Manufacturing & Supply Agreement

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


CONFIDENTIAL


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Manufacturing and Supply Agreement
Between AIWA Co., Ltd. and Ecrix Corporation --------------------------------------------------------------------------------


This Agreement is made by and between AIWA Co., Ltd. ("AIWA"), a
Japanese corporation and Ecrix Corporation ("Ecrix"), a Delaware
corporation. This Agreement is entered into as of this 31st day of
March, 1999.


BACKGROUND


AIWA and Ecrix desire to create and perpetuate a mutually beneficial,
long-term, cooperative strategic relationship for the development,
manufacture, and distribution of computer products utilizing each
party's expertise and capability.


AIWA has development and manufacturing expertise in low cost, helical
scan/DDS tape drives and autoloaders, and significant procurement and
manufacturing resources.


Ecrix has expertise in the design of advanced, proprietary variable
speed technology and in low cost helical scan tape drives. specifically
in the areas of system architecture and data formats, as well as
significant marketing and sales expertise in low cost tape drives.


AIWA and Ecrix have been cooperating in the development of, and are in
process of completing the design of a new helical scan tape drive for
application as a disk backup device attached to workstations and
network file servers. This work has proceeded according to the terms of
a Joint Development Agreement entered into by AIWA and Ecrix in
November and December of 1997.


Ecrix proposed a program to AIWA for sales of more than [Confidential
Information Redacted] units. Both companies mutually understand the
success of this program depends on close cooperation between the
companies and continued product improvement and product cost
reductions.


Ecrix wishes to contract with AIWA to manufacture and sell to Ecrix
such product, and AIWA is willing to manufacture and sell such product
to Ecrix. AIWA and Ecrix also wish to make agreements defining the
rights of each party to market and sell such product to other parties.


The initial term of this Agreement is two (2) years from the date of
initial delivery of the Products as stated in Section 27.1.


AGREEMENT


In consideration of the mutual covenants and promises in this
Agreement, AIWA and Ecrix agree as follows:


1 Roles


1.1 AIWA


AIWA shall have those responsibilities as more particularly set forth
in the Joint Development Agreement entered into between the parties as
of the 4th day of December, 1997.


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1.2 ECRIX


Ecrix shall have those responsibilities as more particularly set forth
in the Joint Development Agreement entered into between the parties as
of the 4th day of December, 1997.


1.3 COOPERATIVE ROLES


AIWA and Ecrix intend that sound cooperation will result from the
contributions of each party and this division of responsibilities. Both
parties understand, however, that full cooperation is necessary to
fully develop this business and achieve the potential opportunities in
this new market.


1.4 FUTURE JOINT DEVELOPMENT


The parties agree to enter into good faith negotiations to reach
agreement for the joint development of the next generation of the
Products which are the subject of this Manufacturing and Supply
Agreement.


2 DEFINITIONS


2.1 PRODUCTS


Those products listed in Exhibit A to this Agreement and as defined by
their associated Product Specifications.


2.2 COMPONENTS


Specially designed parts by Ecrix or AIWA that are used in the
manufacture or repair of the Products and whose use is limited by this
Agreement.


2.3 SPARE PARTS


All parts for the Products as set forth on the Spare Parts List
attached as Exhibit B.


2.4 UNIQUE CUSTOMER CONFIGURATIONS


Products based upon the Product Specification but incorporating changes
that may include electrical, hardware interface, firmware and/or form
factor made pursuant to the terms of this Agreement. The specifications
of such products will be mutually confirmed in writing on an as-needed
basis and each product will utilize a unique designator (i.e., part
number).


2.5 ENGINEERING CHANGE ORDER- DESIGN


Any electrical or mechanical changes to the Products, sub-assemblies,
or component parts proposed by Ecrix, AIWA, or AIWA's suppliers that
affect form, fit or functionality, reliability, performance, quality,
cost, or which result in a departure from the agreed upon Product
Specifications.


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2.6 ENGINEERING CHANGE ORDER- MANUFACTURING PROCESS


Any changes to the manufacturing process, proposed by Ecrix, AIWA, or
AIWA's suppliers that affect form, fit or functionality, reliability,
performance, quality, cost, or which result in a departure from the
agreed upon Product Specifications.


2.7 PRODUCT SPECIFICATION


The specifications for the Product provided by Ecrix to AIWA detailing
the requirements for the manufacture and test of each Product. Such
specifications will be mutually confirmed between Ecrix and AIWA in
advance.


2.8 PURCHASE ORDER


The written or electronically transmitted order from Ecrix to AIWA for
the Products covered by this Agreement, stating the product part/model
number, quantity, price, delivery date, special packaging or other
requirements and any other information required to enable the delivery
of the Products.


2.9 FIRMWARE CODE


The internal micro-code that controls the operation of the tape drive.


2.10 INTERFACE TYPE


Defines the SCSI standard. For example, narrow single ended, narrow
differential, wide differential, etc.


2.11 ACCEPTABLE QUALITY LEVEL


Will be a criteria used by Ecrix to determine whether AIWA is
satisfactorily meeting its obligations under this agreement. The
baseline to make such a decision on whether something is accepted or
rejected will be Ecrix's Product Specification and the test tools and
matrix defined by the two companies. The acceptable quality levels are
defined in Exhibit E. The parties recognize that it will be necessary
to implement a program to meet the quality levels as set forth in
Exhibit E based on anticipated OEM customer quality standards.


2.12 NO TROUBLE FOUND


Product initially rejected by Ecrix at incoming test or inspection or
rejected at a customer site, which is subsequently tested by either
AIWA or Ecrix and found to contain no defects.


2.13 EXCLUSIVE


Sole rights excluding all other parties.


2.14 DEVELOPMENT COSTS


All expenditures associated with Product Development until the
completion of drawings and associated documents defining the
requirements and design of the Product up to the stage that such
Product can be put into pre-production manufacturing by AIWA.


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2.15 MANUFACTURING EXPENDITURES


Includes all costs of the design, development and construction of the
manufacturing hardware for the Product, including tooling design,
equipment acquisition, and on-going maintenance.


2.16 APPLICATION PRODUCT


A product which may be developed for a certain application and which
utilizes the Tape Format and incorporates an additional feature and/or
hardware specifically designed for that application. Such product
cannot compete in the same market segment as is contemplated with this
joint project, which primary function is in the classical role of a
tape device in the computer data storage hierarchy. In addition, the
value of such Application Product should be in the additional feature
and/or hardware that has been added, and not the basic functionality of
a back up device.


2.17 TAPE FORMAT


A certain tape streamer data storage format which Ecrix has proposed
based upon 8mm tape storage products, including a Physical
Specifications and a Logical Specifications for the 8mm data storage
drive and the 8mm data cartridge media (the "Format"). If a logo type
for the Format will be made, such logo type will be deemed as part of
Format.


2.18 SALES TERRITORY


Is defined as where the end-user installs the Product or where the
Product is consumed.


2.19 AIWA


"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.


2.20 ECRIX


"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.


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3 MANUFACTURING RIGHTS


3.1 AIWA MANUFACTURING RIGHTS


AIWA shall have the Exclusive worldwide rights to manufacture the
Products during the term of this Agreement, subject to the provisions
listed in Section 3.3 and 3.4. AIWA shall not have the right to grant
to other parties the rights to manufacture or have manufactured the
Product without receipt of written consent from Ecrix to any such
arrangements.


3.2 MANUFACTURING DECISIONS


AIWA will have complete responsibility and control over the development
of manufacturing processes, acquisition and maintenance of production
equipment and the construction and location of facilities. All costs of
financing the development and construction of the manufacturing
facilities will be borne by AIWA.


3.3 ECRIX MANUFACTURING


(a) AIWA and Ecrix understand that the assurance of continued
production of the Product in a high quality, low-cost manner is
critical to the business success of Ecrix, and that Ecrix is relying
on AIWA as the sole source of the Product. Both parties recognize that
laws existing in certain countries, unforeseen political or economic
events, or contractual conditions contained in OEM agreements (which
Ecrix will use its best efforts to avoid) may arise which would either
limit or prevent AIWA from manufacturing the Products in Japan or in
other countries or from satisfying Ecrix's purchase requirements. In
the event that any legal, political, economic, or contractual
restrictions or provisions; any event described in Section 31.7; or a
material breach of this Agreement by AIWA as determined by arbitration
pursuant to Section 30, prevent or limit the supply of products from
AIWA to Ecrix or its customers, Ecrix and AIWA will immediately
cooperate to find a method otherwise to allow AIWA to continue
supplying the Products for Ecrix. In the event that no mutually
acceptable and feasible method is found, Ecrix shall have the right to
manufacture the Products and utilize the manufacturing processes and
know-how developed by AIWA but only to the extent necessary to
manufacture Products that AIWA is not otherwise able to supply taking
into account the factors detailed above. In such event, subject to
Japanese governmental approval (if applicable), AIWA shall provide
Ecrix with Technical Information of AIWA in a way to be mutually
agreed upon, including appropriate compensation which may include a
royalty, to establish manufacturing by Ecrix or third parties selected
by Ecrix to manufacture the Products for Ecrix. Should Ecrix desire to
acquire any equipment of AIWA used in the manufacture of any Products
pursuant to this Section 3.3, the terms of such acquisition shall be
as mutually agreed.


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(b) AIWA shall have the unrestricted rights to sell Application
Products world-wide, however for the initial two (2) years AIWA will
pay Ecrix compensation in an amount and on terms to be mutually agreed
upon for sales of Application Products in Ecrix's sales Territories as
described in the agreement titled "Aiwa's Response" dated 9 December
1998.


(c) AIWA shall not manufacture and sell any product which utilizes the
Format and directly competes in Ecrix's Sales Territories (referred to
in Section 4.1) with the Products supplied to Ecrix pursuant to this
Agreement.


3.4 THIRD PARTY MANUFACTURING


AIWA recognizes that part of Ecrix's sales strategy is to establish
purchase agreements with customers who are original equipment
manufacturers ("OEM's") who will incorporate the Products into their
products and systems. Certain OEM's may require as part of such
purchase agreements assurances of the supply of such Products and the
right to manufacture the Products under specified circumstances (which
Ecrix will use its best efforts to avoid). Subject to AIWA's prior
written consent and to Japanese governmental approval (if applicable),
Ecrix shall have the right and authority to grant OEM's the
nontransferable right to manufacture such Products only for the
purpose of incorporating them into the OEM's own products. systems, or
subsystems, to the limited extent which Ecrix considers it necessary
to obtain the purchase agreement with the OEM. OEM's who are granted
such rights may obtain drawings and schematics of the Products
purchased by the OEM for its manufacture thereof. OEM's who are
granted rights will not be entitled to receive Technical Information
of AIWA without AIWA's written consent. AIWA and Ecrix will mutually
agree on the royalties to be paid by the OEM and the sharing of
royalties between Ecrix and AIWA, if such limited manufacturing rights
are granted to the OEM.


4 MARKETING AND SALES RIGHTS


This section has been superseded by the agreements titled "Aiwa's
Response" dated 9 December 1998 and "Clarification of Aiwa's Response"
dated 24 December 1998.


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4.1 AIWA AND ECRIX RIGHTS


(a) The parties respective Sales Territories shall be as follows:


Ecrix: The Americas, Europe, Australia, and Israel.


AIWA: Japan, Asia, Middle East, and South Africa


Each party will evaluate and determine the distribution methods, the
organization to be established, the customers to whom the Products will
be sold and the strategy to be utilized. Each party shall further be
responsible for planning and reviewing marketing opportunities and is
responsible for all costs incurred in the sale and marketing of the
Product within their defined territories.


(b) In the event one party introduces a customer to the other party who
sells Products in the other party's Sales Territory, the other party
shall pay the introducing party a sales commission and other sales
costs in consideration for such introduction in such amount and terms
to be mutually agreed upon provided that the other party will be
entitled to retain any revenue for such sales in its Sales Territory.
Furthermore, the other party has ownership of that customer and is
responsible for providing service and support.


(c) In the event a party (the "First Party") indirectly sells or
otherwise distributes Products in the Sales Territory of the other
party (the "Second Party") as a result of sales to customers who
ultimately re-sell or distribute the Products into the Second Party's
Sales Territory, the First party shall pay to the Second Party
compensation on such terms and in such amount as shall be agreed upon
by the parties. Further, the parties shall meet and determine the most
appropriate method of resolving the issue of the sale and distribution
of such Products into the Second Party's Sales Territory having regard
to the Second Party's marketing and distribution strategies for that
particular Territory.


(d) In the spirit of item (c) above, both parties shall have
unrestricted rights to sell Application Products worldwide upon a sixty
(60) day prior notice to the other party. Each party will pay the other
party compensation in an amount and on terms to be mutually agreed upon
(within the 60 day notice period) for sales of Application Products
into the other party's Sales Territories.


(e) For all Product requirements of SONY America and/or AIWA America,
Ecrix shall be the exclusive supplier of such Products. Prices for
Products will be in accordance with Ecrix's standard pricing policy.


(f) As each party signs an agreement with an OEM customer, the two
parties shall review the amount of sales that will go into the other
party's Sales Territories and agree in good faith to negotiate
reasonable compensation payable in accordance with paragraph (c) and/or
(d) above for these lost revenues and the costs associated to service
this OEM customer.


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5 EXPENSES


5.1 DEVELOPMENT COSTS


(a) Ecrix shall be responsible and pay for all its costs associated
with the development activities described in the Joint Development
Agreement dated December 4, 1997.


(b) AIWA shall be responsible and pay for all its costs associated with
the development activities described in the Joint Development Agreement
dated December 4, 1997. AIWA shall amortize such costs in a manner that
minimizes the impact of such costs on the Product sales price to Ecrix
and stays within the cost targets established within the Joint
Development Agreement.


5.2 MANUFACTURING EXPENDITURES


(a) AIWA agrees to pay for all Manufacturing Expenditures.


(b) The parties agree that AIWA will, for the purposes of this
Agreement, capitalize and amortize all of the Manufacturing
Expenditures incurred under this Section. AIWA shall amortize such
costs in a manner that minimizes the impact of such costs on the
Product sales price to Ecrix and stays within the cost targets
established within the Joint Development Agreement. It is understood
between the parties that all manufacturing processes of AIWA, equipment
and facilities, excluding test software programs supplied by Ecrix
without charge, for the Products, shall continue to be property of AIWA
and that they may be used for any other purposes, subject to Section 29
hereof.


5.3 TECHNOLOGY EXCHANGE COSTS


AIWA and Ecrix will be exchanging engineering personnel as part of the
initial and ongoing technology exchange described in Section 22. Each
party will be solely responsible for the costs and expenses (including
but not limited to airfares, accommodation transport and incidental
expenses) of its own engineering personnel whilst engaged in such
visits at the other's facilities. If such costs become burdensome for
one of the parties or the visit is to resolve a technical or quality
deficiency, both companies agree to negotiate in good faith a
satisfactory cost sharing settlement.


6 OEM REQUIREMENTS


(a) AIWA understands that after the Products are introduced into the
marketplace by Ecrix any subsequent changes may affect the design of
the system into which an OEM has incorporated such Product. Requests
for enhancements and modifications to the Product design will be
submitted from time to time by either party. Changes to Product design
and the manufacturing process shall be dealt with in accordance with
the provisions of Section 20.


(b) Without limiting the above, both parties shall provide each other
with such cooperation and assistance as may be necessary in order to
conclude agreements with OEM customers. This may involve modifications
to firmware design by Ecrix and the modification of the Product's
hardware by AIWA. The costs and expenses associated with the
implementation of such modifications shall be principally borne by the
party who concludes an agreement with the OEM customer and in such
amount as shall be agreed upon by the parties in the spirit of this
paragraph.


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7 PURCHASE ORDERS


7.1 ORDERS


(a) The purchase and sale of Products and Spare Parts shall be made
against specific Purchase Orders placed by Ecrix to AIWA and accepted
by AIWA during the term of this Agreement in accordance with the
provisions hereof, provided that such acceptance shall not be
unreasonably withheld. Purchase Orders may be placed by fax, or e-mail.
All Purchase Orders shall be deemed to incorporate by reference the
terms and conditions of this Agreement which shall supersede all terms
and conditions contained in Ecrix's Order or in AIWA's acknowledgement.
Any Purchase Order issued for any firm commitment of purchase of
Products hereunder shall be non-cancelable and may not be modified in
any respect once accepted by AIWA, subject to the provisions of
Sections 9, 13.3 or 31.7.


(b) Purchase Orders shall be placed no later than the fifth (5th) day
of the month that is [Confidential Information Redacted] prior to the
month in which shipment is requested (example: for shipment in October
the relevant P/O must be received by AIWA no later than the 5th of
July). Orders received after the 5th will be scheduled according to
AIWA's standard lead-time.


(c) The minimum order quantity for the Ecrix drive in each Purchase
Order shall be [Confidential Information Redacted] Drives for each of
the Model Numbers listed in Exhibit A.


(d) Ecrix may at its option delay the delivery of any amount of
Products contained in a Purchase Order for a maximum period of four (4)
months from the scheduled date of delivery upon the giving of written
notice to AIWA at any time prior to the delivery of the relevant
Products.


7.2 CONFIRMATION


AIWA will notify Ecrix of the receipt of a Purchase Order within two
(2) working days after its receipt. AIWA will notify ECRIX of AIWA's
acceptance or otherwise of the relevant Purchase Order on or before the
fifteenth (15th) day of the month of its receipt. Confirmation of
receipt and acceptance or otherwise by AIWA may be by fax or e-mail. No
individual Purchase Order shall be binding upon AIWA unless and until
accepted in writing by AIWA, but such acceptance shall not be
unreasonably withheld. AIWA shall be obliged to accept Purchase Orders
for the quantity of the Products provided such quantity fall within the
range of the relevant forecast schedule provided pursuant to Section
8.1 below and otherwise comply with the terms of this Agreement.


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7.3 CONTENTS


All Purchase Orders for Products and Spare Parts submitted by Ecrix
shall state the following: (a) price, (b) quantities ordered, (c) the
month of delivery (d) destination, and (e) Product model/part number or
Spare Part number, (f) special packaging requirements and (g) any other
information required to enable delivery of the relevant Products in
accordance with the terms and conditions hereof.


7.4 EMERGENCY ORDERS/DEMAND UPSIDE


If there is an increase in actual requirements above and beyond the
forecast, AIWA shall make every reasonable effort to service an
increase and shall advise Ecrix of its efforts. AIWA and Ecrix shall
jointly work together to ensure that an adequate supply of long lead
components are available at all times to cover these potential
requirements. In the event that an OEM customer requires Ecrix ...