C 0 M P R E H E N S I V E - C D D I S C

                        L I C E N S E A G R E E M E N T

     AGREEMENT, having an effective date of January 1, 1996 by and between U.S.
Philips Corporation having its principal office at 580 White Plains Road,
Tarrytown, New York 10591 (hereinafter referred to as "USPC") and Hauppauge
Record Manufacturing having its principal office at 15 Gilpin Avenue, Hauppauge,
New York 11788 (hereinafter referred to as "Licensee").

     WHEREAS, the Philips' Group of Companies (hereinafter referred to as
"Philips") has for many years been engaged in research and development of
systems, in which signals encoded in digital form and stored on a disc are read
and reproduced by means of devices using an optical read out beam, and has
obtained valuable know-how and experience thereby;

     WHEREAS, one of the achievements of such research and development efforts
was a new and revolutionary high-fidelity sound storage and reproduction system,
which was further developed and defined in a cooperation with Sony Corporation
of Japan and has been jointly presented under the name "Compact Disc Digital
Audio System" (CD-A);


                                       1
<PAGE>

     WHEREAS, on the basis of this "Compact Disc Digital Audio System" three
further systems have been defined in a cooperation with Sony Corporation of
Japan and have been jointly presented under the names "Compact Disc Data System"
(CD-ROM);"CDV System (CDV) and "Compact Disc Interactive System" (CD-i);

     WHEREAS, a multi-session CD system has been defined by Philips and Sony and
jointly presented under the name "Enhanced Music Compact Disc System", which
system is capable of storing sound and data respectively in two sessions on an
optical disc;

     WHEREAS, Licensee desires the right to manufacture and sell discs utilizing
any or all of the above CD-A, CD-ROM, CDV, CD-i and Enhanced Music CD Systems
(jointly hereinafter referred to as "CD Systems", and wishes such discs to be
interchangeable with the discs manufactured and sold by the Philips' Group of
Companies and others utilizing such CD-Systems;

     WHEREAS, USPC owns and/or controls the right to license patent rights
pertinent to the CD-Systems and owns additional patent rights pertinent to
optical disc manufacturing in general;


                                       2

<PAGE>

     WHEREAS, USPC has been authorized by Sony to license patents owned by Sony
and indicated on the Exhibits hereto under the terms and conditions specified
herein, while Sony retains the right to also license such patents;

     WHEREAS, Licensee understands that USPC is willing to license any one or
more patents owned by it for optical disc manufacturing, whether within or
outside(1) of the Standard Specifications defining the CD Systems on reasonable
terms and conditions; and

     WHEREAS, in furtherance of Licensee's efforts to manufacture and sell discs
which are interchangeable within the respective CD-Systems, Licensee has
requested USPC for a license under patent rights pertinent to the CD-Systems,
which USPC has the free right to license, and, in addition, has requested USPC
to disclose and make available certain basic information on the CD-Systems;

     NOW, THEREFORE, in mutual consideration of the premises and the faithful
performance of the mutual covenants

----------
(1) or further information please contact Michael E. Marion, U.S. Philips
Corporation, 580 White Plains Road, Tarrytown, NY 10591


                                        3

<PAGE>

hereinafter set forth, the parties hereto have agreed as follows:

                             Article I - DEFINITIONS

      As used in this Agreement the following terms shall have the following
meanings, unless the context clearly requires otherwise: 

1.01 Disc - any non-recordable, reflective, disc-shaped information carrier
     comprising any kind of information such as, but not limited to,
     audio/video/text/data related information, which information is
     irreversibly stored in a layer during and as an integral part of the
     manufacturing process of the disc, in a form which is optically readable by
     playback devices.

1.02 CD-Audio Disc - any Disc comprising audio information encoded in digital
     form, which is optically readable by a CD-Audio-Player (as hereinafter
     defined) and conforms to the CD-Audio Standard Specifications (as
     hereinafter defined).

1.03 CD-ROM Disc - any Disc comprising information encoded in digital form,
     which is optically readable by a CD-ROM Player (as hereinafter defined) and
     conforms to either the


                                        4

<PAGE>

     CD-ROM Standard Specifications (as hereinafter defined) or the CD-ROM(XA)
     Standard Specifications (as hereinafter defined).

1.04 CD-i Disc - any Disc comprising any kind of information such as, but not
     limited to audio, video, text and data related information, encoded in
     digital form, which is optically readable by a CD-i Player (as hereinafter
     defined) and conforms to the CD-i Standard Specifications (as hereinafter
     defined).

1.05 CDV-Disc - any Disc comprising television picture information consisting of
     analog video information with digital audio information, and with or
     without additional information to be used for control, retrieval,
     educational and/or instructional purposes in relation to the visual display
     of said television picture information, which is optically readable by a
     CDV-Player (as hereinafter defined) and conforms to the CDV-Standard
     Specifications (as hereinafter defined).

1.06 Enhanced Music CD Disc - any disc comprising any kind of information such
     as, but not limited to, audio, video, text and data related information
     encoded in digital form


                                        5

<PAGE>

     and which conforms to the Enhanced Music CD-Standard Specifications (as
     hereinafter defined).

1.07 CD-Audio Standard Specifications - the specifications for the
     CD-Audio-Disc/Player parameters as made available, modified or added to
     from time to time in accordance with the provisions of Article III hereof.

1.08 CD-ROM Standard Specifications - the specifications for the CD-ROM
     Disc/Player parameters as made available, modified or added to from time to
     time in accordance with the provisions of Article III hereof.

1.09 CD-ROM(XA) Standard Specifications - the specifications for the CD-
     ROM(XA)Disc/Player parameters as made available, modified or added to from
     time to time in accordance with the provisions of Article III hereof.

1.10 CD-i Standard Specifications - the specifications for the CD-i Disc/Player
     parameters (as hereinafter defined) as made available, modified or added to
     from time to time in accordance with the provision of Article III hereof.

1.11 CDV-Standard Specifications - the NTSC and/or PAL specifications for the
     CDV-Disc/Player parameters as made available, modified or added to from
     time to time in


                                        6

<PAGE>

     accordance with the provisions of Article III hereof.

1.12 Enhanced Music CD-Standard Specifications - the specifications for the
     Enhanced Music CD-Disc/Player parameters as made available, modified or
     added to from time to time in accordance with the provisions of Article III
     hereof.

1.13 Player - any playback device for optically reading information stored on a
     Disc and converting such information into electrical signals for
     reproduction purposes.

1.14 CD-Audio Player - a Player which is designed and manufactured solely for
     the reproduction of information stored on a CD-Audio Disc and conversion of
     such information, which is bit-encoded according to the CD-Audio Standard
     Specifications, into electrical signals by means prescribed in the CD-Audio
     Standard Specifications, which electrical signals are directly capable and
     intended to be used for sound reproduction through amplifiers and
     loudspeakers.

1.15 CD-ROM Player - a Player which is designed and manufactured solely for the
     reproduction of information


                                        7

<PAGE>

     stored on a CD-ROM Disc and conversion of such information, which is
     bit-encoded according to the CD-ROM Standard Specifications, into
     electrical signals by means prescribed in the CD-ROM-Standard
     Specifications, which electrical signals are directly capable and intended
     to be used for reproduction of computer-related-data through data handling
     and/or data processing apparatus.

1.16 CD-i Player - a Player which is designed and manufactured solely for the
     reproduction of any kind of information stored on a CD-i Disc and as
     defined in the CD-i Standard Specifications, and conversion of such
     information, which is bit-encoded according to said CD-i Standard
     Specifications, into electrical signals by means as prescribed in the CD-i
     Standard Specifications, which electrical signals are directly capable and
     intended to be used for reproduction of such information.

1.17 CDV-Player - a Player which is designed and manufactured solely for the
     reproduction of information stored on a CDV-Disc and conversion of such
     information, which is encoded according to the CDV-Standard Specifications,
     into electrical signals by means as prescribed in the CDV-


                                        8

<PAGE>

     Standard Specifications, which electrical signals are directly capable and
     intended to be used for visual reproduction through standard television
     receivers and/or standard television monitors.

1.18 Enhanced Music CD-Player - a Player which is designed and manufactured
     solely for the reproduction of information stored on an Enhanced Music CD
     Disc and conversion of such information, which is bit-encoded according to
     the Enhanced Music CD Standard Specifications, into electrical signals by
     means as prescribed in the Enhanced Music CD Standard Specifications, which
     electrical signals are directly capable and intended to be used for the
     reproduction of audio, video, text and data related information through
     data handling and/or data processing apparatus.

1.19 Combi-Player - a Player which is any combination of a CD-Audio Player, a
     CD-ROM Player, a CD-i Player, a CDV-Player and an Enhanced Music CD Player.

1.20 Licensed Product - any CD-Audio Disc, CD-ROM Disc, CD-i Disc, CDV-Disc or
     Enhanced Music CD Disc.

1.21 Licensed Patents - shall mean the patent rights listed in


                                        9

<PAGE>

     accordance with one of the following license options to be selected by the
     Licensee: 

     (circle type of Licensed Product and Exhibit list of patents on each option
     chosen, whether A or B, for each type of Disc)

     I. Option A: Licensee, at its option, chooses from one or more of the U.S.
     Patents listed on Exhibit I (CD-Audio Disc), Exhibit III (CD-ROM Disc),
     Exhibit V (CD-i Disc), Exhibit VII (CDV Disc), and/or Exhibit IX (Enhanced
     Music CD), and defined herein as Licensed Patents;

OR

     II. Option B: Licensee chooses, at its option, all of the U.S. Patents
     listed on Exhibit II (CD-Audio Disc), Exhibit IV (CD-ROM Disc), Exhibit VI
     (CD-i Disc), Exhibit VIII (CDV Disc), and/or Exhibit X (Enhanced Music CD
     Disc), and defined herein as Licensed Patents.

By __________________________  Date ______________

1.22 Associated Company - any corporation or other legal entity, in which a
     party hereto, Philips Electronics North America Corporation, Philips
     Electronics, N.V. (PENV) of the Netherlands or Sony Corporation of Japan,
     now or


                                       10

<PAGE>

     hereafter controls, directly or indirectly, more than fifty percent (50%)
     of the shares entitled to vote for the election of directors or persons
     performing similar functions, but any such company or other legal entity
     shall be deemed an Associated Company only for as long as such control
     exists.

1.23 Territory - United States of America, its territories and possessions

                              Article II - LICENSES

Subject to the terms and conditions of this Agreement:

2.01 USPC hereby grants to Licensee and its Associated Companies a
     non-exclusive, non-transferable license under Licensed Patents to make, use
     and sell or otherwise dispose of Licensed Products in the Territory, but
     not to have Licensed Products made for it by third parties except as
     provided in Article IV.

2.02 USPC and Sony further agree for a period of ten (10) years from the date of
     this Agreement, to grant Licensee and its Associated Companies a
     non-exclusive, non-transferable license on reasonable, non-discriminatory
     terms comparable to those set forth herein, to make, use, sell or otherwise


                                       11

<PAGE>

     dispose of Licensed Products in the Territory, under any patent rights not
     yet licensed hereunder which are essential to the manufacturing, use or
     sale of Licensed Products, as to which, and to the extent to which, USPC or
     Sony, have, or may hereafter acquire, the free right to grant licenses to
     Licensee and its Associated Companies and which patent rights were first
     filed in any country of the world after December 31, 1982. It is expressly
     understood that in respect of the patent rights to be licensed pursuant to
     this paragraph 2.02 of Article II, paragraph 5.02 of Article V will not be
     applicable and that royalties payable may have to be paid over and above
     the royalties due on the basis of the use of Licensed Patents pursuant to
     paragraph 2.01 of this Article II.

2.03 Finally, USPC and Sony agree for a period of ten (10) years from the date
     of this Agreement to grant Licensee and its Associated Companies upon their
     request and on reasonable, non-discriminating royalty rates and conditions
     to be agreed upon from case to case, a non exclusive, non-transferable
     license to make, use, sell or otherwise dispose of CD-Audio Players, CD-ROM
     Players, CD-


                                       12

<PAGE>

     i Players, CDV-Players and Combi-Players in the Territory, under any or all
     present and future patent rights essential to the manufacture, use or sale
     of such Players, as to which, and to the extent to which, USPC or Sony may
     now have, or may hereafter acquire, the free right to grant licenses to
     Licensee and its Associated Companies for the manufacture, use and sale of
     such Players. It is expressly understood that paragraphs 5.01 and 5.02 of
     Article V shall not in any way be applicable to licenses pursuant to this
     paragraph 2.03 of Article II.

2.04 In consideration of the undertakings set forth in paragraphs 2.01, 2.02 and
     2.03 and similar undertakings by third party licensees of USPC or PENV, for
     a period of ten (10) years from the effective date of this Agreement,
     Licensee, agrees to grant to USPC, Philips Electronics North America
     Corporation, PENV, Sony Corporation of Japan and their respective
     Associated Companies, and to other third parties who have similarly
     entered, or will enter, into a license agreement with USPC, PENV or an
     Associated Company thereof concerning Licensed Products and who have
     elected to accept or will accept a similar undertaking as


                                       13

<PAGE>

     contained in this paragraph 2.04, on reasonable, nondiscriminating
     conditions comparable to those set forth herein, non-exclusive,
     non-transferable licenses to manufacture, use, sell or otherwise dispose of
     Licensed Products under any or all present and future patent rights which
     are essential to the manufacturing, use or sale of Licensed Product, as to
     which, and to the extent to which, Licensee or its Associated Companies may
     now have or may hereafter acquire the right to grant licenses.

2.05 In consideration of the undertakings set forth in paragraphs 2.01, 2.02 and
     2.03 and similar undertakings by third party licensees of USPC or PENV, for
     a period of ten (10) years from the effective date of this Agreement,
     Licensee agrees to grant to USPC, Philips Electronics North America
     Corporation, PENV, Sony Corporation of Japan and their respective
     Associated Companies, and to other third parties who have entered or will
     enter into a license agreement with USPC, PENV or an Associated Company
     thereof concerning Players and who have accepted or will accept a similar
     undertaking as contained in this paragraph 2.05, on reasonable,
     non-discriminating


                                       14

<PAGE>

     conditions to be agreed upon from case to case, nonexclusive,
     non-transferable licenses to manufacture, use, sell or otherwise dispose of
     CD-Audio, CD-ROM, CD-i, CDV, Enhanced Music CD and/or Combi-Players under
     any or all present and future patent rights which are essential to the
     manufacture, use or sale of such Player, as to which, and to the extent to
     which, Licensee or its Associated Companies may now have or may hereafter
     acquire the right to grant licenses.

2.06 To the extent a dispute exists between USPC, Licensee and/or Sony regarding
     whether any patent is "essential" or whether any license offered by
     Licensee, USPC, or Sony pursuant to this Article II is under "reasonable...
     conditions" as those words are used in this Article II then USPC, Sony
     and/or licensee shall submit such dispute to binding arbitration under the
     1992 Patent Arbitration Rules of the American Arbitration Association
     ("AAA"). Such arbitration shall be held before a panel of three arbitrators
     and shall take place in New York, New York. Licensee, USPC and/or Sony each
     shall choose one arbitrator who shall be unaffiliated with the parties and


                                       15

<PAGE>

     who shall have been a member of the bar of the United States Court of
     Appeals for the Federal Circuit for at least the preceding five years. The
     two arbitrators chosen by USPC, Licensee and/or Sony shall then choose a
     third arbitrator who shall also have been a member of the bar of the
     Federal Circuit for at least the preceding five years and who shall serve
     as chairperson of the panel. If the arbitrators chosen by USPC, Licensee
     and/or Sony are unable to agree on a chairperson of the panel within sixty
     days of their designation by USPC, Licensee and/or Sony then such third
     arbitrator shall be chosen in accord with the rules of the AAA. All other
     disputes regarding or relating to this License Agreement other than those
     specified in this paragraph shall not be subject to arbitration.

IT IS EXPRESSLY UNDERSTOOD THAT

(I)  THE LICENSES AND LICENSE UNDERTAKINGS WITH REGARD TO THE MANUFACTURE OF
     LICENSED PRODUCTS DO NOT REFER TO RECORDING MACHINES, OR APPARATUS OR
     METHODS FOR THE MULTIPLICATION OF DISCS, OR APPARATUS OR METHODS FOR THE
     MANUFACTURE OF MATERIALS; NOR DO THE LICENSE UNDERTAKINGS WITH REGARD TO


                                       16

<PAGE>

     THE MANUFACTURE OF PLAYERS EXTEND TO THE MANUFACTURE OF COMPONENTS OF
     PLAYERS SUCH AS, BUT NOT LIMITED TO SEMICONDUCTOR DEVICES, INTEGRATED
     CIRCUITS, LASERS, MOTORS AND LENSES, EXCEPT FOR PATENT RIGHTS PERTAINING TO
     CIRCUITRY AND/OR SYSTEM ASPECTS SPECIFIC TO THE CD-SYSTEMS (AND SIMILAR
     TYPE OPTICAL READ-OUT SYSTEMS), AND

(II) THE RIGHTS AND LICENSES GRANTED PURSUANT TO THIS AGREEMENT DO NOT EXTEND TO
     ANY COMBINATION OF ONE OR MORE LICENSED PRODUCTS WITH ANY OTHER ITEMS,
     PRODUCTS, SYSTEMS, STRUCTURES, APPARATUS OR SOFTWARE.

                     Article III - STANDARD SPECIFICATIONS,
                        TECHNICAL INFORMATION AND SUPPORT

3.01 Upon execution of this Agreement and receipt of the payment provided in
     paragraph 5.01 of Article V, USPC shall make available to Licensee for use
     by Licensee and its Associated Companies a copy of then current version of
     the respective Standard Specifications, together with such information as
     is in USPC's reasonable opinion is required for the interpretation of such
     then current Standard Specifications.

3.02 If USPC in its reasonable opinion determines


                                       17

<PAGE>

     that an addition or modification to any of the Standard Specifications
     should be made, Licensee shall be so notified in writing and be furnished
     with information to assist Licensee in the interpretation of such addition
     and/or modification.

3.03 Insofar as USPC has a free and legal right to do so, USPC further agrees to
     make available to Licensee upon Licensee's request and for use by Licensee
     and its Associated Companies in accordance with the terms of this
     Agreement, such other information, data and material as are, in USPC's
     reasonable opinion, strictly required to manufacture Licensed Products,
     which are interchangeable with Licensed Products made and/or sold by
     Philips.

                             Article IV - HAVE MADE

     The licenses and rights granted to Licensee and its Associated Companies
pursuant to Article II and the right to use the information pursuant to Article
III, include the right for Licensee and its Associated Companies to have third
parties manufacture for Licensee's or its Associated Companies' use and account
with due regard to what has been provided hereinbefore, such Licensed Products
as Licensee and/or its Associated


                                       18

<PAGE>

Companies require in and for their sale of Licensed Products, provided that such
third parties agree to use the information obtained by Licensee pursuant to
Article III only for the manufacture of Licensed Products ordered by Licensee
and its Associated Companies and also agree to observe the secrecy obligations
accepted by Licensee hereunder. As and when the information supplied by USPC to
Licensee pursuant to Article III is supplied by Licensee or an Associated
Company of Licensee to a third party supplier to have such third party supplier
manufacture Licensed Products for Licensee and/or its Associated Companies,
Licensee will notify USPC of the name of such third party supplier and of the
fact that such third party supplier has agreed in writing to the restrictions on
the use of the USPC supplied information to be observed by it.

                   Article V - ROYALTIES, REPORTS AND PAYMENTS

5.01 Upon execution of this Agreement, Licensee will make a non-refundable
     payment of twenty five thousand ($25,000) US dollars to USPC. Said payment
     of twenty five thousand dollars shall not be credited against royalties
     payable hereunder pursuant to paragraph 5.02 of this Article V.

5.02 (A) In the case where Licensee has chosen Option A to


                                       19

<PAGE>

     define Licensed Patents - In consideration of the patent licenses granted
     hereunder by USPC to Licensee, Licensee agrees to pay to USPC royalties as
     follows:

          (a) seven point five U.S. cents ($0.075) for each CDV Disc with an
          outer diameter greater than 130mm; 

          (b) two U.S. cents ($0.02) for each CD-Audio Disc with an outer
          diameter smaller than 90mm; and

          (c) four point five US cents ($0.045) for: 

               -each CD-i Disc; 

               -each Enhanced Music CD Disc; 

               -each CDV Disc with an outer diameter equal to, or smaller than
                    130 mm; and 

               -each CD-Audio Disc with an outer diameter equal to, or greater
                    than, 90mm; 

which is made, used, sold or otherwise disposed of by Licensee or an Associated
Company of Licensee, and in which a Licensed Patent is utilized.

5.02(B) In the case where Licensee has chosen Option B to define Licensed
     Patents - In consideration of the patent licenses granted hereunder by USPC
     to Licensee, Licensee agrees


                                       20

<PAGE>

     to pay to USPC royalties as follows:

          (a) eight U.S. cents ($0.08) for each CDV Disc with an outer diameter
          greater than 130mm;

          (b) two point two U.S. cents ($0.022) for each CD-Audio Disc with an
          outer diameter smaller than 90mm; and

          (c) four point eight US cents ($0.048) for:

               -each CD-ROM Disc;

               -each CD-i Disc;

               -each Enhanced Music CD Disc;

               -each CDV Disc with an outer diameter equal to, or smaller than,
                    130mm; and 

               -each CD-Audio Disc with an outer diameter equal to, or greater
                    than, 90mm;

which is made, used, sold or otherwise disposed of by Licensee or an Associated
Company of Licensee, and in which a Licensed Patent is utilized.

5.03 A Licensed Product shall be considered sold when invoiced, or if not
     invoiced, when delivered to a party other than the manufacturer.

5.04 Within thirty (30) days after the 31st March, the 30th June, the 30th
     September and the 31st December of each


                                       21

<PAGE>

     year during the period this Agreement shall be in force and effect,
     Licensee shall submit to USPC, even if there are no sales, a statement in
     writing, duly certified by an officer of the Licensee, setting forth with
     respect to the preceding quarterly period: 

     (i)  The quantities of Licensed Products sold by Licensee and its
          Associated Companies, specifying the quantities for each of the
          following individual type of Licensed Products:
 
          (a)  CD-Audio Discs with an outer diameter smaller than 90 mm;

          (b)  CD-Audio Discs with an outer diameter greater than 90 mm;

          (c)  CDV Discs with an outer diameter greater than 130 mm;

          (d)  CDV Discs with an outer diameter smaller than 130 mm;

          (e)  CD-ROM Discs;

          (f)  CD-i Discs;

          (g)  Enhanced Music CD Discs; and


                                       22

<PAGE>

     (ii) the royalty payable to USPC as calculated under the terms of this
          Agreement.

     Licensee shall pay to USPC the royalty due hereunder in U.S. dollars
concurrently with submission of the above mentioned statement.

5.05 Royalties shall be due and payable on all Licensed Products manufactured
     prior to, but remaining in stock with Licensee and its Associated Companies
     at the date of expiration or termination of this Agreement. Certified
     reports on the number of Licensed Products in stock at the time of
     expiration or termination of this Agreement shall be submitted to USPC
     within thirty (30) days after such expiration or termination. For the
     purpose of royalty computation it shall be assumed that all Licensed
     Products in stock will be sold, leased or otherwise disposed of in the same
     countries and in proportionally the same quantities as in the last full six
     (6) months period reported on during the term of this Agreement. Payment of
     royalties due shall be effected concurrently with the submission of said
     certified report.

5.06 All payments which are not made on the dates specified


                                       23

<PAGE>

     herein, shall accrue interest at the rate of two percent (2%) per month or
     the maximum permitted by applicable law, whichever is less. 

5.07 All costs, such as stamp duties, taxes and other similar levies originating
     from or in connection with the conclusion of this Agreement shall be borne
     by Licensee. However, in the event that the government of a country imposes
     any income taxes on payments hereunder by Licensee to USPC and requires
     Licensee to withhold such tax from such payments, Licensee may deduct such
     tax from such payments. In such event, Licensee shall promptly furnish USPC
     with tax receipts issued by appropriate tax authorities so as to enable
     USPC to support a claim for credit against income taxes which may be
     payable by USPC and/or its Associated Companies in the Netherlands.

5.08 In order that the royalties and reports provided for in this Article V may
     be verified, Licensee agrees to ensure that full, complete and accurate
     books and records shall be kept covering all sales or other disposal of
     Licensed Products by Licensee and/or its Associated Companies, for a period
     of three (3) years following such sales or other


                                       24

<PAGE>

     dispositions. It is agreed that the books and records of Licensee and/or
     its Associated Companies may be audited from time to time, but not more
     than once in each calendar year, by an independent certified public
     accountant appointed by USPC and reasonably acceptable to Licensee, to the
     extent necessary to verify the accuracy of the aforementioned statements
     and payments. Such inspection shall be completed at USPC's own expense
     provided that if any discrepancy or error exceeding three percent (3%) of
     the money actually due is found in connection with the computation, the
     cost of such inspection shall be borne by Licensee.

5.09 Notwithstanding the provisions of paragraph 5.08 of this Article V,
     Licensee shall furnish whatever additional information as USPC may
     reasonably request from time to time to enable USPC to ascertain which
     products sold, leased or put into use by Licensee and/or its Associated
     Companies are subject to the payment of royalties to USPC hereunder, the
     patent rights which have been utilized in connection with such products,
     and the amount of royalties payable.


                                       25

<PAGE>

                     Article VI - MOST FAVORABLE CONDITIONS

     If under otherwise substantially the same conditions as contained in this
Agreement, licenses under the patent rights referred to and licensed pursuant to
Article II should be granted for Licensed Products to any third party at a
royalty rate more favorable than the rate payable by Licensee under this
Agreement, Licensee shall be entitled to have the royalty rate applicable to it
modified to such extent that the same shall be as favorable as that available to
such third party, provided always that such obligation shall not apply in
respect of cross-license agreements and other agreements, in which the
consideration for such licenses shall not be wholly expressed in payment of
royalties and shall also not apply to licenses or other arrangements made
pursuant to a court decision or a settlement of a dispute between USPC and a
Licensee or between USPC and a third party. Without limiting the foregoing, this
Article VI shall not apply to terms entered into in settlement of a filed court
action regardless of the nature of such action or settlement terms.

                            Article VII - DISCLAIMER

     USPC warrants that it shall furnish the information to be


                                       26

<PAGE>

suppled by it to the best of its ability, but it makes no representation or
warranty as to the value of the information transmitted or the ability of
Licensee to make use thereof to secure interchangability. USPC makes no warranty
whatsoever that the use of information supplied by USPC does not infringe or may
not cause infringement of patent rights owned or controlled by third parties, or
of patent rights owned or controlled by USPC or an Associated Company of USPC
not licensed pursuant to Article II.

     In further certainty the parties of this agreement recognize that third
parties owned patent rights in the field of Licensed Products and Licensee
excepts that USPC makes no warranty whatsoever that any manufacture, use, sale,
lease or other disposition of Licensed Product will be free from infringement of
any patent other than Licensed Patents.

                             Article VIII - SECRECY

     Licensee agrees that, subject to what has been provided for in Article IV
of this Agreement, Licensee and its Associated Companies shall not disclose to
any third party information relative to the manufacture and sale of Licensed
Products acquired from USPC or USPC's Associated Companies.


                                       27

<PAGE>

This obligation, which shall run for the period of this Agreement and for a
period of three (3) years thereafter, shall not apply to the extent information
so acquired:

(a)  was known to Licensee or its Associated Companies prior to the date said
     information was acquired from USPC or its Associated Companies, as shown by
     records of Licensee or any Associated Company of Licensee or otherwise
     demonstrated to Philips' satisfaction;

(b)  is or has become available to the public in general through no fault of
     Licensee or its Associated Companies;

(c)  was or is received from a third party who was free and had a legal right to
     disclose the same.

     In protecting information acquired from USPC or their Associated Companies
pertaining to Licensed Products, Licensee has agreed that Licensee and its
Associated Companies will take all necessary measures and precautions,
including, but not limited to, measures requiring their present and future
employees to give suitable undertakings of secrecy both for the period of their
employment and thereafter, and that in general such information will be treated
in the same manner and with the same degree of care as Licensee applies and has
applied to


                                       28

<PAGE>

its own information of a sensitive or confidential nature.

                      Article IX - PATENT MARKINGS AND LOGO

9.01 If requested by USPC, Licensee shall place appropriate patent markings on
     an exposed surface of the Licensed Products made, used, sold and/or
     otherwise disposed of hereunder. The content, form, location and language
     used in such markings shall be in accordance with the laws and practices of
     the country, where such markings are used.

9.02 In addition, Licensed Products may be provided with respective logos in
     accordance with the instructions laid down in the CD Logo Guide which is
     available from USPC on request (hereinafter referred to as "the Logo"). In
     advertisements and sales literature with respect to Licensed Products sold
     by Licensee and/or its Associated Companies the Logo may similarly be used
     and applied.

9.03 USPC grants Licensee and its Associated Companies a royalty free,
     non-exclusive, non-transferable, indivisible right to use the Logo on and
     with respect to Licensed Products manufactured by or for Licensee and/or
     its Associated Companies in accordance with the instructions laid down in
     Exhibit AA.


                                       29

<PAGE>

9.04 Licensee understands and agrees that USPC makes no warranty whatsoever that
     any use of the Logo will be free from infringement of intellectual property
     rights owned by third parties.

                             Article X - ASSIGNMENT

     This Agreement shall inure to the benefit of and be binding upon each of
the parties hereto and their respective assigns. It may not be assigned in whole
or in part by Licensee without the prior consent in writing of USPC except to
the surviving corporation of a merger, consolidation or other transfer of all or
substantially all the assets of Licensee and except that Licensee may assign
this Agreement to one of its Associated Companies provided that Licensee remains
liable hereunder and the transferee has the capability to perform all
obligations to be performed hereunder.

                        Article XI - TERM AND TERMINATION

11.01 This Agreement shall be effective from the date first written above, if
      and unless otherwise terminated shall remain in force for a period of ten
      (10) years from the effective date of this Agreement. Notwithstanding the


                                       30

<PAGE>

      foregoing, this Agreement shall expire on the expiration date of the last
      to expire of the Licensed Patents licensed and referred to in Article II.

11.02 Either party may terminate this Agreement at any time on thirty (30) days
      notice to the other party in the event that the latter shall fail to
      perform any obligation under this Agreement and such default is not
      remedied within thirty (30) days after receipt of a notice specifying the
      nature of the default. Such right of termination shall not be exclusive of
      any other remedies or means of redress to which the non-defaulting party
      may be lawfully entitled, it being intended that all such remedies shall
      be cumulative. Any such termination shall not affect any payments, the
      rights to which may have fallen due under this Agreement prior to such
      termination. Notwithstanding anything to the contrary herein, USPC shall
      have the right, at its sole option and discretion, to terminate this
      Agreement without advance notice (but with written notice) in the event
      that Licensee shall fail to abide by the obligations as set forth in
      Article V hereof for three (3) consecutive quarters.


                                       31

<PAGE>

11.03 The obligations set forth in paragraphs 2.02, 2.03, 2.04, 2.05, 5.05,
      12.05 and Article VIII shall survive termination of this Agreement.
      Notwithstanding the foregoing, in the event termination is due to the
      breach of the Agreement by Licensee, paragraphs 2.02 and 2.03 shall not
      survive termination.

11.04 If Licensee should be dissolved or file a voluntary petition in bankruptcy
      or seek any court or governmental protection from creditors or make any
      assignment for creditors, or should an order be entered pursuant to any
      law relating to bankruptcy or insolvency appointing a receiver or trustee
      for Licensee, and if any such receivership is not terminated within sixty
      (60) days, then, in any of the events specified in this paragraph 11.04,
      USPC may give written notice to Licensee terminating this Agreement and
      this Agreement shall be terminated in accordance with the notice.

                           Article XII - MISCELLANEOUS

12.01 This Agreement sets forth the entire agreement and understanding between
      the parties as to the subject matter hereof and merges all prior
      discussions between them and


                                       32

<PAGE>

      neither of the parties shall be bound by any conditions, definitions,
      warranties, waivers, releases or representations (either expressed or
      implied) with respect to the subject matter of this Agreement, other than
      expressly provided for herein, or as duly set forth on or subsequent to
      the date hereof in writing signed by a duly authorized representative of
      the party to be bound thereby.

12.02 Nothing contained in this Agreement shall be construed:

      (a)   as imposing on either party any obligation to institute any suit or
            action for infringement of any of the patent rights licensed
            hereunder or to defend any suit or action brought by a third party
            which challenges or concerns the validity of any of such patent
            rights, it being expressly understood that Licensee shall have no
            right to institute any such suit or action for infringement of any
            of the patent rights licensed by USPC hereunder, nor the right to
            defend any such suit or action which challenges or concerns the
            validity of any such USPC patent right;

      (b)   as imposing any obligation to file any patent


                                       33

<PAGE>

            application or to secure any patent or to maintain any patent in
            force;

      (c)   as conferring any license or right to copy or to simulate the
            appearance and/or design of any product of USPC or its Associated
            Companies;

      (d)   as conferring any license under the patent rights licensed pursuant
            to Article II hereof to manufacture, use, sell, lease or otherwise
            dispose of any product or device other than a Licensed Product.

12.03 If at any time a party shall elect not to assert its rights under any
      provision of this Agreement, such action or lack of action in that respect
      shall not be construed as a waiver of its rights under said provision or
      of any other provision of this Agreement.

12.04 Any notice or request required or permitted to be given under or in
      connection with this Agreement or the subject matter hereof shall be in
      writing and shall be deemed to have been sufficiently given when, if given
      to Licensee,


                                       34

<PAGE>

      it is addressed to:

           Hauppauge record Manufacturing
           15 Gilpin Avenue
           Hauppauge, New York 11788

      and in respect to USPC, to:

           Intellectual Property Department
           U.S. Philips Corporation
           580 White Plains Road,
           Tarrytown, New York 10591

      and sent in each case by telecopy and Registered Mail, postage prepaid.
      The date of mailing shall be deemed to be the date on which such notice of
      request has been given. Either party may give written notice of change of
      address and, after notice of such change has been received, any notice or
      request required to be given shall thereafter be given to such party at
      such changed address in the manner as provided above. 

12.05 This Agreement and all disputes, claims or controversies arising out of,
      or in any way relating to, this Agreement ("Dispute") shall be governed by
      and construed, and any claim or controversy arising with respect thereto
      shall be determined, in accordance with the laws and in the competent
      courts of the State of New York. The parties


                                       35

<PAGE>

      hereto consent to the personal jurisdiction of the competent courts of the
      State of New York for the purpose of prosecuting or resolving any such
      Dispute.

      IN WITNESS WHEREOF, the parties hereof have caused this Agreement to be
signed on the date first above written.



U.S. PHILIPS CORPORATION               HAUPPAUGE RECORD MANUFACTURING


By /s/ [ILLEGIBLE]                     By /s/ [ILLEGIBLE]
   ---------------------------            --------------------------------


Title Vice President                   Title VP
      ------------------------               -----------------------------
Date  4/1/96                           Date  2/29/29
      ------------------------               -----------------------------


                                       36