2005

UNIVERSAL INTERNATIONAL MUSIC B.V.

and

UNIVERSAL MANUFACTURING & LOGISTICS GMBH

(to be renamed [EDC GERMANY GMBH])

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MANUFACTURING AND RELATED SERVICES AGREEMENT*

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(UNIVERSAL LOGO) [g95544g9554400.gif]

* 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: [*****].

 

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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 orders, Drop Shipment orders and NDU Orders, and will manage the
provision of third-party transport services to such locations as set forth in
this Section 7.2 (“Direct Distribution”). Supplier will Tender by 2:00 pm
(Hanover time) onwards on the due date. By way of example, for purposes of
clarity, a Direct Distribution Workable Order received at Supplier’s Hanover
plant prior to [*****] Hanover

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      time on a Working Day, if properly designated by Customer [*****]
lead-time must be Tendered for loading on a third-party lorry [*****] pm Hanover
time the Working Day.[*****] The management of transport services in relation to
Direct Distribution by Supplier shall be at no additional cost to the Customer.

  7.2.1   Supplier shall load the Optical Discs, together with the applicable
dispatch documents, onto a lorry at Hanover or any successor facility for
dispatch to Universal Music Group member or customer warehouses, as applicable.
    7.2.2   Supplier will, upon shipment of any such orders, transmit and
advance shipping notice (“ASN”) by electronic means to the applicable Universal
Music Group member, which ASN shall contain information as to the quantities
shipped, on an SKU-by-SKU basis, and the contents of the individual palettes.  
  7.2.3   Intentionally deleted.     7.2.4   Transport costs charged to Supplier
in relation to such Direct Distributions shall be charged to Customer at cost
and on the same payment terms as are provided by the transport provider to
Supplier (“Transport Charges”). Supplier will charge Customer the actual amount
of any Transport Charges it properly incurs and subsequently pays in relation to
the distribution of product. Customer will be invoiced by Supplier separately
for the Transport Charges on a country by country basis once per[*****]. In any
event payment terms for Transport Charges are such that Customer is obliged to
pay Supplier a minimum of [*****] prior to the date Supplier must meet its
payment obligations to transport providers for Transport Charges. Supplier will
supply Customer on request with copies of the invoices relating to Transport
Charges at the time of their receipt by Supplier.     7.2.5   Supplier shall at
Customer’s written request negotiate and contract with transport providers in
relation to the distribution of product and will use its reasonable endeavors to
ensure that the net Transport Charges will be at the lowest levels practicable
given the volume and make-up of dispatched product and to consolidate
manufacturing and distribution shipments where practicable.     7.2.6   Customer
and Supplier shall consult in relation to all agreements with transport
providers for distribution of Universal Music Group product provided that
Customer has absolute discretion to determine all providers of transport
services and must approve all material terms of agreements with transport
providers and may designate an alternative transport provider in the event of
its dissatisfaction with any transport provider’s services. Supplier is acting
as Customer’s agent in connection with all agreements, arrangements and dealings
with transport providers.

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  7.3   Supplier will provide services to support Customer’s promotional
products requirements commonly referred to as DJ Promo. Services include:

  7.3.1   Promotional manufacturing orders, processed through the normal
manufacturing services function. Manufacturing lead times for DJ Promo orders
will [*****] Days. The aforementioned notwithstanding, Customer may designate
[*****] DJ Promo orders per [*****] Day to be manufactured in [*****] Days.    
7.3.2   Intentionally deleted

  7.4   Supplier will at no additional cost to Customer provide and maintain
certain reports and electronic data feeds to the extent available to Customer as
of the Effective Date, including but not limited to:         [*****]        
Supplier will supply Customer with on-line access to such information as
Customer shall reasonably require to (a) [*****]. Supplier will provide such
additional reports and electronic data as Customer shall reasonably require, and
the Parties shall mutually agree upon how additional costs, if any are actually
incurred by Supplier for any such reports or electronic data feeds, will be
shared or allocated.     7.5   Supplier agrees and understands that it has
normal and customary custodial responsibilities for Customer owned components
and parts (including paper parts) in Supplier’s possession and Supplier
specifically agrees consistent with Prevailing Practice to:

  7.5.1   Store, at [*****] additional charge (except as set forth in
Schedule 10.1) and in accordance with the terms of this Agreement, all
manufacturing and packaging components supplied to it by Customer or procured by
Supplier on behalf of Customer (“Manufacturing Components”). Customer will
review all stocks of Manufacturing Components at least [*****] per year, and
will propose to Supplier Customer’s desired disposition (e.g., scrapping) of all
such materials which have not been the subject of Orders in the last [*****]
months, and shall work with Supplier in good faith to resolve any storage issues
faced by Supplier if not resolved pursuant to such disposition instructions. All
Manufacturing Components held by Supplier shall remain the property of Customer.
    7.5.2   Maintain and provide to Customer on hand inventory balance
information and to employ systems and procedures such that, at any given
time[*****]% of said balances per component are within [*****]% of the actual
amount on hand.     7.5.3   Carry out a [*****] cycle a physical inventory of
all Manufacturing Components and all other materials owned by Customer in the
custody of

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      Supplier such that each storage location will be checked [*****]. Supplier
will provide a monthly inventory report to Customer. Customer may amend the
stock control procedure to reflect the express requirements of its auditors from
time to time, or as reasonably required to address any failure to meet the
standards set forth in Section 7.5.2.     7.5.4   Permit Customer to carry out
an audit of all Manufacturing Components and all other materials owned by
Customer in the custody of Supplier at any time at Customer’s cost, provided
that Customer (i) gives Supplier at least two weeks advance notice;
(ii) conducts the audit during normal business hours; (iii) conducts any such
audit without interference to Supplier’s business operations; and (iv) conducts
such an audit no more than once per year. Supplier shall supply all
documentation, logistical and administrative support reasonably requested by
Customer for such audit.     7.5.5   Be responsible for, and at Customer’s
request pay Customer its cost for, any Lost Inventory of Customer-owned printed
or other components in its possession exceeding [*****]% per SKU of the amount
of such inventory delivered to Supplier.

      Notwithstanding the foregoing, for certain non-standard, high cost
packaging items (by way of example, for purposes of clarity but without
limitation, non-standard, high cost packaging items include multi-disc boxes and
multi-disc booklets) specified from time to time by Customer, Supplier shall pay
for Lost Inventory exceeding [*****]% per SKU of the amount of such inventory
delivered to Supplier.

  7.5.6   At least twice per Working Day, provide Customer electronically (a) on
hand inventory balances by SKU and (b) receipts by SKU from Customer’s vendors.
    7.5.7   Upon receipt of written notice from Customer of all deletions from
Customer’s catalogue, scrap, dispose of or return production parts for such
deleted items as instructed, [*****]charge and within [*****] Working Days of
such notice, and Supplier shall notify Customer promptly that this has occurred.
    7.5.8   Retrieve from stock and prepare for shipment any Manufacturing
Components required in connection with dispatches under Section 7.2, orders
placed under Section 7.8, orders placed under Section 25, or for supplies to
Customer’s customers as reasonably requested and to facilitate the provision of
Manufacturing Services by third parties where this is permitted under this
Agreement.

  7.6   Supplier Ordering Components On Behalf of Customer

  7.6.1   Supplier will order and receive components (other than Other Existing
Formats, which are subject instead to Section 7.7) (that will be owned by

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      Customer), as requested by Customer, including printed components and
point-of-sale materials (any such components, “Components”), and pay the
applicable component vendors, following the order quantity and order timing
procedures as disclosed to the Supplier in writing prior to the Effective Date .
The agreements, if any, between the component vendors and the Customer shall be
utilized by the Supplier in placing such orders, and Supplier agrees to comply
with the payment and other terms applicable to the ordering of product under
such vendor agreements; provided that (a) Supplier shall be Customer’s agent for
the purposes of placing orders under such agreements, (b) no modifications,
renegotiations or amendments of such agreements will be made without
consultation with Supplier, and (c) such agreements do not require payment to
the third-party vendor prior to [*****] days after shipment.     7.6.2  
Supplier will invoice Customer, within [*****]days following the end of each,
[*****] for the cost Supplier has paid (or will pay) for all Components the
Supplier purchased and received on behalf of Customer for the[*****]. Supplier’s
invoice (a) will include, as backup documentation, copies of the applicable
vendor invoices (or detailed EDI invoicing files), the total of which shall
agree with the Supplier’s invoice total, (b) will be calculated in accordance
with the Components Procurement Matrix provided in Schedule 7.6.2, and (c) will
take into account any prior invoices for such materials. Customer shall pay
Supplier a minimum of [*****] prior to the date Supplier must meet its payment
obligations to the applicable component vendors. All such Components shall be
owned by the Customer.     7.6.3   Supplier will for the period Customer
requests and in accordance with Customer instructions add Customer-owned
Component prices to the prices set forth on Schedule 10.1, and reflect them in
its invoices of Manufactured Services to Customer, which Customer will pay in
accordance with the other terms of this Agreement.     7.6.4   [*****], Supplier
will calculate the sum of the Euro amounts of Components included in its
invoices of Manufacturing Services to Customer for the [*****] and, to the
extent not offset as set forth below, issue a credit memo or other payment to
Customer for the difference between the sum of the calculated amount and the
amount invoiced under Section 7.6.2. Customer may offset the credit referenced
in this Section 7.6.4 against the invoices referenced under Section 7.6.3,
provided both the invoice and the credit are due on the same date.     7.6.5  
Supplier shall conform to all performance standards and policies disclosed to
Supplier pursuant to Section 7.6.1 with respect to the ordering of Components on
the behalf of Customer. If Supplier fails to meet any such performance standards
or policies, Supplier shall be responsible for all of Customer’s direct costs
attributable to such failure. [*****]

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  7.6.6   Customer may, for any reasonable business purpose of Customer, at any
time elect to order some or all Components and/or pay Component vendors
directly. In the event Customer elects to order Components or pay Component
vendors directly under the foregoing provisions, (a) Supplier will cease
including the cost of Customer-supplied Components in its invoices of finished
product to Customer as of the effective date of such change, (b) Customer shall
provide Supplier with [*****] days written notice of its intention to implement
such change, (c) Customer shall reimburse Supplier for [*****] and (d) Supplier
and Customer shall agree to an equitable adjustment in the prices on
Schedule 10.1 to reflect the corresponding decrease in Supplier’s ongoing costs.
Supplier shall consult with Customer prior to incurring any costs referred to in
(c) above and shall use commercially reasonable efforts to minimize any
resulting cost to the Customer under this Section 7.6.6.     7.6.7   Supplier
will indemnify, defend and hold harmless the Customer, and its Affiliates, its
and their shareholders, officers, employees and agents from any and all
third-party claims, demands, causes of action, liability, judgments, damages,
costs and expense (including reasonable attorney’s fees) asserted against,
imposed upon or suffered by such parties as a result of Supplier’s failure to
pay any amounts owed by Supplier to any printed component vendor under this
Section 7.6 when such amounts are due (provided Customer has paid such amounts
to Supplier).

  7.7   Supplier Ordering Other Existing Formats On Behalf of Customer

  7.7.1   Supplier will order and receive, at Customer’s request and in
accordance with Customer’s instructions, on a country-by-country basis, Other
Existing Formats (that will be owned by Customer) and pay the suppliers of such
formats. The agreements, if any, between the Other Existing Formats suppliers
and the Customer shall be utilized by the Supplier in placing such orders, and
Supplier agrees to comply with the payment and other terms applicable to the
ordering of product under such agreements; provided that (a) Supplier shall be
Customer’s agent for the purposes of placing orders under such agreements, (b)
no modifications, renegotiations or amendments of such agreements will be made
without Supplier’s cooperation, and (c) such agreements do not require payment
to the third-party supplier prior to [*****] after shipment. Supplier will
include the third-party charges for all such Other Existing Formats in its
invoices to Customer, and Customer will bear all such charges. Customer is
obliged to pay Supplier a minimum of [*****] prior to the date Supplier must
meet its payment obligations to Other Existing Format vendors. Supplier’s
invoice will include, as backup documentation, copies of the applicable vendor
invoices (or detailed EDI invoicing files), the total of which shall agree with
the Supplier’s invoice total.

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  7.7.2   Customer may, for any reasonable business purpose of Customer, at any
time elect to order some or all Other Existing Formats and/or pay such Other
Existing Formats vendors directly. In the event Customer elects to order and
receive Other Existing Formats and pay such vendors directly under the foregoing
provisions, (a) Customer shall provide Supplier with [*****] days written notice
of its intention to implement this change, (b) Customer shall reimburse Supplier
[*****] and (c) Supplier and Customer shall agree to an equitable adjustment in
the prices on Schedule 10.1 to reflect the corresponding decrease in Supplier’s
ongoing costs. Supplier shall consult with Customer prior to incurring any costs
referred to in (c) above and shall use commercially reasonable efforts to
minimize any resulting cost to the Customer under this Section 7.7.2.    
7.7.3   Supplier will indemnify, defend and hold harmless the Customer, and its
Affiliates, its and their shareholders, officers, employees and agents from any
and all third-party claims, demands, causes of action, liability, judgments,
damages, costs and expense (including reasonable attorney’s fees) asserted
against, imposed upon or suffered by such parties as a result of Supplier’s
failure to pay any amounts owed by Supplier to any vendor under this Section 7.7
when such amounts are due (provided Customer has paid such amounts to Supplier).
    7.7.4   All such Other Existing Formats purchased for Customer hereunder
shall be owned by the Customer.

  7.8   Supplier shall schedule orders to [*****], in connection with the
volumes committed to such parties as set out in Schedule 4.1(ii), in accordance
with instructions provided by Customer as to the quantities and periods
specified by Customer.     7.9   Supplier shall, provide the following IT
services:

  (i)   additions and changes to data, reports, interfaces and systems if and
when Customer requests such changes, at no additional cost to Customer provided
the scope and quantity of such changes are within the scope and quantity of
changes implemented by Supplier during calendar year 2003 or if provided to any
other customer of Supplier provided Customer pays all incremental costs of
implementation; and     (ii)   plan, design and implement web enabled systems
access for Customer and its Affiliates’ employees to Supplier’s systems to the
extent related to Customer and its Affiliates’ Products and the services
provided by Supplier to Customer under this Agreement.

  If Customer’s requirements related to the clauses above would require staffing
beyond that available to Supplier at the Effective Date or additional costs or
expense, Supplier shall be entitled to charge Customer for such service or

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      additional costs or expense, provided Supplier first notifies Customer of
the proposed charge for such service. If Supplier proposes a charge for a
service under the clauses above, Customer can elect to order such services or
decline such services.     7.10   To the extent that any Customer changes to any
Customer computer systems would cause Supplier to incur any significant
out-of-pocket costs in connection with adapting to, conforming to, custom
programming for, or otherwise interfacing with such systems in order to
facilitate the efficient performance of its obligations under this Agreement,
including without limitation, this Section 7.10, Supplier shall notify Customer
of such out-of-pocket costs and the reasons therefor, and Customer shall within
a reasonable time period approve such costs or work with Supplier to reduce or
eliminate such costs. Customer shall reimburse Supplier for all such costs
chargeable to Customer pursuant to this Section 7.10.

8.0   Product Quality:

  8.1   All Optical Discs shall conform to the Input Material for such Optical
Discs provided by Customer.     8.2   The quality of the Optical Discs
manufactured by Supplier, and the Specified Related Services provided by
Supplier to Customer shall (a) conform to the standards set forth in the
relevant industry technology licensor manuals (e.g., CD manufacturing levels
will be sufficient to meet the Sony-Philips Red Book CD specifications, also
known as the Sony Philips Optical Disc Specifications), and (b) conform to the
AQL standards set forth in Schedule 8.2.1 for CDs and 8.2.2. for DVDs.     8.3  
Supplier will perform such inspections as are called for on Schedule 8.2.1 and
8.2.2 and shall certify and send the written results of all such inspections to
Customer for the previous calendar month within seven Working Days of the end of
such month.     8.4   For the purposes of this Agreement, an “Epidemic Multiple
Defectives Event” (or “EMDE”) shall be deemed to have occurred if either (a) at
least[*****]% or (b) more than [*****] of the Optical Discs of any given
Order(s) exhibit the same type of defect, in which said defect renders the
Optical Discs not merchantable or fit for their intended purpose (such defective
Optical Discs, “Epidemic Multiple Defectives”) and (i) senior management of
Supplier actually learns of such defect, or (ii) Customer notifies Supplier in
writing providing reasonable particulars of such defect. In the event of an
EMDE, Customer shall have the right, as its sole and exclusive remedy, to elect
either a refund or replacement remedy. In the event Customer elects a
replacement remedy, Supplier shall promptly deliver a non-defective replacement
of the defective Optical Discs to the applicable distributor, retailer and/or
other customer who purchased any such defective

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      copies, at Supplier’s sole cost and expense. In the event Customer elects
a refund remedy, Supplier shall refund to Customer the price paid for the
finished product containing such defective Optical Discs. In the event of any
EMDE, Customer agrees to use reasonable endeavors to determine the extent of the
problem among its customers, to assist Supplier in resolving any problems with
Epidemic Multiple Defectives in order that Supplier may provide replacement
Optical Discs promptly and to assist in Customer’s mitigation of any negative
effects on Customer.     8.5   [*****]     8.6   Intentionally deleted.

9.0   Key Failures.

  9.1   A “Key Failure” is an occurrence of any of the events identified as a
“KPI Repeated Failure Event” on Schedule 9.1 of this Agreement. As soon as it
becomes aware of a Key Failure, Customer or Supplier shall notify the other of
the Key Failure, specifying the nature of the Key Failure and the data sources
used to identify such Key Failure (each such notice is a “Failure Notice”).    
9.2   Any Key Failure which is not cured in accordance with this Section 9.2 is
an “Uncured Key Failure,” provided that Customer has provided Supplier (or
Supplier has provided Customer) with an associated Failure Notice within [*****]
days of the Key Failure. A Key Failure which is cured under this Section 9.2
shall not relieve Supplier of any other remedies to which Customer may be
entitled under Section 6.11 or Section 10.7 of this Agreement. In order to cure
a Key Failure, Supplier must do each of the following:

  9.2.1   Within seven calendar days of receipt of a Failure Notice identifying
such Key Failure from Customer, or delivery of a Failure Notice by Supplier,
after consultation with Customer, provide to Customer a detailed, written
correction action plan (“CAP”), with defined and traceable milestones, metrics
and timelines which address the causes of the Key Failure and describes how
Supplier will monitor and manage the relevant business practices/processes to
ensure that the causes of the Key Failure are successfully addressed;    
9.2.2   During the six-week period following the date of Supplier’s receipt or
sending of the Failure Notice (the “Cure Period”), on each Tuesday, provide
Customer with a written report describing the progress on the CAP and any Key
Failures during the preceding Work Week (ending on the immediately preceding
Saturday); and     9.2.3   By the end of the Cure Period, successfully address
the causes of the Key Failure, and provide Customer with a written report of the
relevant business practices/process implemented.

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  9.3   The effects of Key Failures and Uncured Key Failures shall be as
follows:

  9.3.1   On the first Uncured Key Failure with respect to which Supplier has
received or delivered a Failure Notice during any five-year period, Customer
shall have the right, as Supplier’s sole liability and as Customer’s sole remedy
for such Key Failure(s), to either (a) source up to [*****]% of the
Manufacturing Services with any other entity or entities for a period of twelve
months, or (b) receive from Supplier liquidated damages in the amount [*****]
payable in the form of a monthly credit towards Customer’s accounts payable to
Supplier in the amount of [*****].     9.3.2   On the second Uncured Key Failure
with respect to which Supplier has received or delivered a Failure Notice during
any [*****] year period, Customer shall have the right, as Supplier’s sole
liability and as Customer’s sole remedy for such Key Failure(s), to either
(a) source up to [*****]% of the Manufacturing Services with any other entity or
entities for a period [*****] months, or for an additional [*****] period in the
event that Customer is then-currently exercising a prior sourcing right under
any sub-section of Section 9.3, or (b) receive from Supplier liquidated damages
in the amount of [*****] payable in the form of a monthly credit towards
Customer’s accounts payable to Supplier in the amount of [*****].     9.3.3  
Notwithstanding Section 9.3.2, if two Key Failures under “Production” or
“Delivery” on Schedule 9.1 with respect to which Supplier has received or
delivered a Failure Notice occur between September 15th and December 31st of the
same calendar year, whether cured or not, Customer shall have the right, as
Supplier’s sole liability and as Customer’s sole remedy for such Key Failure(s),
either (a) to source up to [*****]% of the Manufacturing Services with any other
entity or entities for a period of [*****], or for an additional period in the
event that Customer is then-currently exercising a prior sourcing right under
any sub-section of this Section 9.3, or (b) receive from Supplier liquidated
damages in the amount of [*****] payable in the form of a monthly credit towards
Customer’s accounts payable to Supplier in the amount of [*****].     9.3.4   If
three Key Failures of the same category (e.g., EMDE) with respect to which
Supplier has received or delivered a Failure Notice occur during any rolling
[*****] year period, whether cured or not, Customer shall have the right, as
Supplier’s sole liability and as Customer’s sole remedy for such Key Failure(s),
to either (a) source up to [*****]% of the Manufacturing Services with any other
entity or entities for the remainder of the Term, or (b) terminate this
Agreement or, (c) receive from Supplier liquidated damages in the amount of
[*****] payable in the form of a monthly credit towards Customer’s accounts
payable to Supplier in the amount of [*****].

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  9.3.5   On the fourth Key Failure with respect to which Supplier has received
or delivered a Failure Notice during any rolling [*****] year period, whether
cured or not, Customer shall have the right, as Supplier’s sole liability and as
Customer’s sole remedy for such Key Failure(s), either (a) to source up to
[*****]% of the Manufacturing Services with any other entity or entities for a
period of twelve months, or for an additional [*****] period in the event that
Customer is then-currently exercising a prior sourcing right under any
sub-section of this Section 9.3, or (b) receive from Supplier liquidated damages
in the amount of [*****] payable in the form of a monthly credit towards
Customer’s accounts payable to Supplier in the amount of [*****].     9.3.6   On
the fifth Key Failure with respect to which Supplier has received or delivered a
Failure Notice during any rolling [*****]-year period, whether cured or not,
Customer shall have the right, as Supplier’s sole liability and as Customer’s
sole remedy for such Key Failure(s), to either (a) source up to [*****]% of the
Manufacturing Services with any other entity or entities for the remainder of
the Term, or (b) terminate this Agreement, or (c) receive from Supplier
liquidated damages in the amount of [*****] payable in the form of a monthly
credit towards Customer’s accounts payable to Supplier in the amount of [*****].
    9.3.7   For purposes of clarity, the Parties agree that (a) Customer shall
never have a right to source any more than [*****]% under the provisions of
Sections 9.3.1, 9.3.2, 9.3.3 and 9.3.5, and (b) where the provisions of more
than one sub-section of Section 9.3 would provide Customer with a remedy with
respect to any new Key Failure event, Customer may elect only one of such
remedies. In addition, to the extent that an event that would constitute a Key
Failure under “Quality” or “Multiple Defective” on Schedule 9.1 is uncured and
continuing during the applicable Cure Period, such event may not constitute
another Key Failure until the end of the applicable Cure Period in accordance
with Section 9.2.     9.3.8   Customer’s right to invoke any remedy available to
Customer under the provisions of any sub-section of Section 9.3 shall be
exercised, if at all, in writing and within [*****] after the date upon which
such right first accrues to Customer (e.g., at the end of the cure period or on
the occurrence of a Key Failure and receipt of a Failure Notice, as applicable),
and any period of loss of exclusive volume under any sub-section of Section 9.3
shall commence upon such date, except in the case where a period of loss of
exclusive volume under any sub-section of this Section 9.3 is currently running,
in which case the new period shall commence upon the expiration of the current
period.     9.3.9   In the event that Customer exercises any right to source any
volumes with third parties under any sub-section of this Section 9.3, Customer
shall provide Supplier with timely notice of such third-party sourcing, and

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      Supplier’s capacity commitments under this Agreement shall be reduced by
the amount of such third-party sourcing. Upon the conclusion of any period in
which Customer has elected to outsource exclusive volume pursuant to
Sections 9.3.1 through 9.3.6, such exclusive volume shall automatically revert
to Supplier. If Customer elects to source [*****]% of the Manufacturing Services
with another entity or entities for the remainder of the Term under
Section 9.3.4 or Section 9.3.6, Supplier shall be relieved of its capacity and
similar commitments under this Agreement for the remainder of the Term.    
9.3.10   Notwithstanding any other provision of this Agreement, any failure of
Supplier to perform any of its obligations under this Agreement shall not be
considered a default, breach, Key Failure or Uncured Key Failure to the extent
that such failure is caused by (a) any Customer breach of, or noncompliance
with, this Agreement; (b) the failure of Customer to timely provide any required
consents, approvals, instructions or assistance; or (c) any Customer Affiliate’s
breach of, or noncompliance with either the Transition Services Agreement, the
Share Purchase Agreement, the International Distribution Agreement or the Lease
Agreement.

10.0   Pricing, Rebate:

  10.1   Schedule 10.1 contains the prices (excluding the prices associated with
the items set forth in Section 10.3) for Manufacturing Services and related
configurations. Subject to Section 10.9, these prices are fixed through the term
of the Agreement, with the exception(s) described in this Agreement, including
without limitation pursuant to Sections 10.3, 10.5, 10.6, 10.12 and 10.13. The
Parties agree that Supplier will not charge, and Customer will not pay for, any
service or activity that is not listed on Schedule 10.1 or elsewhere referenced
or included in this Agreement unless Customer has approved such services and any
charges in writing.     10.2   Supplier shall invoice Customer [*****]. Such
invoices shall reflect the prices contemplated by Sections 10.1 and 10.3, or as
may be agreed upon by the Parties pursuant to this Agreement. Each Supplier
invoice shall identify on a country by country basis all modular charges from
Schedule 10.1 and any additional charges agreed by the Parties which are applied
to the Manufacturing Services. All prices stated in this Agreement are exclusive
of any applicable VAT or sales tax which shall be stated separately on each
invoice at the applicable rate and shall be payable by Customer to Supplier at
the same time as the invoice is payable. Invoices will be for the actual number
of Optical Discs shipped (if less than the number of Optical Discs comprised in
an Order). All prices and other amounts hereunder are to be charged and paid in
Euros unless expressly stated otherwise herein or as otherwise agreed in writing
by the Parties.

  10.2.1   Customer shall pay interest on any amounts (excluding those disputed
in good faith, including without limitation, where the late payment is the

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      result of Supplier’s action or inaction, e.g. Supplier’s warehouse receipt
does not match Supplier’s invoice) past due under this Agreement at a monthly
rate equal to the lesser of (a) the London Interbank Offered Rate (“LIBOR”) +
0.5% or (b) the maximum rate permitted by law.     10.2.2   If Customer becomes
delinquent in the payment of any amount (excluding amounts disputed in good
faith) in excess of, [*****] Supplier shall have the right to suspend some or
all shipments hereunder pending such payment, and any such failure to make
shipments will not be a default, breach, Key Failure or Uncured Key Failure
under this Agreement and will not entitle Customer to terminate this Agreement
or to any other damages or remedy.     10.2.3   In the case of a disputed
invoice, Customer will pay the undisputed amount of the invoice and Customer and
Supplier will work together in good faith to resolve the disputed amount. In the
event an agreement cannot be reached on the disputed amount within [*****] days
of the invoice due date, either Supplier or Customer may submit the matter to
arbitration as provided in Article 14.0 “Dispute Resolution” to resolve the
disputed amount, but without the need for or right to preliminary discussions
provided for in Article 14.0. Upon resolution of the dispute, Customer will pay
the Supplier the amount, if any, determined to be due to Supplier.

  10.3   Supplier shall issue a [*****] to Customer depending on changes in
Supplier’s costs for polycarbonate, polystyrene and Packaging Components via the
following formulas:

  10.3.1   Polycarbonate adjustment (raw material for optical disc) for CDs. At
the end of each [*****] following the Effective Date, Supplier will calculate:
(i) the Polycarbonate Reference Price minus (ii) Supplier’s daily average net
price per kilogram for polycarbonate for the calendar quarter (or portion
thereof) with the remainder (iii) multiplied by the number of CDs manufactured
by Supplier and shipped to the Customer in the calendar quarter (or portion
thereof) which are Cost-Based Optical Discs multiplied by the gross
(input) polycarbonate content per CD of [*****]. If this calculation produces a
negative result, that Euro amount will be charged to Customer, subject to
Sections 10.3.7 – 10.3.10 below. If this calculation produces a positive result,
that Euro amount will be credited to Customer, subject to Sections 10.3.7 —
10.3.10 below. The initial Polycarbonate Reference Price shall be [*****] per
kilogram. The Polycarbonate Reference Price shall be reset at the end of each of
Customer’s [*****] to equal the average price paid per kilogram by Supplier for
polycarbonate during the previous [*****] month period, provided that the change
in the Polycarbonate Reference Price from the previous Customer fiscal year is
greater than plus or minus [*****]%. Upon each such readjustment of the

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      Polycarbonate Reference Price, the prices in Schedule 10.1 shall be
updated accordingly.     10.3.2   Intentionally deleted.     10.3.3  
Polycarbonate adjustment (raw material for optical disc) resulting from disc
recycling activity. At the end of each [*****] following the Effective Date,
Supplier will calculate: (i) the number of CDs supplied by Customer to Supplier
for recycling multiplied by (ii) the net recycled material output from the
recycling process per CD of [*****] multiplied by (iii) Supplier’s daily average
net price per kilogram for polycarbonate for the calendar quarter (or portion
thereof) just ended reduced by the departmental cost of the recycling activity
of [*****] kilogram. This Euro amount will be credited to Customer, subject to
Sections 10.3.7 – 10.3.10 below. This procedure shall remain in place as long as
Supplier retains the polycarbonate recycling operation.     10.3.4   Adjustment
in respect of “bought-in” polystyrene packaging. At the end of each [*****]
following the Effective Date, for each Packaging Component, Supplier will
calculate: (i) the Packaging Components Reference Price minus (ii) Supplier’s
daily average net price for the Packaging Component for the calendar quarter,
with the remainder (iii) multiplied by the number of finished goods containing
the Packaging Component manufactured by the Supplier and shipped to Customer for
such quarter (or portion thereof). If this calculation produces a negative
result, that Euro amount will be charged to Customer, subject to Sections 10.3.7
— 10.3.10. If this calculation produces a positive result, that Euro amount will
be credited to Customer subject to Sections 10.3.7 — 10.3.10. The initial
Packaging Components Reference Prices shall be as set forth in Schedule 10.3.4.
The Packaging Components Reference Price shall be reset at the end of each of
Customer’s [*****] to equal the average price paid by Supplier for each
Packaging Component during the previous [*****] month period, provided that the
change in the Packaging Components Reference Price from the previous Customer
fiscal year is greater than plus or minus [*****]%. Upon each such readjustment
of the Packaging Components Reference Prices, the prices in Schedule 10.1 shall
be updated accordingly.     10.3.5   Adjustment in respect of polystyrene
packaging molded on site. At the end of each [*****] following the Effective
Date, Supplier will calculate: (i) the Polystyrene Reference Price minus
(ii) Supplier’s daily average net price per kilogram of Polystyrene for the
calendar quarter, with the remainder (iii) multiplied by the number of Supplier
injection-molded products shipped to Customer multiplied by (iv) the
corresponding gross polystyrene content thereof as set forth below. If this
calculation produces a negative result, that Euro amount will be charged to
Customer, subject to Sections 10.3.7 - 10.3.10. If this calculation produces a
positive result,

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      that Euro amount will be credited to Customer subject to Section 10.3.7 -
10.3.10. The initial Polystyrene Reference Price shall be Euro [*****]. The
Polystyrene Reference Price shall be reset at the end of each of Customer’s
[*****] to equal the average price paid per kilogram by Supplier for polystyrene
during the previous [*****]-month period, provided that the change in the
Polystyrene Reference Price from the previous Customer fiscal year is greater
than plus or minus [*****]%. Upon each such readjustment of the Polystyrene
Reference Price, the prices in Schedule 10.1 shall be updated accordingly. For
the purposes of this Section 10.3.5, the gross polystyrene content of the
injected-molded products is: for a three-piece box, [*****] per finished
product; for a two-piece box, [*****] per finished product; and for a multipack
[*****] without trays, and [*****] with trays, per finished product.    
10.3.6   [*****]     10.3.7   Supplier agrees and understands that the
terminology contained in Sections 10.3.1 through 10.3.5, “... Supplier’s daily
average net price...” includes all discounts, rebates and any and all other
economic related considerations Supplier receives from its suppliers of
polycarbonate, polystyrene and Packaging Components.     10.3.8   Supplier will
perform the calculations described in Sections 10.3.1 through 10.3.6 within
[*****] Working Days following the end of each calendar [*****] and submit the
results to Customer, along with data and records that support the calculation of
Supplier’s daily average net price. Customer will have the right to request
additional data and records and/or audit Supplier’s financial records concerning
Supplier’s daily average net price.     10.3.9   In the event Customer agrees
with Supplier’s calculation of the charges or credits for changes in Supplier’s
prices for Packaging Components, polystyrene and polycarbonate, Customer will
notify Supplier to issue debit or credit memo’s within [*****] Working Days of
receipt of the data and calculations described in Section 10.3.8. In the event
Customer does not agree with Supplier’s calculation of the charges or credits
for changes in Supplier’s prices for Packaging Components, polystyrene and
polycarbonate, Customer will promptly schedule a meeting with Supplier to
discuss approaches to resolve the disagreement.     10.3.10   Should New Formats
be priced as Cost-Based Optical Discs the Parties shall adopt the methodology of
10.3.1 to 10.3.6 above in adjusting the raw material charges to be paid by
Customer in respect of either the Optical Disc and/or the non-paper packaging
applied to it.

  10.4   All prices will be Free Carrier (FCA) International Chamber of Commerce
(ICC) International Commercial Terms (INCOTERMS 2000) from Supplier’s

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      manufacturing location. Subject to the terms and conditions of the
International Distribution Agreement, (a) Customer will have the right to select
all carriers and will pay all associated freight costs, and (b) Supplier will
coordinate with such carriers and make appropriate arrangements for pick-ups on
Customer’s account. However, if sourced from a manufacturing location that
results in a higher transportation cost than if produced at the Hanover
location, Supplier will issue a credit to Customer equal to the additional costs
to deliver the product to the RSC.     10.5   Subject to Section 10.10, in the
event a CD configuration which is not listed on Schedule 10.1 (except for New
Format configurations) is required by Customer or any Universal Music Group
member, the following procedure will be followed by Customer and Supplier to
establish a price for said Manufacturing Services.

  10.5.1   Customer will request the Manufacturing Service from Supplier in
writing.     10.5.2   Supplier will propose a price equal to [*****].    
10.5.3   Customer may accept or reject Supplier’s proposed price.     10.5.4  
In the event Customer accepts Supplier’s proposed price, such Manufacturing
Service and associated price shall be added to Schedule 10.1.     10.5.5   In
the event Customer rejects Supplier’s proposed price, Customer may audit the
documentation supporting the calculation of Supplier’s proposed price. [*****].
All of the foregoing information constitutes confidential information of
Supplier.     10.5.6   Following the completion of Customer’s audit, the Parties
will meet and engage in good faith negotiations concerning Supplier’s proposed
price. In the event an agreement cannot be reached on the proposed price within
[*****] days of Supplier’s proposal of a price, either Supplier or Customer may
invoke Article 14.0 “Dispute Resolution” to determine the price for a
configuration or service not contained in Schedule 10.1, which price shall be
calculated using the formula set forth in Section 10.5.2. Once such price is
determined, such Manufacturing Service and associated price shall be added to
Schedule 10.1.

  10.6   The Parties agree and understand that subsequent to the Effective Date,
but within the Term of this Agreement, Customer may have access to Optical Disc
manufacturing volumes other than for Universal Music Group Manufacturing
Requirements for distribution in one or more European Countries, including
volumes (a) then-currently committed to other manufacturers as described in
Section 4.1(ii); (b) from non-Universal Music Group companies or labels with
which it has no written agreements as of the Effective Date; (c) for Special
Project orders for any SKUs in volumes forecast to be greater than [*****] units
per SKU; and (d) Manufacturing Requirements of a party who becomes a Universal
Music Group member by acquisition after the Effective Date to the extent and for

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      the period that such Manufacturing Requirements are contractually
committed to a third party as of the date of signing of the relevant acquisition
agreement. All and any such Optical Disc manufacturing, to the extent for
distribution in one or more European Countries (as of the Effective Date), will
be hereafter referred to as “Incremental Volumes”. For purposes of clarity,
examples of such Incremental Volumes would include, but not be limited to, the
CD volumes committed to third parties as described in Section 4.1(ii) (but only
to the extent that some or all of such volume becomes available to other
third-party manufacturers under the terms of any such third-party agreement and
during the time that such agreement remains in effect) or Optical Discs
manufactured pursuant to a future P&D Agreement.         For the purposes of
clarity, upon the termination of any of the supply agreements with the third
parties mentioned above and described in Section 4.1(ii), the previously
Excluded CD volumes shall become part of the Universal Music Group’s
Manufacturing Requirements and are not Incremental Volumes.         On each
occasion on which Customer gains access to any Incremental Volumes which could
be placed under this Agreement, Customer shall notify Supplier of the volumes,
terms (including those which may be country or deal-specific, e.g., a
requirement for direct distribution, landed price and landed lead times but
other than pricing), conditions, and any other relevant information related to
such Incremental Volume necessary for Supplier to prepare a proposal to supply
such Incremental Volume to Customer (each such notice, an “Incremental Volume
Offer”). Within [*****] days of its receipt of an Incremental Volume Offer,
Supplier must advise Customer of its interest in supplying such Incremental
Volume which is the subject of the Incremental Volume Offer, and set forth in
such acceptance its proposal all the necessary terms for such acceptance, which
shall include all the terms set forth in the Incremental Volume Offer (each such
acceptance, the “Supplier Incremental Volume Proposal”). Supplier’s decision not
to submit, or its failure to provide a Supplier Incremental Volume Proposal
within the [*****] days, shall mean that, notwithstanding Section 4.1, Customer
may take the Incremental Volume subject to the Incremental Volume Offer to any
entity. Notwithstanding the foregoing, Supplier must advise Customer within
[*****] Working Days of its interest in supplying Incremental Volume for Special
Projects.         If Supplier’s Incremental Volume Proposal is [*****] to other
proposals Customer receives (which must be based on the same terms and
conditions set forth in the Incremental Volume Offer) and is otherwise
substantially the equivalent of any other proposal, [*****] of all proposals,
Customer shall order the Incremental Volume from Supplier on the terms and
conditions set forth in the Supplier Incremental Volume Proposal and in this
Agreement (provided in the event of a conflict, the terms of the Supplier
Incremental Volume Proposal will prevail). If Customer does not have an
obligation to order the Incremental Volume from Supplier under the foregoing
provision, then notwithstanding

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      Section 4.1, Customer may purchase such Incremental Volume from a third
party; provided, however, [*****]     10.7   Without limiting Supplier’s
obligations to meet the standards set forth in this Agreement, within [*****]
days of the end of each,[*****] Supplier will provide Customer a credit equal
[*****]% of the total amount of all invoices paid in such quarter as
compensation for defectives. In the event either of the Parties can reasonably
demonstrate that the long term, average defective rate is materially different
than [*****] of manufactured Optical Discs, the Parties agree to conduct good
faith negotiations to establish a different percentage as a basis to compensate
Customer for defective manufacturing. The foregoing remedy shall be Supplier’s
sole liability for defective units, and Customer’s sole remedy, except as set
forth in Section 8.4 and Article 9.

  10.8.1   Supplier shall pay to Customer in the form of a rebate to be used
against all then-outstanding invoices of Supplier to Customer, and to be paid in
cash to the extent in excess of all then outstanding invoices.

     
December 15, 2005
  Euros 2,000,000
May 31, 2006
  Euros 2,600,000
May 31, 2007
  Euros 4,600,000
May 31, 2008
  Euros 4,600,000

  10.8.2   In each year of the Term on December 15 Supplier shall pay to
Customer the amount of 325,000 Euros in the form of a rebate to be used against
all then-outstanding invoices of Supplier to Customer, and to be paid in cash to
the extent in excess of all then outstanding invoices.

  10.9   Either Party shall have the right to dispute the accuracy of the
Aggregate 2003 Manufacturing Costs, as a whole, or the Allocated 2003
Manufacturing Costs, on a line item basis, as follows:

  10.9.1   Either Party may notify the other Party of an error or omission in
the Aggregate 2003 Manufacturing Costs or any Allocated 2003 Manufacturing Costs
in writing [*****] of the Effective Date and request an adjustment of the
Aggregate 2003 Manufacturing Costs and/or any Allocated Manufacturing Costs,
either up or down, as required to accurately reflect the Euro amount of such
error(s) or omission(s) (any such requested adjustments, the “Requested Cost
Adjustment”). A Requested Cost Adjustment may only be requested to the extent it
relates to a variance in costs at the Supplier Hanover facility in 2003.    
10.9.2   Within 15 days of receiving notification of a Requested Cost
Adjustment, Customer and Supplier will meet and conduct good faith negotiations
and attempt to reach agreement on whether such adjustments are appropriate

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      and in the correct amount. Either Party may audit the other’s books,
records and supporting documentation supporting the calculation of the data in,
or the data used in preparing, Schedule 10.1 and the Requested Cost Adjustment.
Such audits shall be performed with reasonable advance written notice, during
normal business hours, and in a manner not disruptive of the audited Party’s
operations. Once a Requested Cost Adjustment has been agreed or determined
hereunder (the “Final Cost Adjustment”), the Aggregate 2003 Manufacturing Costs
and the Allocated 2003 Manufacturing Costs shall be modified as follows:

  10.9.2.1   If the dispute involves an error in the allocation of the Allocated
2003 Manufacturing Costs, the Final Cost Adjustment shall be added to or
subtracted from the existing cost allocation for any and each disputed line item
which contains the cost item and the amount of the Final Cost Adjustment shall
be offset by a subtraction (in the case of an addition above) or addition (in
the case of a subtraction above) for one or more other cost items in the
relevant line items in which such other cost items are contained such that, had
the adjusted costs been used to calculate the Aggregate 2003 Manufacturing
Costs, based on the 2003 Product Mix, the Aggregate 2003 Manufacturing Costs
would not have changed.     10.9.2.2   If the dispute involves increasing or
adding a cost item or amount to the Aggregate 2003 Manufacturing Costs, the
Final Cost Adjustment for such cost item shall be added to the Aggregate 2003
Manufacturing Costs, and to the relevant line items of the Allocated 2003
Manufacturing Costs such that, had the adjusted costs been used to calculate the
Aggregate 2003 Manufacturing Costs, based on the 2003 Product Mix, the Aggregate
2003 Manufacturing Costs would have increased by the amount of the Final Cost
Adjustment.     10.9.2.3   If the dispute involves reducing or removing a cost
item or amount from the Aggregate 2003 Manufacturing Costs, the Final Cost
Adjustment for such cost item shall be subtracted from the Aggregate 2003
Manufacturing Costs, and from the relevant line items of the Allocated 2003
Manufacturing Costs such that, had the adjusted costs been used to calculate the
Aggregate 2003 Manufacturing Costs, based on the 2003 Product Mix, the Aggregate
2003 Manufacturing Costs would have decreased by the amount of the Final Cost
Adjustment.

  10.9.3   Once a Final Cost Adjustment has been made to the Allocated 2003
Manufacturing Costs as described in Section 10.9.2 above, the Parties shall
adjust the prices (for Optical Discs, other than the [*****] per Optical Discs
margin reflected therein) shown on Schedule 10.1 to take

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      into account the adjustments described in Sections 10.9.2.1 through
10.9.2.3. In the event an agreement cannot be reached on any cost changes or any
changes in Schedule 10.1 within two weeks of the commencement of negotiations
under Section 10.9.2, either Party may invoke Section 14.0 (Dispute Resolution)
to determine the appropriate Schedule 10.1 prices, provided that solely for
purposes of resolving disputes under this Section 10.9, Section 14.0 procedures
shall not be used and (A) the arbitrator shall be a single person who shall be a
CPA (or equivalent) based in London, England and then in practice at a
recognized public accounting firm which firm shall be selected by the Parties
mutually, and which shall be asked to name the person to so act, (B) there shall
be no discovery (other than that which has occurred pursuant to Section 10.9.2),
(C) each Party shall submit, on the tenth business day after the arbitrator is
named, its proposal on price adjustments and any support it has for its position
(including, e.g., any documentation submitted under Section 10.9.1 and the
results of any audit under Section 10.9.2), and the arbitrator shall make a
determination, within 10 days of such submissions, of how the prices on
Schedule 10.1 shall be adjusted, provided that such determination must comply
with the parameters set forth in this Section 10.9. If the Parties fail to
invoke the arbitration provision, the prices on Schedule 10.1 shall remain
unadjusted, and if one Party fails to submit its proposal timely to the named
arbitrator, the arbitrator shall accept the other Party’s proposal provided such
proposal meets the parameters set forth in this Section 10.9. Once the prices
for all configurations are agreed or determined pursuant to this Section 10.9,
such new prices shall be deemed to amend Schedule 10.1 accordingly, and shall be
applied both retroactively (to the Effective Date) and prospectively, and all
amounts owing from one Party to the other as a result of such adjustment shall
be paid within thirty days of the final determination of the changes in such
prices.

      Recourse to the procedures and remedies set forth in this Section 10.9
shall be Customer’s sole liability, and Supplier’s sole remedy, in the event of
a breach by Customer of its representation and warranty in Section 12.2(d).    
10.10   Notwithstanding any other provision of this Article 10, in the event
Supplier uses third parties to provide for certain parts of Manufacturing
Services, particularly packaging or assembly services for non-standard
configurations, that are not identified and priced in Section 10.1, Supplier’s
price to Customer for such parts of the Manufacturing Services shall be equal to
Supplier’s price from the third party.     10.11   The initial prices for DVD
configurations shall be as set forth in Schedule 10.1. Customer and Supplier
will follow the procedure described in this Section 10.11 to reestablish the
pricing for DVD configurations, and to establish and re-establish the pricing
for New Format configurations (collectively “DVD and New Format Configuration
Pricing”), from time to time.

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  10.11.1   Customer may, at any time other than between September 15 and
December 31 of any year, notify Supplier that it wishes to establish a market
price for a new New Format configuration. In addition, Customer shall on [*****]
anniversary of the Effective Date or at any time other than between September 15
and December 31 of any other year, at least once per [*****] and no more often
than [*****] period, notify Supplier that it wishes to re-establish a market
price for all current DVD and New Format configurations; provided, however, that
Customer may reestablish a market price for New Format configurations every
[*****] in the [*****] years after the establishment of an initial market price
therefor. Such notices shall be referred to as a “Market Pricing Notice”. At the
time of delivery of such Market Pricing Notice, or within [*****] days thereof,
Customer shall submit to Supplier, in writing, the Market Pricing Information,
and will make available to Customer (and to any arbitrator selected under
Section 10.11.6) copies of the quotations upon which such Market Pricing
Information is based.     10.11.2   “Market Pricing Information” means the
individual prices for each type of DVD or New Format configuration, or other
relevant Manufacturing Service, obtained within [*****] days of the Market
Pricing Notice from [*****] identified Qualified Manufacturers, based on an
annual volume of at least [*****]% of Customer’s DVD and New Formats volume in
the [*****]-month period prior to the Market Pricing Notice and on order lot
sizes and lead times similar to Customer’s, unless the lower of such prices is
less than [*****] multiplied by the higher of such prices, in which case the
Market Pricing Information must include three prices for each DVD or New Format
configuration, or other relevant Manufacturing Service, obtained within [*****]
days of the Market Pricing Notice from three Qualified Manufacturers, such
prices based on an annual volume of least [*****]% of Customer’s DVD and New
Formats volume in the prior [*****]-month period and on order lot sizes and lead
times similar to Customer’s.     10.11.3   Intentionally deleted.     10.11.4  
The Supplier shall have [*****] business days after receipt of the Market
Pricing Information to object to such Market Pricing Information, provided the
only grounds for such objection [*****]. If Supplier makes such an objection the
matter shall be subject to arbitration as set forth in Section 10.11.6 below.  
  10.11.5   For each DVD and New Format configuration, [*****] shall become the
effective DVD and New Format Configuration Pricing (and be reflected on
Schedule 10.1) on the 30th day after the delivery of the Market Pricing
Information ([*****] day, the “Market Price Reset Date”). If an arbitration
under Section 10.11.6 is still pending on such [*****] day, on the date the
arbitrator makes a final determination of such dispute, the

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      [*****] (as determined by such arbitrator) shall be retroactively
effective as of the Market Price Reset Date.     10.11.6   For purposes of
resolving a dispute under this Section 10.11, UNCITRAL procedures shall not be
used and (A) the arbitrator shall be an individual who shall be a Certified
Public Accountant (or equivalent) based in London, England and then in practice
at a recognized public accounting firm which firm shall be selected by the
parties mutually, and the firm shall be asked to nominate the person to be the
arbitrator, (B) there shall be no discovery other than under Section 10.11.1,
(C) Supplier shall present its evidence that the prices proposed by Customer
under Section 10.11.1 (“Proposed Prices”) do not meet the parameters of the
definition of Market Pricing Information, with a copy to Customer; (D) Customer
shall have [*****] days thereafter to respond to Supplier’s submission; (E) the
arbitrator shall rule within [*****] days thereafter on all issues, or may
during such period require either party to obtain and provide additional
Proposed Prices; (F) any additional Proposed Prices obtained by order of the
arbitrator shall be [*****] and (G) the arbitrator shall set the Revised Average
Market Prices as the new DVD or New Format Configuration Pricing, as applicable.
    10.11.7   In the event neither party timely invokes the arbitration
provisions of Section 10.11.6, the Average Market Prices based on the Market
Pricing Information as provided by Customer shall be the new DVD or New Format
Configuration Pricing, as applicable, effective as of the Market Pricing Reset
Date.     10.11.8   [*****]     10.11.9   The parties may change the
market-based pricing mechanism set forth in this Section 10.11 to a cost-based
formulation upon the mutual written agreement of the parties, and the parties
shall discuss such a transition in good faith if requested by either party.    
10.11.10   In the case of Market Pricing Notices with respect to the initial
establishment of New Format configurations, (a) such Market Pricing Notice shall
include any requested terms associated with such New Format configuration,
[*****] (b) the Market Pricing Information therefor shall be based upon such
Associated Terms, and (c) upon the establishment of prices for such New Format
configurations under this Section 10.11, whether by agreement of the Parties or
by arbitration under Section 10.11.6, such Associated Terms, as they may be
amended by agreement of the Parties or by any arbitrator under Section 10.11.6,
shall become part of this Agreement.

  10.12   Subject to Section 10.10, in the event Customer or any Universal Music
Group member requires any manufacturing, mastering, pressing, assembly or
similar

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      service not listed on Schedule 10.1 and which is not the manufacture of a
CD, DVD or New Format configuration (“Priced Manufacturing Services”), the
following procedure will be followed by Customer and Supplier to establish a
price for such services.

  10.12.1   As to all Priced Manufacturing Services, Customer will request the
Priced Manufacturing Service from Supplier in writing (a “Quote Request”).    
10.12.2   Within [*****] of a Quote Request, Supplier will propose a price for
the requested services subject to such Quote Request equal to [*****] Supplier
will supply documentation to Customer that supports the calculation of its
Supplier Cost Bid.     10.12.3   On the [*****] after the Quote Request,
Customer may accept or reject Supplier’s Cost Bid. In the event Customer accepts
Supplier’s Cost Bid as to the subject of the Quote Request, the price accepted
by Customer shall be added to Schedule 10.1.     10.12.4   In the event Customer
rejects Supplier’s Cost Bid (or Supplier does not provide such information),
Customer may audit Supplier’s books and records related to that information
required to create Supplier’s Cost Bid. [*****]. All of the foregoing
information constitutes confidential information of Supplier.     10.12.5   In
all events under this Section 10.12, the price for the Priced Manufacturing
Services subject to the Quote Request shall be the [*****].     10.12.6  
Supplier may object to the Market Pricing Information provided by Customer, if
any, provided Supplier may do so only in the [*****] days after the delivery of
the Market Pricing Information and the only grounds for such objection can be
that the Market Pricing Information does not [*****].     10.12.7   Following
the completion of any Customer audit under this Section 10.12, parties will meet
and engage in good faith negotiations concerning Supplier’s Cost Bid and the
Market Pricing Information, if any. In the event an agreement cannot be reached
on the proposed price within [*****] days of the Quote Request, either Supplier
or Customer may invoke Article 14.0 “Dispute Resolution” to determine the price.
If an arbitration under this Section 10.12 is still pending on the Price Reset
Date, on the date the arbitrator makes a final determination of such dispute,
the lowest of the Market Pricing Information (as determined by such arbitrator)
and Supplier’s Cost Bid, on a configuration by configuration basis, shall be
retroactively effective as of the Price Reset Date.     10.12.8   Regardless of
whether the price for the Priced Manufacturing Services is set via agreement of
the Parties or otherwise under this Section 10.12, all

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      Priced Manufacturing Services set under this Section 10.12 shall be
reviewed at least [*****] and shall be readjusted using the same mechanisms as
are set forth in this Section 10.12.     10.12.9   In the event an agreement
cannot be reached on any prices within [*****] days of a Quote Request, either
Supplier or Customer may invoke Article 14.0 (“Dispute Resolution”) to determine
the price for the Manufacturing Service which is the subject of the applicable
Quote Request. For purposes of resolving a dispute under this Section 10.12
however, the procedures set forth in Section 14.0 shall not apply and the
following shall apply (A) there shall be one arbitrator only who shall be a
Certified Public Accountant (or equivalent) based in London, England and then in
practice at a recognized public accounting firm and the firm shall be selected
by the parties mutually, and the firm shall nominate the person to be the
arbitrator, (B) there shall be no discovery other than under Sections 10.12.2
and 10.12.4, (C) Supplier shall present its evidence that the prices proposed by
Customer under Section 10.12.4 (“Proposed Prices”) do not meet the parameters of
the definition of Market Pricing Information, in each case such submissions to
be made no later than the [*****] day after the arbitrator is named, with a copy
to the other party; (D) Customer and Supplier shall each have [*****] days
thereafter to respond to the other’s submission; (E) the arbitrator shall rule
within [*****] days thereafter on all issues, or may during such period require
Customer to obtain and provide additional Proposed Prices; (F) any additional
Proposed Prices obtained by order of the arbitrator shall be averaged by the
arbitrator with all other Proposed Prices which the arbitrator determines meet
the parameters of the definition of Market Pricing Information (the resulting
average, the “Revised Market Pricing Information”) and (G) the arbitrator shall
select [*****].     10.12.10   In the event neither party timely invokes the
arbitration provisions of this Section 10.12, the lowest of the Market Pricing
Information as provided by Customer and Supplier’s Cost Bid shall be the new
pricing effective as of the Pricing Reset Date.     10.12.11   Once a price is
determined for the subject of a Quote Request, the subject and its associated
price shall be added to Schedule 10.1, and/or Schedule 10.1 shall be amended to
reflect the new pricing.     10.12.12   Notwithstanding the foregoing provisions
of this Section 10.12, Supplier will not charge Customer prices for Priced
Manufacturing Services higher than the prices that Supplier is paying
third-party subcontractors under Section 5.4 for similar volumes of the relevant
Priced Manufacturing Services on similar terms. Customer may audit Supplier’s
records of the prices paid to such third-party suppliers of Priced Manufacturing
Services, in the manner described in Section 23.

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  10.13   Supplier will use normal and customary endeavors to obtain the lowest
and best net price from any third-party providers of products and services such
as polycarbonate, polystyrene and jewel boxes, transport services, paper parts
components and hand packing services.     10.14   At Customer’s request,
Supplier shall invoice the Universal Music Group members placing Orders under
this Agreement on behalf of Customer, with instructions for such Universal Music
Group member to pay such invoice directly to Customer.

11.0   Patent Charges Paid by Supplier for Optical Discs Sold to Customer:

  11.1   To the extent that the pricing of DVD and New Formats is derived from a
market price which is inclusive of patent charges Customer shall not be liable
to Supplier for Patent Charges and Supplier shall indemnify Customer in respect
of Patent Charges payable in relation to product so priced.     11.2   In
relation to Cost-Based Optical Discs or DVDs derived from market pricing which
is exclusive of Patent Charges, Customer must pay Supplier for Patent Charges
within five business days prior to the date that such Patent Charges are due to
the respective licensors. Customer will pay only the actual cost of Supplier’s
Patent Charges net any form of rebate and Customer will have no obligation to
compensate Supplier for any compliance, administration or legal costs related to
the Patent Charges paid by Supplier, except as set forth in Section 11.6 below.
    11.3   To support its claim for payment pursuant to Section 11.2, above,
Supplier shall present evidence of payment of Patent Charges on a [*****] basis,
consisting of proof of funds transferred along with normal and customary back-up
documentation, including the number of Optical Discs and royalty rates that form
the basis for the Patent Charges.     11.4   [*****].     11.5   [*****].    
11.6   [*****].     11.7   To the extent that, subsequent to receipt by Supplier
of any Patent Charge payment from Customer, Supplier is relieved of its
obligation to pay the Patent Charge then Supplier will make an appropriate
refund to Customer, less any out-of-pocket costs incurred by Supplier in
obtaining such relief.     11.8   Should Supplier sub-contract the provision of
any Manufacturing Services it shall not be entitled to charge Customer a Patent
Charge per Optical Disc in excess of the amount that would have been charged to
Customer had Supplier manufactured such Optical Disc in-house.

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12.0   Representations of the Parties:

  12.1   Representations of Supplier:         As of the Effective Date, and at
all times during the Term, Supplier represents and warrants as follows:

  (a)   Supplier is a valid existing private limited liability stock company
(GmbH) and in good standing under the laws of Germany. Supplier has the
corporate power and authority required to carry on its activities as they are
now conducted.     (b)   Supplier has full legal right and corporate power,
without the consent of any other person to execute, deliver and to perform its
obligations under this Agreement.     (c)   All corporate and other actions
required to be taken by Supplier to authorize the execution, delivery and
performance of this Agreement and all transactions contemplated hereby have been
duly and properly taken. No consent, approval or authorization of, or filing of
any certificate, notice application, report or other document with any
governmental authority is required on the part of Supplier in connection with
the valid execution and delivery of this Agreement or the performance by
Supplier of any of its obligations hereunder.

  12.2   Representations of Customer:         As of the Effective Date, and at
all times during the Term Customer represents and warrants as follows:

  (a)   It is a valid existing private limited liability stock company and in
good standing under the laws of the Netherlands. It has the corporate power and
authority required to carry on its activities as they are now conducted.    
(b)   It has full legal right and corporate power, without the consent of any
other person to execute, deliver and to perform its obligations under this
Agreement.     (c)   All corporate and other actions required to be taken by it
to authorize the execution, delivery and performance of this Agreement and all
transactions contemplated hereby have been duly and properly taken. No consent,
approval or authorization of, or filing of any certificate, notice application,
report or other document with any governmental authority is required on the part
of it in connection with its valid execution and delivery of this Agreement or
the performance by it of any of its obligations hereunder.

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  (d)   The Aggregate 2003 Manufacturing Costs accurately reflect the Supplier’s
actual, recurring, aggregate stand-alone cost of providing Manufacturing
Services in relation to total Supplier manufacturing volume in 2003 (“Total
Volume”), after those certain adjustments mutually agreed upon by Customer and
Supplier and are set forth on Schedule 12.2 (d).     (e)   The Allocated 2003
Manufacturing Costs when divided by Total Volume and allocated to CD and DVD
replication (as shown in Schedule 12.2 (d)) results in the departmental cost per
disc included in the disc price set forth in Schedule 10.1.     (f)   The
third-party contracts referenced on Schedule 4.1(ii) (“Third Party Contracts”)
attached hereto are the complete list of all contracts or arrangements which any
Universal Music Group entity is a party to, as of the Effective Date, under
which any amount of the Universal Music Group Manufacturing Requirements is
committed to any party under such joint venture or other contract or
arrangement.     (g)   The amounts set forth in Schedule 4.1(ii) as the volumes
contractually committed under all Third Party Contracts as of the Effective Date
are complete and accurate.     (h)   The Manufacturing Requirements of the
Universal Music Group and its third party business in calendar year 2003 totaled
not less than [*****] million Optical Disc units, and no corporate
reorganizations have occurred in or since such period which could reasonably be
expected to reduce such Manufacturing Requirements. Of such [*****] million
aggregate Optical Discs set forth in the preceding sentence, certain amounts are
attributable to orders from customers that have time limited agreements with the
Universal Music Group, as set forth on Schedule 12.2G.     (i)   Customer has
the right to authorize Supplier to perform the Manufacturing Services on
Customer’s and the Universal Music Group’s behalf (including, without
limitation, the purchase of materials and components on behalf of Customer and
the Universal Music Group).

  12.3   Warranty Disclaimers:         EXCEPT AS EXPRESSLY STATED IN THIS
AGREEMENT, ALL WARRANTIES AND CONDITIONS, WHETHER EXPRESS OR IMPLIED BY STATUTE,
COMMON LAW OR OTHERWISE (INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT) ARE HEREBY
EXCLUDED.

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13.0   Termination:

  13.1   This Agreement may be terminated:

  (a)   By mutual written consent of the Parties at any time;     (b)   By
Customer pursuant to Section 9.3.4 or Section 9.3.6;     (c)   In the event
there is a Change of Control during the Term of this Agreement, notwithstanding
any other provision of this Agreement, Customer may terminate this Agreement
upon 90 calendar days written notice to Supplier, which notice may only be
served in the period from such Change of Control to three months of Supplier’s
giving Customer written notice to Customer of such Change of Control;     (d)  
By Customer in the event Supplier is adjudged insolvent, makes a general
assignment for the benefit of its creditors, or files a petition for relief
under applicable bankruptcy or insolvency law; or a receiver is appointed on
account of Supplier’s insolvency; or     (e)   By Customer, if Supplier has
materially breached its obligations under any of Sections 5.5 or 27, without
cure (after written notice by Customer) of such breaches, [*****] or more times
in any [*****] period. For the purposes of this Section 13.1(e), “cure” shall
mean undertaking the same cure process as is set forth in Sections 9.2.1 through
9.2.3 for Key Failures. For purposes of this Section 13.1(e) “material breach”
shall mean that such breach resulted in a material loss to Customer and/or
Universal Music Group.     (f)   By Customer, if Supplier has materially
breached its obligations under Section 10.8.1 or Section 18 (with respect to
assignment to a Competitor), without cure (after written notice by Customer and
reasonable opportunity to do so) of such breaches.

  13.2   Effect of Distribution Agreement Termination         In the event that
the International Distribution Agreement is terminated by Customer during the
Term of this Agreement due to Supplier’s breach, Customer shall have the right
to terminate this Agreement unless Supplier agrees, and does, reimburse Customer
for the costs of transportation from Supplier’s manufacturing facilities to the
location(s) from which Customer will distribute the Optical Discs manufactured
by Supplier under this Agreement.     13.3   Upon any termination or expiration
of this Agreement, all of the provisions of this Agreement will terminate,
except for the following provisions, which will survive in perpetuity:
Sections 13.2, 13.3, 14.0, 15.0, 20.0, 21.0, 24.0 and 31.0. No termination or
expiration of this Agreement will relieve either Party of any payment
obligations outstanding at the time of such termination or expiration.

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  13.4   At the expiration of the Term or upon earlier termination, Customer
will be entitled to repossess all of its manufacturing and packaging components
(e.g. tapes, paper parts, packaging, etc.) provided by it to Supplier over the
Term. Supplier will pack such parts appropriately and make them available for
pick up by Customer with a clear dispatch and content note per shipment in
agreement with Customer. Customer commits to take back such components within
120 days after the expiration of the Term or earlier termination. In the event
of termination as a result of Supplier’s breach, Supplier shall bear any
packaging, retrieval or storage costs incurred by Supplier for this service
during this period. In the event of any other expiration or termination,
Supplier shall notify Customer of all such costs prior to incurring them, and
Customer and Supplier shall split all such costs equally.     13.5   If this
Agreement is terminated by Customer as a result of any of the items set out in
sections 13.1 (b), (c), (d) or (e) Supplier shall pay Customer the following
amounts:

          Date of termination   Amount payable (€)  
Effective Date – December 15, 2005
    13,800,000  
December 16, 2005 – May 31, 2006
    11,800,000  
June 1, 2006 – May 31, 2007
    9,200,000  
June 1, 2007- May 31, 2008
    4,600,000  

14.0   Dispute Resolution:       During the pendency of any dispute, the
Agreement shall continue to be in force and the Parties shall abide by all terms
of the Agreement. Any dispute concerning the interpretation of this Agreement or
any Party’s performance under any provision of this Agreement shall be discussed
by the Parties, and if the Parties are unable to reach agreement concerning such
matter, the dispute shall be settled by arbitration by three arbitrators (the
“Arbitral Tribunal”) appointed in accordance with the UNCITRAL Arbitration Rules
(the “UNCITRAL Rules”) in force at the time of commencement of the arbitration.
The language of the arbitration shall be English. Each Party shall select one
arbitrator and the two arbitrators selected by the Parties shall select the
third arbitrator, who shall act as chairman and shall be a practicing solicitor
or barrister admitted in New York and/or England and Wales for a continuous
period of at least 10 years as at the date of commencement of the arbitration.
The arbitration shall take place in London or New York, the selection of which
shall be made by Customer. Any court of applicable jurisdiction may grant
interim relief as set forth in Section 14.1 (notwithstanding any provision of
the UNCITRAL Rules to the contrary). The Arbitral Tribunal, once fully
constituted, shall have the power to order on a provisional basis any relief
which it would have power to order in a final award. The Arbitral Tribunal shall
apply New York law to any questions regarding the validity of this clause
(insofar as any such questions are separable from questions as to the validity
of the agreement of which this clause forms part) including but not limited to
any question as to the authority of the signatories to this Agreement. The IBA
Rules on the Taking of Evidence in International

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    Commercial Arbitration (the “IBA Rules of Evidence”) shall apply to any
arbitration in accordance with this clause. In case of any inconsistency with
any clause of this Agreement or with the UNCITRAL Rules, the IBA Rules of
Evidence shall prevail but solely as regards the presentation and reception of
evidence. Judgment upon any arbitration award may be entered in any court of
competent jurisdiction. Arbitration shall occur over consecutive business days
and in no event shall an arbitration procedure continue for more than two weeks.

  14.1   Notwithstanding the foregoing, either Party may pursue the remedy of
specific performance of any provision contained herein, or seek a preliminary or
permanent injunction against the breach of any such provision or in aid of the
exercise of any power granted herein, or any combination thereof, in any court
having jurisdiction thereof without resort to arbitration.     14.2   In the
event of any arbitration between the Parties hereto with respect to any of the
transactions contemplated herein or the subject matter hereof, the prevailing
Party shall, in addition to such other relief as the arbitrators may award, be
entitled to recover reasonable attorney’s fees, expenses and costs of
investigation, all as actually incurred, including without limitation,
attorneys’ fees, expenses and costs of investigation incurred in any case or
proceeding under any bankruptcy, insolvency or reorganization proceeding.

15.0   Retention of Rights:       All Input Materials and other source and
graphic materials provided by Customer in connection herewith, and all rights
therein, shall remain the exclusive property of Customer. All work product, if
any, produced hereunder specifically and solely for Customer and incorporation
into Customer Optical Discs, artwork or other materials, from its inception,
will be considered a “work made for hire” for Customer, which entitles Customer
to, among other things, the copyright and all other rights, title and interest
therein and such work product shall be and remain the sole property of Customer.
Customer shall not provide Supplier with any original or irreplaceable materials
under this Agreement. Notwithstanding the above, to the extent Customer
nevertheless provides Supplier with any such original or irreplaceable
materials, Supplier shall use commercially reasonable endeavors to ensure the
safety and security of such materials but shall not be liable for any damages
other than those specified in Section 21.1 below, in the event that such
materials are lost, damaged, destroyed or stolen.   16.0   Binding Effect and No
Other Agreements:       This Agreement and the International Distribution
Agreement together constitute the entire agreement between the Parties on the
subjects herein contained and supercede, cancel and terminate all other
understandings between the Parties with respect to the subject matter hereof.

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17.0   Amendments:       No modification of or supplement to this Agreement
shall be effective unless signed in writing by each Party.   18.0   Successors
and Assigns; Assignment:       The rights and obligations of the Parties
hereunder shall attach to their successors and permitted assigns. Supplier shall
have the right to assign this Agreement or any of the rights granted to Supplier
hereunder, including without limitation, the right to assign any interests under
this Agreement to (a) lenders providing financing to Supplier from time to time
and (b) to any third party acquiring all or substantially all of Supplier’s
assets or equity, provided that such third party is not a Competitor and agrees
in writing to assume all of Customer’s obligations hereunder. Except as provided
in this Section 18.0, Supplier shall not assign, or grant any lien or
encumbrance on, any property of Customer (including finished goods). Customer
shall not have the right, without Supplier’s prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed, to assign
this Agreement or any of the rights, obligations or interests of Customer
hereunder, in whole or in part, by operation of law, pursuant to a change of
control, or otherwise; provided, however, that Customer shall have the right
without Supplier’s consent to assign its rights and obligations under this
Agreement to any Affiliate of Parent or to any third party acquiring all or
substantially all of Customer’s assets or equity, provided that (i) such
Affiliate or third party agrees in writing to assume all of Customer’s
obligations hereunder, and (ii) Customer and such third party have confirmed in
writing to Supplier that (A) it then-currently has Manufacturing Requirements
substantially similar to or greater than Customer’s then-current Manufacturing
Requirements, and (B) its then-current forecasts for Manufacturing Requirements
for the remainder of the Term are substantially similar to or greater than
Customer’s then-current forecasts for Manufacturing Requirements for the
remainder of the Term. Notwithstanding the foregoing, in the event a
non-Affiliate third party acquires all or substantially all of Customer’s assets
or equity, such third party shall thereafter only be bound by the purchase
commitment in Section 4.1 for the volume that is Customer’s and any other member
of the Universal Music Group’s volume (i.e., no Customer Affiliate not part of
the Universal Music Group immediately prior to the transaction shall be bound by
this Agreement).   19.0   Compliance:       Any waiver by any Party of any
breach hereof by the other Party shall not be deemed a waiver of such Party’s
obligation for future compliance with the terms and conditions in this
Agreement, notwithstanding any custom, practice or course of dealing to the
contrary.   20.0   Confidentiality:       Except as may be required by law, no
Party shall disclose to any third party any confidential information on business
or technology of any other party obtained in

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    connection with this Agreement for three years from the date of the
disclosure of any such confidential information without the prior written
consent of the other Party. Notwithstanding the foregoing, except as may be
required by law, Supplier agrees to keep confidential (a) all Customer-specific
product specifications, and (b) all Customer order information, in perpetuity.  
21.0   Indemnification:       Each Party (the “Indemnifying Party”) hereto
agrees to and does hereby indemnify, defend and hold harmless, the other Party
and its parent, subsidiaries, affiliated companies, and its and their
shareholders, officers, employees and agents (“Indemnified Party”) from any and
all third-party claims, demands, causes of action, liability, judgments,
damages, costs and expense (including reasonable attorney’s fees) asserted
against, imposed upon or suffered by an Indemnified Party to the extent any such
claims are caused by the Indemnifying Party’s performance of this Agreement,
including but not limited to any claims for bodily injury, death or property
damage, product liability and any infringement of any proprietary right, patent,
copyright or trademark. For the avoidance of doubt, claims in relation to patent
charges shall be made in accordance with Section 11.6

  21.1   Supplier agrees to be expressly and solely responsible for any property
of Customer (including, without limitation, masters, components, paper parts,
etc.) while such property is in the care or custody of or under the control of
Supplier, whether or not such possession constitutes a legal bailment, and in
the event of any damage to or loss of such property while in the possession of
Supplier, if the property is not an original or irreplaceable item or items,
Supplier shall promptly pay Customer the full replacement value of such property
or the costs to repair the damage or restore the loss to any such property, as
applicable, regardless of cause. If, notwithstanding Section 15.0, Customer has
provided Supplier with original or irreplaceable items which are damaged or lost
while in possession of Supplier, Supplier shall be liable only for the cost of
repair or replacement as if the lost or damaged original were a copy.

22.0   Favored Nations:

  22.1   As to Significant Companies. In the event Supplier sells any
Manufacturing Services to a Significant Company under similar or more favorable
(to the other customer) terms and conditions to those described in Sections 1.0
through 10.0, 13, 21 and 25 herein for net prices for such Manufacturing
Services (including all discounts, rebates and all other economic-related
considerations) lower than those then in effect for Customer under Section 10.0
and this Section 22.1, Supplier will lower Customer’s prices for such
Manufacturing Services such that they are equivalent to the prices paid by said
Significant Company effective as of the date of the first invoice to the
Significant Company, and for the duration that such Significant Customer
receives such lower prices.

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  22.2   As To Other Customers. In the event Supplier sells any Manufacturing
Services under similar or more favorable terms and conditions to those described
in Sections 1.0 through 10.0, 13, 21 and 25 herein to a customer other than a
Significant Company (an “MFN Customer”) for net prices for such Manufacturing
Services (including all discounts, rebates, and all other economic related
considerations) lower than those then in effect for Customer under Section 10.0
and Section 22.1 (said lower configuration price(s) called the “MFN
Configuration Price”), Supplier will:

  (a)   immediately notify Customer in writing of such sale and the pricing
therefor; and     (b)   15 days following the end of each calendar quarter
during which the MFN Customer receives the MFN Configuration Price, issue the
Customer a credit to Customer’s payables equal to the number of units for each
configuration sold to the MFN Customer(s) multiplied by the MFN Factor shown in
Schedule 22.0.

  22.3   For purposes of clarity, only Section 22.1 or Section 22.2 shall apply
to any one sale to another customer, but each section may be used multiple
times, whether for the same or different customers, and both sections may be
operative at the same time (e.g., (1) if Significant Company A receives a lower
price than Customer, Customer’s prices shall be adjusted under Section 22.1, and
if Significant Company B receives an even lower price than Customer’s adjusted
prices, Customer’s prices shall be reduced again; (2) If MFN Customer I receives
a lower price than Customer, Customer shall receive a rebate as to MFN Customer
I under Section 22.2, and if MFN Customer II receives a lower price than
Customer (but not as low as MFN Customer I), Customer shall also receive a
rebate as to MFN Customer II under Section 22.2(calculated for that MFN Customer
II), and (3) if Customer’s prices are lowered as a result of Section 22.1, and
then an MFN Customer receives an even lower price, Customer shall retain the
prices set pursuant to Section 22.1, and shall be entitled to the rebate set
forth in Section 22.2 for the latter sale).

    Notwithstanding any other provision of this Section 22, Customer shall
receive no price adjustment or other benefit under this Section 22: (a) with
respect to orders from other Supplier customers which are Spot Market Orders, or
(b) with respect to orders from other Supplier customers which are not
Significant Companies and which are fulfilled using assets and facilities other
than those purchased or leased by Supplier from Customer under the Share
Purchase Agreement or Lease Agreement, or (c) with respect to orders from a
Significant Company if such orders are fulfilled using assets and facilities
purchased by Supplier from such Significant Company.   23.0   Audit Rights:

  (a)   Customer shall have the right to inspect Supplier’s books and records
related to its performance under this Agreement, including Section 22.0 hereof,
provided such

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      right shall not be exercised more than once per calendar year and
provided, further, that any information subject to a confidentiality agreement
with a third party shall only be subject to inspection by an independent third
party auditor hired by Customer that enters into a confidentiality agreement
with Supplier that maintains the confidentiality of third party information and
permits the auditor to report on Supplier’s performance to Customer. Such audits
shall be performed with reasonable advance written notice, during normal
business hours, and in a manner not disruptive of Supplier’s operations.    
(b)   Supplier shall have the right to inspect Customer’s books and records
related to its performance under Section 4.1 of this Agreement, provided such
right shall not be exercised more than once per calendar year and provided,
further, that any information subject to a confidentiality agreement with a
third party shall only be subject to inspection by an independent third party
auditor hired by Supplier that enters into a confidentiality agreement with
Customer that maintains the confidentiality of third party information and
permits the auditor to report on Customer’s performance to Supplier. Such audits
shall be performed with reasonable advance written notice, during normal
business hours, and in a manner not disruptive of Customer’s operations.

24.0   Notice:       All notices, requests, claims, demands and other
communications hereunder shall be in writing (in the English language) and shall
be given or made (and shall be deemed to have been duly given or made upon
receipt) by delivery in person, by courier service, by telecopy or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
Parties at the following addresses (or at such other address for a Party as
shall be specified in a notice given in accordance with this Section 24.0):  
    If to CUSTOMER:       Universal International Music, B.V.
Gerrit van der Veenlaan 4
3743 DN Baarn
The Netherlands
Attn: The Directors
Fax: +31 35 6245 796       With a copy to:       General Counsel
Universal Music International Ltd
8 St. James’s Square
London SW1Y 4JU
England
Fax: 44 20 7747 4473

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    If to SUPPLIER:       Entertainment Distribution Company
c/o Glenayre Technologies, Inc.
11360 Lakefield Drive
Duluth, Georgia 30097
Attn: Chief Financial Officer
Telephone: (770) 283-2525
Fax: (770) 497-3992       With copies to:       Entertainment Distribution
Company LLC
360 Madison Avenue
Suite 500
New York, NY 10017
Attn: Chief Financial Officer
Telephone: (212) 981-6917
Fax: (212) 869-6418       and       Greenberg Traurig, LLP
3290 Northside Parkway, N.W.
Suite 400
Atlanta, GA 30327
Attn: James Altenbach
(678) 553-2212

    Any notice delivered after 5:00 p.m. (local time of recipient) shall be
deemed delivered on the next business day following. For this purpose, “business
day” means any day other than a Saturday, Sunday, or a day which is a public
holiday in the place both of dispatch and of the recipient of the notice.  
25.0   Force Majeure:

  25.1   Notwithstanding any provision hereof to the contrary, Supplier shall
not be liable for any damages incurred by Customer or payments, debits or
credits hereunder whatsoever due to delays or failures in Supplier’s performance
of its obligations under this Agreement due to a Force Majeure Event, and such
delays or failures shall not be deemed a breach of this Agreement.     25.2  
Immediately upon becoming aware of the Force Majeure Event, Supplier will (a)
use commercially reasonable efforts to end or circumvent the Force Majeure
Event, (b) keep Customer apprised of those efforts on a timely basis, and
(c) communicate with, coordinate with and assist Customer in resolving any
impact on Customer caused by the Force Majeure Event.

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  25.3   If a Force Majeure Event continues for a period longer than [*****]
days, then Customer shall have the right to place Orders during the pendency of
such Force Majeure Event with other manufacturing companies, provided that
(a) such Orders shall not be for volumes in excess of the volumes Customer would
ordinarily contract for during such period, and (b) upon notice from Supplier
that Supplier can resume performance under the terms of this Agreement, Customer
shall cease placing such Orders with such third parties and place them with
Supplier under the terms of this Agreement.     25.4   Notwithstanding the
[*****]-day period in Section 25.3, if there would be no doubt in the mind of a
reasonable person that Supplier would be unable to resume performance under the
terms of this Agreement within [*****] days of the Force Majeure Event, then
Customer shall have the right to immediately seek the remedy provided under
Section 25.3, without waiting for the [*****] day period to elapse; provided,
however, that Customer shall consult with Supplier and coordinate its activities
with Supplier’s in such circumstance.

26.0   Designated Person:       Customer and Supplier each agree that each will
designate a single organization, department, and/or person to be the primary
point of contact with the other with the ability to take action as may be
required pursuant to this Agreement.   27.0   Anti-Piracy:       Supplier agrees
to either maintain, or obtain within 1 year of the Effective Date of this
Agreement and subsequently maintain, IRMA (or its successor body’s) Anti-Piracy
Certification at its Hanover location during the term of this Agreement, unless
(i) IRMA ceases to provide this certification, or (ii) it obtains Customer’s
written approval that it need not comply with this section.   28.0   Press
Aheads:       Supplier is prohibited without Customer’s prior written approval
from pressing ahead stock of Customer or from retaining over-pressings or
keeping stock of semi-finished product in anticipation of future Customer
orders. To avoid possible capacity bottle necks in the quarters ended September
and December, the Parties will agree in good faith the terms applicable to a
“press aheads” program, if so required.   29.0   Consents and Approvals:      
Neither Party shall unreasonably withhold, condition or delay any consents,
authorizations or approvals required under this Agreement.   30.0   Employee
Purchase Program:       Supplier’s employees located in Hanover will have the
benefit of the employee product purchase plan in effect as of the Effective Date
unless and until modified by Customer.

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    All orders and sales of Product pursuant to such employee product purchase
plan shall be made through Supplier, which shall be responsible for all payments
therefor. Customer shall not be required to pay any fee in connection with such
sales.   31.0   Governing Law:       The Agreement shall be governed by the laws
of the State of New York without giving effect to any applicable conflict of
laws provisions.   32.0   Counterparts:       This Agreement may be executed in
one or more counterparts (and by facsimile), all of which shall be considered
one and the same agreement, and shall become effective when one or more
counterparts have been signed by each of the Parties and delivered to the other
Parties.   33.0   Enforcement:       Customer shall be entitled to enforce the
provisions of this Agreement on behalf of each member of the Universal Music
Group who places Orders with Supplier. Customer shall be responsible for all
actions or omissions by such parties as if such actions or omissions were
Customer’s hereunder.

              Supplier   Customer
 
           
By:
  /s/ Yorek Koehn      /s/ B. Weichmann   By:   /s/ C. Van Dijk      /s/ Th.
Roos              
 
           
Its:
  Yorek Koehn      Dr. Bodo Weichmann   Its:   Director       Director

             
Date:
  May 31, 2005   Date:   May 31, 2005

Manufacturing Agreement Signature Page

 

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SCHEDULE 2.0

Definitions

The following capitalized terms shall have the meanings attributed to such terms
in the following subsections.

“2003 Product Mix” means the Universal Music Group’s 2003 Manufacturing
Requirements expressed as a product mix on a line-item-by-line-item basis and
included on Schedule 10.1.

“Affiliate” means, as to any person or entity, any person or entity controlling,
under common control with or controlled by such person or entity.

“Aggregate 2003 Manufacturing Costs” means the total cost of operating Supplier
facility in calendar year 2003 after certain adjustments mutually agreed between
the Parties, and set forth on Schedule 12.2 (d).

“Allocated 2003 Manufacturing Costs” means the Aggregate 2003 Manufacturing
Costs divided by the Total Volume and allocated to CD and DVD replication (as
shown in Schedule 12.2(d)) which results in the departmental cost per disc
included in the disc price set forth in Schedule 10.1.

“Booked-On” means to book onto Supplier’s warehousing computer system and make
available for pick, pack and ship activities.

“Business Day” means any weekday on which banks in the federal state of Lower
Saxony, Germany are open.

“CD” means optical discs (CD-Audio and CD-ROM) in all formats manufactured by
Supplier prior to the Effective Date and any optical disc of any diameter or
shape that is consistent with Phillips Red, Yellow, Green and Orange Book
Standards or any Philips specification for Non-Standard CDs.

“Change of Control” means the acquisition by a Competitor, directly or
indirectly, and whether by sale, pledge, proxy agreement or otherwise, of
[*****]% or more of the voting or equity economic interests in Supplier, or the
sale of all or substantially all of Supplier’s assets to a Competitor.

“Competitor” means any entity owned or controlled by a Major Music Company or
one of its Affiliates.

“Cost-Based Optical Discs” means CD’s and, if and for the time period that
Customer is purchasing any other Optical Discs hereunder on a cost-based basis
under any provision of this Agreement, such other Optical Discs.

“Drop Shipment” means (a) a direct shipment to an NDU or its distributor or,
(b) to a customer of Customer in quantities no less than [*****] of any SKUs
shipped in such shipment.

-47-

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“DVD” means the following optical disc formats: DVD-V, 5 and 9; SACD non-hybrid
5 and 9.

“European Countries” means Austria, Belgium, Czech Republic, Denmark, Finland,
France, Germany, Hungry, Ireland, Italy, Luxemburg, Malta, Poland, Portugal,
Slovakia, Slovenia, Spain, Sweden, The Netherlands, the United Kingdom, Norway
and Switzerland.

“Effective Date” means the date of the Closing of the Share Purchase Agreement,
as such term is defined in the Share Purchase Agreement.

“Facility Fixed Costs” means all fixed cost categories referred to in the
Aggregate 2003 Manufacturing Costs.

“Force Majeure Event” means fire, flood, storm, earthquake, landslide, volcanic
activity or other acts of God; acts of terrorism or vandalism; riot, war, civil
disturbance or insurrection; strikes, lockout or other labor unrest; power,
transportation, Internet or other utility or carrier delays or outages,
interference by any governmental authority, or any other event(s) beyond the
reasonable control of Supplier (including a computer virus beyond a party’s
reasonable control).

“IMS Service” means the import music services activity of Supplier and of
Universal Music Group members by which certain Optical Discs are imported into
the Territory with packaging and labeling intended for distribution.

“International Distribution Agreement” means that certain Distribution and
Related Services Agreement, by and between Supplier and Customer, entered into
on the Effective Date.

“Label” means a record sales and marketing company.

“Late Order Fee” is a Euro number equal to (a) the number of Optical Discs
Supplier is obligated to Tender in such Work Week pursuant to the terms of this
Agreement minus the number of those Optical Discs actually Tendered in such Work
Week, times (b) [*****]. For purposes of this definition, Excess Orders shall
not be subject to a Late Order Fee unless Supplier notifies Customer that it
will fulfill such Excess Orders and such Excess Orders thereafter become
Workable Orders.

“Lease Agreement” means that certain Lease Agreement as defined in the Share
Purchase Agreement.

“Lost Inventory” shall be calculated on a component reference number by
component reference number basis (each such unique component an “Inventory
Component”), subtracting as of a particular date the Amount Used of such
Inventory Components and the Actual Inventory of such Inventory Component from
the Amount Delivered, where (i) “Amount Used” means the quantity of such
Inventory Components manufactured by Supplier into products prior to the
particular date, (ii) “Amount Delivered” means the quantity of such Inventory
Components delivered by Customer’s vendor to Supplier

-48-

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(based on receiving information supplied by Supplier) prior to the particular
date, and (iii) “Actual Inventory” means the quantity of such Inventory
Components on-hand as determined by a physical count as of the particular date.

“Major Music Company” means Sony-BMG Music Entertainment, Inc, EMI Group Plc and
Warner Bros. Records, Inc or any of their successors.

“Manufacturing Requirements” means, as applied to a member of the Universal
Music Group, (a) all requirements by the member of the Universal Music Group for
Manufacturing Services for its own account with respect to (i) Optical Discs to
be sold within the Territory and (ii) Optical Discs to be exported from the
Territory by any Universal Music Group member located within the Territory, and
(b) any requirements for Manufacturing Services for a third-party’s account with
respect to Optical Discs to be sold within the Territory by such third party,
for as long as any Universal Music Group member has the contractual right to
control the identity of the provider of the Manufacturing Services to such third
party, provided that such Universal Music Group member had such right as the
Effective Date.

“Manufacturing Services” means mastering of Customer supplied files, molding and
printing Optical Discs, assembling of Optical Discs into designated
configurations with Supplier or Customer components, the Specific Related
Services described in Section 7 of the Agreement and any service or activity
priced pursuant to Section 10.1. The term “Manufacturing Services” means any
particular Manufacturing Service as well as all Manufacturing Services
collectively.

“Maximum Weekly Disc Orders” means the product of [*****] times the first Work
Week Forecast for such Work Week provided by Customer to Supplier pursuant to
Section 6.1. As an example, on April 2, 2005, the forecast would for the first
time include a Work Week Forecast for the Work Week commencing April 25, 2005;
assume that Work Week Forecast for April 25, 2005 shows a forecasted need of
[*****] Optical Discs. On April 9, 2004, the forecast again includes a Work Week
Forecast for the Work Week commencing April 25 2005, now revised to show a
forecasted need of [*****] Optical Discs. The Maximum Weekly Disc Orders for the
Work Week commencing April 25, 2005 [*****], based on the first forecast
provided by Customer for such week.

“Minimum Installed Daily Capacity of CDs” means the minimum installed daily
capacity of Supplier for CDs, [*****]. “Minimum Installed Daily Capacity of
DVDs” means the minimum installed daily capacity of Supplier for DVDs, [*****].
“NDU” means a distribution facility in any location owned and/or used by the
Universal Music Group.

“NDU Orders” means orders of Optical Disc units which are both (a) shipped to an
NDU, and (b) for which Optical Disc RSC is not holding stock.

“New Formats” means all optical disc formats except for (a) CDs and DVDs
currently manufactured by Supplier immediately prior to the Effective Date and
(b) Other Existing Formats.

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“New Formats Manufacturing Requirements” means, as applied to a member of the
Universal Music Group, (a) all requirements by the member of the Universal Music
Group for New Formats Manufacturing Services for its own account with respect to
(i) New Formats to be sold within the Territory and (ii) New Formats to be
exported from the Territory by any Universal Music Group member located within
the Territory, and (b) any requirements for New Formats Manufacturing Services
for a third party’s account with respect to New Formats to be sold within the
Territory for as long as any Universal Music Group member has the unilateral
contractual right to control the identity of the provider of the New Formats
Manufacturing Services to such third party, provided that such Universal Music
Group member had such unilateral right as of the Effective Date.

“New Formats Manufacturing Services” means mastering, manufacturing, assembly of
New Formats into designated configurations with Supplier or Customer components,
the Specific Related Services described in Section 7 of the Agreement and any
related service or activity priced pursuant to Section 10.1. The term “New
Formats Manufacturing Services” means any particular New Formats Manufacturing
Service as well as all New Formats Manufacturing Services collectively.

“Optical Discs” means CDs, DVDs and any New Formats for which a price has been
established under Section 10.11.

“Other Existing Formats” means LP vinyl, music cassette, VHS, DVD-Audio and SACD
(to the extent not in the definition of DVD).

“P&D Agreement” means a production and distribution agreement between Customer
and a non-Universal Music Group third party entered into after the Effective
Date, or any other agreement between Customer and a non-Universal Music Group
third party entered into after the Effective Date under which Customer may or
does direct the sourcing of any Manufacturing Services for any such third party.

“Parent” means Universal Music Group, Inc.

“Packaging Components” means bought in from external supplier standard
three-piece jewel boxes, standard two-piece jewel boxes, brilliant-type boxes,
Amaray-type DVD boxes (used for CDs), or any other primary packaging component
that is used in more than [*****] of annual shipments of CDs from Supplier to
Customer in the calendar year.

“Patent Charges” means charges for optical disc patent royalties, copy
protection technology royalties or similar technology license costs incurred by
Supplier in relation to the Manufacturing Services and New Format Manufacturing
Services provided by Supplier to Customer as a result of Customer Orders.

“Prevailing Practices” means the procedures, timeframes, service levels or
response times generally followed and with respect to section 6.5 generally and
in aggregate equivalent to those followed by Supplier during the 12 months prior
to the Effective Date.

“Qualified Manufacturer” means any manufacturer [*****].

-50-

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“Regional Music Company” means as to each country in the Territory, any recorded
music company whose market share in such country is 35% or more of the Universal
Music Group’s market share for music in such country, in each case as measured
in the most recently ended calendar year.

“RSC” means the regional distribution facility owned by Supplier which shall
initially be located in Hanover, Germany

“Significant Companies” means the entities listed on Schedule 22.1.

“Share Purchase Agreement” means that certain Share Purchase Agreement entered
into between Blitz 05-107 GmbH, Supplier and Universal Music GmbH, dated May 31,
2005.

“Special Projects” means (a) joint venture repertoire product which involves a
profit sharing arrangement with any non-Universal Music Group member third party
(such as [*****]); (b) so called non-traditional product such as kiosk sales,
premiums, cover mounts, give-aways and music club product, which are
(i) generally distributed outside normal Universal Music Group retail or
wholesale channels, and (ii) distributed in the Territory; and
(c) non-commercial promotional product for distribution in territories outside
Germany.

“Spot Market Orders” means orders for Manufacturing Services that (i) originate
from a customer that Supplier supplies a small number of orders per year to and
in general does not have an ongoing relationship with; (ii) originate from a
customer for which Supplier does not provide ancillary services such as long
term component storage and promotional mailings; and (iii) are ordered in large
quantities, significantly greater than Customer’s average order size.

“Technical Plan” means Supplier’s technical planning guide, updated on an annual
basis, which sets forth the output of each individual piece of equipment, and a
statement of all of the assumptions upon which such output is based.

“Tender” means making Optical Discs available to RSC or to the selected carrier
for transportation from the Supplier’s facilities and coordinating with and
assisting such carrier, in a manner consistent with Supplier’s prevailing
practices, but does not include actual transportation of the Optical Discs from
the Supplier’s facility.

“Territory” means the United Kingdom, Denmark, Norway, Sweden, Finland, France,
Spain, Portugal, Italy, Germany, Switzerland, Austria, Belgium, the Netherlands
and Luxembourg.

“Transition Services Agreements” means the Bilateral Information Technology
Transition Services Agreement between Supplier and Universal Music International
Ltd.

“Universal Music Group” means (i) Parent, (ii) Customer and (iii) each
subsidiary or Affiliate , directly or indirectly, more than [*****]% owned by
Parent or Customer (or any of their respective successors or permitted assigns).
For purposes of clarity, (i) no

-51-

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entity whose Optical Discs are distributed by a member of the Universal Music
Group (but which is not directly or indirectly more than [*****]% owned by
Parent or Customer) shall be a member of the Universal Music Group, and (ii) on
the date on which an entity is no longer directly or indirectly more than
[*****]% owned by Parent or Customer or their respective successors or permitted
assigns, it shall cease to be a member of the Universal Music Group.

“Working Day” means those days as agreed by Customer and Supplier set forth at
the commencement of the Term as Schedule 2.11 hereto and updated weekly as
mutually agreed upon by Customer and Supplier in connection with the forecasts
provided under Section 6.1.

“Work Week” means a seven-day period commencing on each Sunday during the term
and ending at 11:59 p.m. the next Saturday (regardless of whether any day
therein is a Working Day or Business Day).

-52-

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The following terms have the meanings set forth in the Sections indicated.

      Term   Section  
Act
  14.0
Agreement
  1.0
Arbitral Tribunal
  14.0
ASN
  7.2.2
Associated Terms
  10.11
CAP
  9.2.1
Cure Period
  9.2.2
Customer
  1.0
Direct Distribution
  7.2
EMDE
  8.4
Epidemic Multiple Defectives
  8.4
Excess Order
  6.10
Excluded CDs
  4.1
Failure Notice
  9.1
IBA Rules of Evidence
  14.0
Incremental Volume Offer
  10.6
Incremental Volumes
  10.6
Indemnified Party
  21.0
Indemnifying Party
  21.1
Input Materials
  6.3
Key Failure
  9.1
Late Orders
  6.11
Manufacturing Components
  7.6.1
Market Price Reset Date
  10.11
Market Pricing Notice
  10.11
MFN Configuration Price
  23.2
MFN Customer
  23.2
Non-CD Market Price
  10.11
Order
  6.2
Parties
  1.0
Proposed Prices
  10
Quote Request
  10.11.1
Revised Market Pricing Information
  10.11
Specific Related Services
  7.0
Supplier Incremental Volume Proposal
  10.6
Supplier Pricing Information
  10.11
Supplier
  1.0
Term
  3.1
Transport Charges
  7.2.4
UNCITRAL Rules
  14.0
Uncured Key Failure
  9.2
Work Week Forecast
  6.1
Workable Orders
  6.4

-53-

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SCHEDULE 2.11

Working Days

See attached.

-54-

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Universal Manufacturing & Logistics GmbH
Hannover   Page 41

Working days CD-manufacturing Technical Planning CY 2 0 0 4
(Job time plan: 5 2/3 days a week 01.-37. CW; 7.0 days a week 38.-48. CW, 5
2/3 day a week 47.-52, CW)

                                                                               
                                                                               
                                                              Working days    
JAN       FEB       MAR       APR       MAY       JUN       JUL       AUG      
SEP       OCT       NOV       DEC       Total       monthly     31.0       29.0
      31.0       30.0       31.0       30       31.0       31.0       30.0      
31.0       30.0       31       366.0                                            
                                             
of It:
                                                                               
                                                     
- Saturdays
      5.0         4.0         4.0         4.0         5.0         4.0        
5.0         4.0         4.0         5.0         4.0         4.0         52.0    
 
- Sundays
      4.0         5.0         4.0         4.0         5.0         4.0        
4.0         5.0         4.0         5.0         4.0         4.0         52.0    
 
- Regular working days
      21.0         20.0         23.0         20.0         19.0         22.0    
    22.0         22.0         22.0         21.0         22.0         23.0      
  257.0      
- Holidays
      1.0                             2.0         2.0                          
                                                    5.0                        
                                                                 
Other downtimes, adjustments
                                    2.3         1.0                            
          0.3                             4.3         7.8                      
                                                                   
- Plant holidays
                                                                               
                                                     
- Working on holidays
                                                                               
                                                     
- Adjustment working days
                                                                               
                                    1.3         1.3      
- Holidays on Saturdays
                                    1.0         1.0                            
                                        2.0         4.0      
- Holidays on Sundays
                                    1.0                                        
                                      1.0         2.0      
- Employee meetings
                                    0.3                                        
        0.3                                       0.5                          
                                                               
Available working days
      30.0         29.0         31.0         25.8         28.0         30.0    
    31.0         31.0         29.8         31.0         30.0         26.7      
  353.2                                                                        
                 
- Regular working days
      21.0         20.0         23.0         19.8         19.0         22.0    
    22.0         22.0         21.8         21.0         22.0         21.7      
  255.3      
- Saturdays
      5.0         4.0         4.0         3.0         4.0         4.0        
5.0         4.0         4.0         5.0         4.0         2.0         48.0    
 
- Sundays
      4.0         5.0         4.0         3.0         5.0         4.0        
4.0         5.0         4.0         5.0         4.0         3.0         50.0    
                                                                               
     
Shifts beyond 5 days operation time a week:
      10.0         8.0         8.0         6.0         8.0         8.0        
10.0         8.0         16.0         30.0         16.0         4.0        
132.0                                                                          
               
- on Saturdays
      10.0         8.0         8.0         6.0         8.0         8.0        
10.0         8.0         10.0         15.0         10.0         4.0        
105.0      
- on Sundays
                                                                               
      6.0         15.0         6.0                   27.0                      
                                                                   
Operational working days
      24.3         22.7         25.7         21.8         21.7         24.7    
    25.3         24.7         27.1         31.0         27.3         23.0      
  299.2                                                                        
               

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Universal Manufacturing & Logistics GmbH   Page 42 Hannover           Demand of
working days CD-manufacturing / Utilization          

                                                                               
                                                      Working days     JAN      
FEB       MAR       APR       MAY       JUN       JUL       AUG       SEP      
OCT       NOV       DEC       Total   monthly     31.0       29.0       31.0    
  30.0       31.0       30.0       31.0       31.0       30.0       31.0      
30.0       31.0       366.0                                                    
                             
of it:
                                                                               
                                                 
- Saturdays
      5.0         4.0         4.0         4.0         5.0         4.0        
5.0         4.0         4.0         5.0         4.0         4.0         52.0  
- Sundays
      4.0         5.0         4.0         4.0         5.0         4.0        
4.0         5.0         4.0         5.0         4.0         4.0         52.0  
- Holidays
      1.0                             2.0         2.0                          
                                                    5.0  
- Plant holidays
                                                                               
                                                 
- Adjustment of job time by plant agrrements
                                    0.3                                        
        0.3                             1.3         1.8                        
                                                         
Regular working days
      21.0         20.0         23.0         19.8         19.0         22.0    
    22.0         22.0         21.8         21.0         22.0         21.7      
  255.2                                                                        
         
Demand of working days
      15.1         14.1         16.1         12.5         14.8         14.4    
    16.4         15.4         20.7         24.5         24.6         19.8      
  208.5                                                                        
         
Demand of expension working days
                                                                               
                3.5         2.6                   6.1  
Add. available working time
      3.3         2.7         2.7         2.0         2.7         2.7        
3.3         2.7         5.3         10.0         5.3         1.3         44.0  
                                                                               
 
Needed working time
Days                                                                            
                    3.5         2.6                   6.1  
beyond 5 days a week
Shifts                                                                          
                      10.6         7.8                   18.4                  
                                                                 
Needed days/week
Days       5.0         5.0         5.0         5.0         5.0         5.0      
  5.0         5.0         5.0         5.7         5.7         5.0         5.1  
                                                                               
 
Utilization 7 days a week
%       71.4 %       71.4 %       71.4 %       71.4 %       71.4 %       71.4 %
      71.4 %       71.4 %       71.4 %       81.5 %       80.7 %       71.4 %  
    73.3 %                                                                      
         
Planned operational working days
                                                                               
- Regular working days
      21.0         20.0         23.0         19.8         19.0         22.0    
    22.0         22.0         21.8         21.0         22.0         21.7      
  255.2  
- Saturdays
      3.3         2.7         2.7         2.0         2.7         2.7        
3.3         2.7         3.3         5.0         3.3         1.3         35.0  
- Sundays
                                                                               
      2.0         5.0         2.0                   9.0                        
                                                         
Total working days
      24.3         22.7         25.7         21.8         21.7         24.7    
    25.3         24.7         27.1         31.0         27.3         23.0      
  299.2  

Utilization capacity based on planned operational working days

                                                                               
                                                          Month     JAN      
FEB       MAR       APR       MAY       JUN       JUL       AUG       SEP      
OCT       NOV       DEC       Total      
Demand CD-manufacturing
      6,744         6,018         7,303         6,260         7,760        
7,422         7,371         7,935         11,525         16,173         15,493  
      9,995         110,000      
Bottleneck capacity net
      10,846         9,674         11,635         10,928         11,370        
12,710         11,353         12,748         15,071         20,437        
17,213         11,592         155,576      
Surplus
      4,102         3,656         4,333         4,668         3,610        
5,287         3,982         4,812         3,546         4,264         1,720    
    1,597         45,576      
Utilization capacity
      62.2         62.2         62.8         57.3         68.2         58.4    
    64.9         62.2         76.5         79.1         90.0         86.2      
  70.7    

--------------------------------------------------------------------------------

 

Schedule 4.1(ii)

Third Party Contracts

                                            Contractually           Manufacturer
    Committed Volume     Time period                      
[*****]
    [*****]     [*****]    
 
               
[*****]
    [*****]     [*****]    
 
                                 
 
               
[*****]
    [*****]     [*****]    
[*****]
    [*****]     [*****]    
 
               
 
    [*****]     [*****]    
 
    [*****]     [*****]    
 
               
 
    [*****]     [*****]    
 
    [*****]     [*****]    
 
    [*****]     [*****]    
 
    [*****]     [*****]    
 
               
 
    [*****]     [*****]    
 
    [*****]     [*****]    
 
                               

Customer represents that both contracts allow tolerances of [*****]% at
quarter’s end to be carried forward as excess or shortfall because exact
quantity planning per quarter is not possible.

-57-

--------------------------------------------------------------------------------

 

Schedule 4.1(iii)

Sourcing of UK and French Product

[*****]

-58-

--------------------------------------------------------------------------------

 

SCHEDULE 5.4

Pre-Approved Subcontractors

     [*****]

                                                    Sorting for Waste     Off
Site Storage     Legal Name of                 Disposal / Recycling     Price
per Pallet     Company     Address     Hand packing (€)     (€)     and Month in
€    

[*****]
   

[*****]    

[*****]    

   

[*****]    

[*****]
   

[*****]    

   

   

[*****]    

[*****]
   

[*****]    

[*****]    

   

   

[*****]
   

[*****]    

   

[*****]    

   

[*****] 1)
   

[*****]    

[*****]    

   

[*****]    

--------------------------------------------------------------------------------

1)   Hour rate depends on volume of hours purchased per annum; [*****] hours the
rate will go down.       The pallet store of [*****] can only be used as interim
and in case [*****] is full

-59-

--------------------------------------------------------------------------------

 

SCHEDULE 6.7

Permitted Variances

     All Workable Orders will be subject to variance by Supplier from the
purchase order quantity per the following schedule:

                Order Size     Variance in Units    
200 – 1000
    [*****]    
1001 – 2000
    [*****]    
2001 – 5000
    [*****]    
5001 – 10000
    [*****]    
10001 – 20000
    [*****]    
20001 – 50000
    [*****]    
50001 +
    [*****]    

-60-

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SCHEDULE 7.6.2

Paper Part Procurement Matrix

     [*****]

-61-

--------------------------------------------------------------------------------

 

SCHEDULE 8.2.1

AQL Standards – Required Inspections (CDs)

Finished Goods Audit and Minimum Acceptable Quality Level % For CD

Initial Evaluation Period

     Beginning on the Effective Date and continuing for a period of nine months
(the “Initial Evaluation Period”), the Parties will evaluate the actual
operating quality level. Based upon that evaluation, the Parties will mutually
agree upon the Minimum Acceptable Quality Level for the remainder of the Term.

Audit Plan

     Once per calendar month, Customer will have shipped to Supplier a quantity
of products (“Products” mean finished goods ready for sale to Customers
customer) not to exceed 300 individual items. The products will be selected by
Customer from inventory lots which to the Customer’s best knowledge represent
Product manufactured by Supplier within the most recent 45 days.

Evaluation Process and criteria

     Each individual product will be evaluated by Supplier. Customer may observe
the evaluation process of up to 100% of the Products sent to Supplier, provided
it has given Supplier five Working days notice of its intent to observe said
Evaluation Process. Supplier will evaluate each product by all of the criteria
shown below, determining in each instance if the evaluation result is “Pass” or
“Fail”. The aforementioned collectively is the “Evaluation Process”

                                  Pass/Fail (under                 minimum      
  Minimum   specification=Fail;         Specification   otherwise=Pass)    
Criteria   or   (Yes=Pass)     For CD   Yes/No   (No=Fail)
1
  Bler   <=220 counts    
2
  Burst   <=6    
3
  E32     0      
4
  13-Min l 3 / l top   =>.300    
5
  Eccentricity   <=70    
6
  Birefringence     +/-100      
7
  Print on disc matches music on disc     Y/N      
8
  Disc matches packaging     Y/N      
9
  Print (colors, legibility, etc) on disc matches proof     Y/N      
10
  Wrap tight and neat     Y/N      
11
  No damage in print or jewel case     Y/N      

-62-

--------------------------------------------------------------------------------

 

                                  Pass/Fail (under                 minimum      
  Minimum   specification=Fail;         Specification   otherwise=Pass)    
Criteria   or   (Yes=Pass)     For CD   Yes/No   (No=Fail)
12
  Correct sticker(s)     Y/N      
13
  Stickers in correct position and orientation     Y/N      
14
  Correct and legible spine label     Y/N      
15
  Correct and readable barcode     Y/N      
16
  Correct tray color     Y/N      
17
  Correct position (multidisc sets)     Y/N      
18
  Wrong product in brownpack and /or Wrong content label in brownpack     Y/N  
   

Quality level

     “Fails” in Criteria 1.- 18. are Fatal Errors. In addition, if on any given
product there are 3 or more “Fails” in Criteria 10.-17. that will also be
considered a Fatal Error for that product. The Quality level will be the number
of products in the month with 1 or more Fatal Errors divided by the total number
of products evaluated in the month.

-63-

--------------------------------------------------------------------------------

 

SCHEDULE 8.2.2

AQL Standards – Required Inspections (DVDs)

Finished Goods Audit and Minimum Acceptable Quality Level % For DVD

Initial Evaluation Period

     Beginning on the Effective Date and continuing for a period of nine months
(the “Initial Evaluation Period”), the Parties will evaluate the actual
operating quality level. Based upon that evaluation, the Parties will mutually
agree upon the Minimum Acceptable Quality Level for the remainder of the Term.

Audit Plan

     Once per calendar month, Customer will have shipped to Supplier a quantity
of products (“Products” mean finished goods ready for sale to Customers
customer) not to exceed 300 individual items. The products will be selected by
Customer from inventory lots which to the Customer’s best knowledge represent
Product manufactured by Supplier within the most recent 45 days.

Evaluation Process and criteria

     Each individual product will be evaluated by Supplier. Customer may observe
the evaluation process of up to 100% of the Products sent to Supplier, provided
it has given Supplier five Working days notice of its intent to observe said
Evaluation Process. Supplier will evaluate each product by all of the criteria
shown below, determining in each instance if the evaluation result is “Pass” or
“Fail”. The aforementioned collectively is the “Evaluation Process”

                                  Pass/Fail (under                 minimum      
  Minimum   specification=Fail;         Specification   otherwise=Pass)    
Criteria   or   (Yes=Pass)     For CD   Yes/No   (No=Fail)
1
  P1 Error   < 280      
2
  Radial 1   < 22    
3
  P0 fails     0      
4a
  I 14 H     18-30      
4b
  I 14 V   < 0.15    
4c
  I V D   < 0.33    
5
  Eccentricity   < 50    
6a
  Birefringence     +/- 100      
6b
  Jitter   Max. 8    
7
  Print on disc matches content on disc     Y/N      

-64-

--------------------------------------------------------------------------------

 

                                  Pass/Fail (under                 minimum      
  Minimum   specification=Fail;         Specification   otherwise=Pass)    
Criteria   or   (Yes=Pass)     For CD   Yes/No   (No=Fail)
8
  Disc matches packaging     Y/N      
9
  Print (colors, legibility, etc) on disc matches proof     Y/N      
10
  Wrap tight and neat     Y/N      
11
  No damage in print or jewel case     Y/N      
12
  Correct sticker(s)     Y/N      
13
  Stickers in correct position and orientation     Y/N      
14
  Correct and legible spine label     Y/N      
15
  Correct and readable barcode     Y/N      
16
  Correct tray color     Y/N      
17
  Correct position (multidisc sets)     Y/N      
18
  Wrong product in brownpack and /or Wrong content label on brownpack     Y/N  
   

Quality level

     “Fails” in Criteria 1.- 9. are Fatal Errors. In addition, if on any given
product there are 3 or more “Fails” in Criteria 10.-17. that will also be
considered a Fatal Error for that product. The Quality level will be the number
of products in the month with 1 or more Fatal Errors divided by the total number
of products evaluated in the month.

-65-

--------------------------------------------------------------------------------

 

SCHEDULE 9.1

Key Failure Events (Manufacturing)

                            Definition and     KPI Repeated Failure     KPI    
Performance Standard     Event    
Weekly Production
    Making and tendering Customer’s aggregate Workable Orders due of Optical
Discs in a Work Week as described in Section 6.11(a)     Supplier fails to
perform in accordance with Section 6.11(a) for any [*****] Work Weeks in a
[*****]-rolling-week period    
Order Tendering
    Meeting lead time parameters as described in Sections 6.5 and 6.6, subject
to Section 6.10     Except with respect to Excess Orders under Section 6.10,
Supplier fails to perform in accordance with Section 6.11(a) or 6.11(b) for any
[*****] Work Weeks in [*****]-rolling-week period    
Quality
    Maintaining average outgoing quality level as described in Section 8.2    
Supplier fails to achieve AQL defined in Section 8.2 and Schedule 8.2 for any
[*****] months in a rolling [*****]-month period    
Multiple Defective
    Avoiding Epidemic Multiple Defective Events (EMDEs) as described in
Section 8.4     [*****] EMDE’s in any calendar [*****] or [*****] EMDE’s in any
calendar [*****] or [*****] EMDE’s in any rolling [*****] months    

-66-

--------------------------------------------------------------------------------

 

SCHEDULE 10.1

Pricing

     [*****]

-67-

--------------------------------------------------------------------------------

 

SCHEDULE 10.3.4

Packaging Component Reference Prices

     [*****]

-68-

--------------------------------------------------------------------------------

 

SCHEDULE 12.2d

Bare Disc Material Cost

     [*****]

-69-

--------------------------------------------------------------------------------

 

Schedule 12.2G

     [*****]

-70-

--------------------------------------------------------------------------------

 

SCHEDULE 22.1

Significant Customers

Each Major Music Company

Each Regional Music Company

-71-