject to any reasonable access rules or confidentiality obligations imposed by the subcontractor. 5.4.3 Notwithstanding any of the foregoing restrictions in this Section 5.4, Supplier may outsource [*****]% of any Manufacturing Services (i) involving hand packaging, refurbishing and other non-automated services; or (ii) constituting Excess Orders.

5.5 Supplier shall maintain and employ plant security systems and procedures that are no less effective in preventing theft, pirating, unauthorized exhibition, copying or duplication of any of Customer' s proprietary audio and/or audio visual product or other material delivered by Customer to Supplier or its designated subcontractors than the security systems and procedures disclosed to Supplier in writing prior to the Effective Date, to the extent such systems and procedures were Prevailing Practices at the existing Supplier manufacturing facilities as of the Effective Date. 5.6 In addition to its obligations under Section 27, Supplier shall comply with all applicable legislation and formal recommendations from the IFPI which are generally implemented by IFPI members in each case in respect of the regulation of piracy (including application of SID codes and/or similar future systems) provided that Supplier shall have a reasonable time to comply with any such formal recommendations from the IFPI and to the extent such systems and procedures were Prevailing Practices at the existing Supplier manufacturing facilities as of the Effective Date. 5.7 Supplier confirms that it is aware of the BIEM-IFPI Memorandum of Understanding of August 1996 on the enforcement of copyrights and neighboring rights and the IFPI Good Business Practice Guidelines and confirms that it will, , and throughout the Term, abide by such memorandum and guidelines as if it were a member of the IFPI and agrees that it will not knowingly manufacture at its facilities sound or other recordings which have not been authorized by the lawful owners of rights in such recordings. Supplier also recognizes that to the extent consistent with Prevailing Practices, it will comply with the SID Code and the ISO Code. 5.8 Supplier shall at all times during the Term have a fulltime dedicated account manager with a full time deputy, who are only responsible for the daily liaison with Customer and who shall be available to Customer daily from 8:00 a.m. to 5:00 p.m. (Hanover time).

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5.9 At all times during the Term, and to the extent consistent with Prevailing Practices, Supplier will maintain a minimum installed daily capacity of the lesser of (a) the Minimum Installed Daily Capacity of CDs and (b) Minimum Installed Daily Capacity of CDs multiplied by a fraction, [*****]. 5.10 At all times during the Term, and to the extent consistent with Prevailing Practices, Supplier will maintain a minimum installed daily capacity of the lesser of (a) Minimum Installed Daily Capacity of DVDs and (b) Minimum Installed Daily Capacity of DVDs multiplied by a fraction, [*****]. 5.11 The Parties hereto acknowledge and agree that, notwithstanding any other provision of this Agreement, the standards to which Supplier will be held in connection with the Manufacturing Services to be provided by Supplier to Customer hereunder, including without limitation, quality, turnaround, shipment, security and reporting standards, shall as of the Effective Date be the standards which Supplier was generally meeting in the twelve-month period prior to the Effective Date; provided, however, that; (a) notwithstanding the foregoing, Supplier shall meet its obligation to manufacture and ship the aggregate number of Optical Discs in all Workable Orders in each Work Week, so long as such amount ordered does not exceed the Maximum Weekly Orders throughout the term of this Agreement, and the provisions of section 6.11 shall apply, and (b) prior to adopting any standards pursuant this Section 5.11 or Section 5.16 that vary from those set forth in this Agreement, Supplier shall first provide written notice to Customer of such intention with a reasonably detailed description of the standards Supplier intends to adopt and the basis for doing so (a " Section 5.11 Notice" ); provided, further, that the Parties further acknowledge and agree that notwithstanding the foregoing, after the [*****] months of the Term, Supplier will (i) meet the standards as set forth herein and established hereunder, and (ii) subject to Section 5.13, further meet industry standards as required by Section 5.12. 5.12 The Parties hereto acknowledge and agree that the standards applicable to the Manufacturing Services to be provided by Supplier to Customer hereunder, including without limitation, quality, the nature of services, security standards, IT systems and support, will change over the Term. If the standards applicable to similar manufacturing services provided by Supplier to any other customer are higher than those applicable to Customer, those higher standards shall also be applicable to the services provided by Supplier to Customer. In addition, Supplier shall, to the extent the industry standards referenced herein or the standards which are generally required by Major Music Company buyers of services such as those provided by Supplier hereunder, increase or improve those standards in effect on the Effective Date, upgrade its operations and services to incorporate such increased or improved standards for the benefit of Customer. Notwithstanding the foregoing, Supplier shall not be required as a result of this Section 5.12 to be the first or an early adopter of new standards or technology, but is required to implement such new standards and technology as and when they become generally used and available.

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5.13 [*****] 5.14 [*****] 5.15 [*****] 5.16 Notwithstanding the provisions of Sections 5.5, 5.6, 5.7, 5.9, 5.10, 6.3.2, 6.5 and 7.5, on and after the first anniversary of the Effective Date, the standards set forth in each such section shall apply without reference to Prevailing Practices unless Supplier has previously challenged and reasonably proven, in the manner set forth below, that Prevailing Practices were inconsistent with the standards otherwise set forth in such section (such standards, collectively, the " Specified Standards" ). [*****]

6.0 Forecasts, Orders, Production and Delivery :

6.1 Customer will provide each [*****] a forecast for Optical Discs that will cover a period of time of no less than [*****] months. The first four weeks of each forecast will be divided into Work Week requirements (with each Work Week forecast being a " Work Week Forecast" ), with the remainder of the forecast divided [*****]. No Customer forecast shall be binding as an Order, but shall represent Customer' s good faith estimate, at the time provided, of its anticipated requirements to meet expected demand. Customer shall provide Supplier at least once a [*****] with Customer' s own internal forecasts of manufacturing requirements made for Customer' s internal budgeting purposes. 6.2 Customer shall place purchase orders for Manufacturing Services through Supplier' s electronic order system or by fax (each, an " Order" ); provided, however, that Customer shall use commercially reasonable endeavors to transition all orders to Supplier' s electronic order system as soon as possible. 6.3 Customer shall provide Supplier with all necessary input materials (" Input Materials" ) for each Order, including as applicable product bills of material, production masters (or components to create a master), packaging components (or artwork to produce same), metadata and disc label film, and (b) be responsible for obtaining any necessary rights, clearances or approvals under IRMA or applicable law for Supplier to manufacture the Optical Disc on Customer' s behalf. Customer shall use commercially reasonable endeavors to provide all Input Materials in digital/electronic format ready for component manufacturing. Supplier shall not charge Customer for any initiation costs (e.g. mastering) unless material rework is required and Customer approves such rework costs in advance. Supplier will for each new master conduct a bit to bit control and evaluation, confirming the accuracy thereof.

6.3.1 Supplier will inspect all Input Materials for defects and identify items which do not meet Customer specification, by the latest [*****] (Hanover time) the day following the date of receipt and promptly notify Customer of any such defects or specification failures identified by Supplier. In

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relation to Orders designated by Customer as priority items and received by Supplier [*****]. Hanover time, Supplier shall undertake such inspection on the day of receipt of relevant Input Materials. 6.3.2 Supplier will check on an Order by Order basis whether the received printed paper parts correspond to the Order requirement for paper parts and are of the quantity, type and quality ordered and shall make such paper parts available for processing[*****] of receipt but shall, at Customer' s request prioritize the checking and availability of paper parts for specific priority products in accordance with Prevailing Practices. 6.3.3 For a limited number of artists [*****] Supplier will supply test pressings of New Release [*****] to any Universal Music Group member office in the Territory and will only commence the commercial manufacture of the relevant CDs after receipt of the appropriate written approvals of the test pressing and packaging. Customer will use reasonable endeavors to minimize the number of instances in which CD test pressings are required by its artists. 6.3.4 Supplier will supply test pressings of DVDs replicated by Supplier [*****] and will only commence the commercial manufacture of the relevant DVDs after receipt of the appropriate approvals of the test pressing and packaging. Customer will use reasonable endeavors to minimize the number of instances in which DVD test pressings are required.

6.4 Orders will be considered workable (" Workable Orders" ) upon:

(a) Receipt by Supplier of Customer' s Order [*****] on a Working Day (if received after such time, the Order will be deemed to have been received the following Working Day), provided that such Order, when assessed collectively with Customer' s other Orders, does not exceed the Maximum Weekly Disc Orders unless otherwise agreed to in writing by Supplier; (b) Receipt and approval, if required, from Customer, of all of the Input Materials for the ordered Manufacturing Services. Supplier will use reasonable endeavors to work with Customer to commence manufacture before all Input Materials are available in order to reduce lead times for specific Orders, if requested by Customer; and (c) To the extent applicable, receipt of Customer' s written approval of any test pressings or packaging provided to Customer under the provisions of Sections 6.3.3 or 6.3.4.

6.5 Workable Orders for Optical Discs will be manufactured in the following lead times to the extent consistent with Prevailing Practices:

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6.5.1 One Working Day : Maximum of [*****] selections, designated by Customer, totaling no more than [*****] CDs and [*****] DVDs, which can be packaged automatically with in-line stickering, shrink-wrapping and inserts, etc. and excluding any items requiring any hand packing. 6.5.2 Two Working Days : Maximum of [*****] CDs and [*****] DVDs, designated by Customer and additional to the Optical Discs in 6.5.1, which can be packaged automatically with in-line stickering, shrink-wrapping and inserts, etc. and excluding any items requiring any hand packing. 6.5.3 Three Working Days : Products that require hand packing other than those considered items subject to Sections 6.5.4 or 6.5.5 below. 6.5.4 Four Working Days : Products not otherwise identified in Sections 6.5.1, 6.5.2, 6.5.3 and 6.5.5. 6.5.5 Six Working Days : Products identified as " New Releases" in the Customer system. 6.5.6 Customer may designate any Workable Order for a 6.5.3 or 6.5.4 item not requiring hand packing to be manufactured within the lead times described in 6.5.1 or 6.5.2 so long as the total orders in 6.5.1 or 6.5.2 do not exceed the maximum limit described therein.

Supplier will use commercially reasonable endeavors to provide faster service when requested. 6.6 Except as set forth in Section 7.2, Supplier shall deliver the Optical Discs into the RSC as part of the pricing herein, in which case Product shall only be considered delivered once Booked-On by the RSC and made available for picking and dispatch. The booking-on will be made by Supplier prior to [*****], Hanover time, on the designated due date. By way of example, for purposes of clarity, a Workable Order received at Supplier' s Hanover plant prior to [*****] local time on a Working Day, if designated by Customer a one-day lead-time must be booked-on to RSC.[*****] (Hanover time) the next Working Day. 6.7 An Order will be deemed fulfilled if the number of Optical Discs shipped are within the variances set forth in Schedule 6.7, provided (i) where either (A) Supplier has agreed in writing to ship exact quantities for certain customer shipments or for certain Optical Discs or (B) where exact quantities are specified by Customer for certain customer shipments or for certain Optical Discs as a result of a condition imposed by a customer, and Supplier has been given timely notice of such requirement, Supplier must ship the exact quantities specified, and (ii) invoices must be for the actual number of Optical Discs shipped. [*****]

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6.8 Without limitation of Customer' s other remedies hereunder, if Supplier is unable or otherwise fails to fulfill any Workable Order in accordance with this Agreement within [*****] days of the date required under this Agreement, then Customer may secure the services of a third party or parties to fulfill the unfilled portion of such Workable Order(s). 6.9 Customer will not issue Orders for less than [*****] Optical Discs for any New Release, or less than [*****] Optical Discs for any reorders, unless (a) an existing (as of the Effective Date) contractual requirement between Customer and its third party, non-Universal Music Group member customer requires otherwise, (b) the Parties have agreed to lesser limits with respect to particular Incremental Volume, or (c) the Order is for a non-commercial Optical Disc such as promo discs, DJ copies and copies for Universal Music Group internal use, in which case no minimum order size applies. 6.10 To the extent that any [*****] or more Customer Orders would exceed the Maximum Weekly Disc Orders for such Work Week (to the extent any such Order exceeds such quantities, an " Excess Order" ), the Supplier shall, at its option, either accept such Excess Order under the terms of this Agreement or offer to accept such Excess Order with extended turnaround times, and shall provide Customer with notice of its offer (along with the extended turnaround times required to fulfill such Excess Order) within hours of receipt of the Excess Order; provided, however, that if Supplier does not accept such Excess Order under the terms of this Agreement or Customer does not accept Supplier' s offer to fulfill an Excess Order with extended turnaround times, Customer shall be entitled to fulfill the Excess Order portion of such Order with any third-party supplier set forth on Schedule 5.4. In the event that Supplier accepts any such Excess Order under the provisions of this Section 6.10 (whether under the normal turnaround times or otherwise), Supplier shall have, notwithstanding any restrictions in Section 5.4, the right to subcontract such Excess Orders. 6.11 In the event Supplier (a) fails to manufacture and Tender the aggregate number of Optical Discs in all Workable Orders due in a given Work Week, so long as such amount ordered does not exceed the Maximum Weekly Disc Orders or (b) fails to manufacture and Tender any Workable Order within the lead times described in 6.5 and 6.6 (any of such orders in (a) or (b) hereafter shall be referred to collectively as " Late Orders" ), Customer shall have the right to debit its payables balance with Supplier by the Late Order Fee for any such Late Order, which right shall be limited to one Late Order Fee for each Late Order. Except with respect to the partial loss of exclusivity provided for in Section 9.3.1 and the rights provided for in Sections 9.3.2, 9.3.3, 9.3.4, 9.3.5 and 9.3.6 the Late Order Fee shall be Customer' s sole remedy, and Supplier' s sole liability, for any Late Orders. Supplier shall have the right to dispute any Late Order Fee debit, and if such a debit is subsequently reversed it shall bear interest as provided in Section 10.2.1. 6.12 No additional or conflicting terms and conditions on any purchase orders or other documentation provided by Customer or any other Universal Music Group

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member incidental to any Orders hereunder shall form any part of any agreement between the Parties, including this Agreement, except for purchase order quantities and descriptions, provided such items are consistent with the requirements of this Agreement. 6.13 On Customer' s request, Supplier shall use commercially reasonable endeavors to increase its staffing levels or cause its staff, to the extent permitted by applicable law, to work on non-Working Days or shall secure capacity at third-party facilities to relieve restrictions on capacity affecting Supplier' s supply of Manufacturing Services. 6.14 Customer shall retain, at all times, the right to prioritize any item, e.g. new releases, singles, TV, campaign and chart Optical Discs above other categories of Optical Discs. 6.15 For [*****]% of the daily capacity allocated to Customer in accordance with Customer' s planned demand, Customer can prioritize the Optical Discs for which it wants " a next day" delivery (meaning available for shipment by [*****] Hanover time the following Working Day). Should instructions under this provision conflict with the time limits set out in Section 6.5, Supplier shall notify Customer and Customer shall designate the Optical Discs that have priority. 6.16 If Supplier cannot meet the turnaround times or the quality requirements set out in this Agreement, Supplier shall inform Customer promptly on becoming so aware, whereupon Customer shall have the right to prioritize different items of Optical Discs to be manufactured by Supplier in addition to other remedies available to it. 6.17 [*****]

7.0 Specific Related Services : Supplier will provide the services to support the Manufacturing Services that are set forth in this Article 7.0 (the " Specific Related Services" ). Except as expressly provided herein, the Specific Related Services will be performed by Supplier at no additional charge. Specific Related Services shall be substantially similar to the current prevailing Supplier practices immediately prior to the Effective Date, and shall include:

7.1 Supplier will evaluate Input Materials in accordance with Section 6.3 on an Order by Order basis for defects and identify items out of Customer specification, within a timely manner, as agreed on by the Parties. Unless otherwise specified, this will be performed at no additional cost to Customer. 7.2 At Customer' s request, Supplier will process for shipment Special Project or ...