Document:

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                                                                    EXHIBIT 10.6

                            SONIC INNOVATIONS, INC.

                                     AND

                          STARKEY LABORATORIES, INC.

                                OEM AGREEMENT

                                April 19, 1999

[ * ]= CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.

<PAGE>

                                 OEM AGREEMENT

          This OEM AGREEMENT, including the attached Exhibits (the "Agreement"),
                                                                    ---------
made and entered into as of April 1, 1999 (the "Effective Date"), is by and
                                                --------------
between Sonic Innovations, Inc. ("Sonic"), a Delaware corporation with an office
                                  -----
at 5330 S 900 East, Ste. 240, Salt Lake City, Utah 84117, and Starkey
Laboratories, Inc. ("Starkey"), a Minnesota corporation with an office at 6600
                     -------
Washington Ave., So., Eden Prairie, Minnesota 55344 (each of Sonic and Starkey,
a "Party"; together, the "Parties").
   -----                  -------

                                   BACKGROUND
                                   ----------

          A.  Sonic is engaged in the business of manufacturing, distributing,
and selling Hybrids (as defined below) for use in hearing aid devices and other
products; and

          B.  Starkey desires to purchase Hybrids from Sonic, and distribute and
sell Products (as defined below) to, customers in the Territory (as defined
below); and

          C.  Starkey desires to purchase from Sonic, and Sonic desires to sell
to Starkey, such Hybrids for the purpose of incorporating the same into Products
for resale to customers in the Territory.

          NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Parties agree as follows:

1.  DEFINITIONS.
    -----------

          1.1  "Date Code" shall mean the date of manufacture of each Hybrid
                ---------
manufactured and sold by Sonic.

          1.2  "Hybrid" shall mean Sonic's proprietary integrated circuit for
                ------
digital signal processing as it exists as of the Effective Date.

          1.3  "Product(s)" shall mean Starkey's proprietary hearing aid product
                ----------
which incorporates a Hybrid.

          1.4  "Reliability Specification" shall mean the reliability
                -------------------------
specification documents numbers 99012-008 (Effective Date 7/9/95), Rev. A and
99012-006 (Effective Date 7/9/95), Rev. A, as provided by Starkey to Sonic and
attached hereto as Exhibit C.

          1.5  "Specifications" shall mean the specifications for the use and
                --------------
operation of the Hybrid as set forth in Exhibit A.

                                      -1-
<PAGE>

          1.6  "Starkey Affiliate" shall mean, with respect to Starkey, a
                -----------------
corporation, company or other entity that is owned or controlled by Starkey by
virtue of Starkey's direct or indirect ownership or control of more than fifty
percent (50%) of the outstanding shares or securities (representing the right to
vote for the election of directors or other managing authority) of such
corporation, company or other entity, but such corporation, company or other
entity shall be deemed to be a Starkey Affiliate only so long as such ownership
or control exists.

          1.7  "Term" shall have the meaning set forth in Section 11.1.
                ----

          1.8  "Territory" shall mean, until October 1, 1999, any country
                ---------
outside the United States of America and its territories in which Starkey
operates wholly-owned manufacturing or distribution facilities; provided,
however, that after October 1, 1999, the Territory shall expand to include such
entities within the United States of America and its territories.

2.  GRANT OF OEM RIGHTS.
    -------------------

          2.1  Appointment. Subject to the terms and conditions of this
               -----------
Agreement, Sonic hereby grants to Starkey and Starkey Affiliates the non-
exclusive rights to (i) manufacture Products, and (ii) market, sell and
distribute Products to end user customers in the Territory.

          2.2  Sale Conveys No Right to Manufacture or Modify. The Hybrids are
               ----------------------------------------------
offered for sale and are sold by Sonic subject in every case to the condition
that (i) except as necessary to program such Hybrid for a particular end-user,
such sale does not convey any license, expressly or by implication, to modify,
duplicate, reverse engineer or otherwise copy or reproduce any of the Hybrids,
(ii) Starkey and Starkey Affiliates shall use each Hybrid only as incorporated
into and sold as part of a Product and for no other purpose whatsoever, (iii)
Starkey and Starkey Affiliates shall not use Hybrids for any purpose except to
manufacture and service Products, and (iv) Starkey and Starkey Affiliates will
not sell or otherwise distribute Hybrids except incorporated into a Product.

          2.3  Reservation of Rights; No Rights Beyond OEM Rights. Except as
               --------------------------------------------------
expressly provided in this Article 2, (i) no right, title, or interest is
granted, whether express or implied, by Sonic to Starkey or a Starkey Affiliate,
(ii) nothing in this Agreement shall be deemed to grant to Starkey or a Starkey
Affiliate rights in any products or technology other than the Hybrids, and (iii)
no provision of this Agreement shall be deemed to restrict Sonic's right to
exploit technology, know-how, patents, or any other intellectual property
rights.

3.  PRICE AND PAYMENT.
    -----------------

               3.1  Hybrid Prices.  Starkey shall pay to Sonic the sum of [ * ]
                    -------------
for each Hybrid that it receives from Sonic.

[ * ]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                      -2-
<PAGE>

          3.2  Payment.
               -------

               (a) Sonic shall invoice Starkey and Starkey shall make payments
to Sonic under this Agreement in United States dollars in immediately available
funds to a bank account designated by Sonic by wire transfer as follows: [Sonic
to provide]. All payments made hereunder shall be paid in full, without any
deduction of taxes or charges of any kind, except to the extent that a
governmental authority imposes income taxes or other taxes on payments made to
Sonic pursuant to this Agreement. In the event that such taxes must be paid by
Starkey, then Starkey may deduct such taxes from the payment and send Sonic tax
payment certificates, receipts, and other such supporting data and to take other
reasonable acts as may be requested by Sonic to establish that such taxes have
been deducted and paid by Starkey on behalf of Sonic. Starkey shall cooperate
with Sonic to aid Sonic to recover any such taxes paid.

               (b) Payment for Hybrids supplied subject to Section 3.1 shall be
made net thirty (30) days after the date of shipment of the relevant Hybrids by
Sonic to Starkey.

               (c) Any payments due hereunder which are not paid within five (5)
days of the date such payments are due in accordance with Section 3.2(b) shall
bear interest at the lesser of one and one-half percent (1-1/2%) per month or
the maximum rate permitted by law, calculated on the number of days such payment
is delinquent. This Section 3.2(c) shall in no way limit any other remedies
available to Sonic.

4.  TERMS OF PURCHASE AND SALE.
    ---------------------------

               4.1  Minimum Annual Order.  Upon Starkey's successful evaluation
                    --------------------
of the Hybrid and calibration test systems, which evaluation period will end no
later than May 31, 1999, Starkey shall place a binding purchase order with Sonic
for a minimum of [ * ] Hybrids to be delivered no later than twelve (12) months
after the Effective Date.

               4.2  Forecasts.  On the ninetieth (90/th/) day prior to the first
                    ---------
(1/st/) anniversary of the Effective Date, and every year thereafter during the
Term, Starkey shall provide to Sonic a [non-binding] written forecast of the
number of Hybrids that Starkey expects to purchase over the subsequent twelve
(12) months ("Forecasts").

               4.3  Order and Acceptance.   All orders for Hybrids shall be made
by signed written purchase orders by Starkey to a Sonic employee designated in
writing by Sonic, sent to Sonic at Sonic's address for notice hereunder and
proposing a delivery date that is consistent with the Forecasts and not less
than sixty (60) days after Sonic's receipt of such purchase order. To the extent
that any one purchase order exceeds [  *  ] Hybrids, such purchase order must be
submitted to Sonic at least ninety (90) days in advance of any requested
delivery date. Orders shall be placed by a signed written purchase order, which
may be provided to Sonic by fax. Sonic shall accept or reject purchase orders by
fax or in writing within seven (7) days of receipt, it being understood that no
purchase order shall be binding upon Sonic until accepted by Sonic. Sonic shall
fulfill purchase orders accepted by Sonic pursuant to the terms and conditions
of this Agreement.

[ * ]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                      -3-
<PAGE>

No partial shipment of an order shall constitute the acceptance of the entire
order, absent the written acceptance of such entire order. Once accepted by
Sonic, Starkey may cancel or reschedule purchase orders for Hybrids only with
Sonic's prior written approval.

    4.4  Invoicing. Sonic shall submit an invoice to Starkey upon shipment by
         ---------
Sonic of Hybrids ordered by Starkey. Each such invoice shall state Starkey's
aggregate price for Hybrids in a given shipment, plus any freight, taxes or
other costs incident to the purchase or shipment initially paid by Sonic but to
be borne by Starkey hereunder.

    4.5  Shipping.  All Hybrids delivered pursuant to the terms of this
         --------
Agreement shall be suitably packed for surface or air shipment, in Starkey's
discretion, in Sonic's standard shipping cartons, and delivered, at Starkey's
direction, to Starkey or a carrier agent FCA (per Incoterms, ICC Ed. 1990) the
shipping location designated by Starkey (the "Shipping Location"), at which time
                                              -----------------
risk of loss shall pass to Starkey.  Sonic shall ship Hybrids using the carrier
specified in Starkey's purchase order provided that if Starkey does not provide
instructions with respect to the carrier to be used, Sonic shall select the
carrier.  All freight, insurance, and other shipping expenses, as well as any
special packing expenses incurred by Sonic at the request of Starkey, shall be
paid by Starkey.  Starkey shall also bear all applicable taxes, export taxes,
duties and similar charges, and any charges that may be assessed against the
Hybrids after delivery to Starkey or the carrier at the Shipping Location.  All
shipments and freight charges shall be deemed correct unless Sonic receives from
Starkey, no later than forty-five (45) days after the shipping date of a given
shipment, a written notice specifying the shipment, the purchase order number,
and the exact nature of the discrepancy between the order and shipment or
discrepancy in the freight cost, as applicable.  To the extent that there is any
conflict between any invoice or purchase order delivered hereunder and the terms
and conditions of this Agreement, the terms and conditions of this Agreement
shall control as to such conflict.

    4.6  Returns.  Except as set forth in Article 5 below, Starkey may return
         -------
Hybrids only with Sonic's prior written approval. Hybrids returned to Sonic
other than under Article 7 shall be returned FCA (per Incoterms, ICC Ed. 1990)
the destination point designated by Sonic and shall be subject to a restocking
fee in an amount equal to five percent (5%) of the price paid by Starkey to
Sonic for such Hybrid as set forth in Section 3.1. Starkey shall also bear all
applicable taxes, export taxes, duties and similar charges, and any charges that
may be assessed against the Products in connection with such delivery to Sonic
at the destination point.

5.  ACCEPTANCE.  Starkey shall inspect all Hybrids promptly upon receipt thereof
    ----------
and may reject any Hybrid [that fails to conform to the warranties set forth in
Article 7 below at the time of delivery to Starkey,] provided that Starkey
notifies Sonic of such non-conformity within thirty (30) days of delivery.
Except as set forth in this Article 5 and Article 7 below, Starkey shall return
Hybrids to Sonic only with Sonic's prior written approval.

6.  SONIC MANUFACTURING CALIBRATION SYSTEM.  In order to permit Starkey to test
    --------------------------------------
and calibrate Products, Sonic shall sell to Starkey units of its Sonic
Manufacturing Calibration System at Sonic's cost.  Such sale is made subject to
the condition that (i) such sale does not convey

                                      -4-
<PAGE>

any license, expressly or by implication, to modify, duplicate, reverse
engineer, or otherwise copy or reproduce the Sonic Manufacturing Calibration
System, and (ii) Starkey shall not make any other use of the Sonic Manufacturing
Calibration System other than to test Hybrids sold by Sonic to Starkey pursuant
to this Agreement.

7.        LIMITED WARRANTY.
          ----------------

          7.1  Hybrid Limited Warranty.  Sonic warrants to Starkey that, subject
               -----------------------
to the exclusions set forth in this Section 7.1 and in Section 7.2 below, for a
period of one hundred twenty (120) days following delivery to Starkey, Hybrids
manufactured and delivered hereunder shall:  (i) substantially conform to the
Specifications and the Reliability Specification; (ii) be manufactured in
accordance with good manufacturing practices and standards established in the
trade; and (iii) be manufactured in accordance with all applicable laws,
regulations, rules and governmental directives.  The foregoing warranty is
contingent upon proper use of the Hybrid in the applications for it was intended
as indicated in the Specifications.  The above limited warranty applies only to
defects reported to Sonic in accordance with Sonic's standard reporting
procedures [described in the Specifications] and does not apply to any Hybrid
which after dispatch from the Shipping Location (i) has been altered or subject
to undue electrical or mechanical force or stresses, (ii) has not been
maintained in accordance with any transportation, storage, handling or
maintenance instructions supplied by Sonic, (iii) has been damaged by negligence
or accident, or (iv) has been damaged by acts of nature, vandalism, burglary,
neglect, or misuse.  In the event of any breach of the above limited warranty
and provided that the Parties agree to upon a Return Merchandise Authorization
(an "RMA"), Starkey's exclusive remedy and Sonic's sole and exclusive liability
     ---
shall be, at Sonic's sole election, to replace the Hybrid at Sonic's expense or
to provide Starkey with a credit or refund in the amount of the price paid by
Starkey for the non-conforming Hybrid(s) properly assigned an RMA.

          7.2  Disclaimer of Other Warranties.  EXCEPT FOR THE LIMITED
               ------------------------------
WARRANTIES PROVIDED IN SECTION 7.1 ABOVE, SONIC GRANTS NO OTHER WARRANTIES OR
CONDITIONS, EXPRESS OR IMPLIED, BY STATUTE, OR OTHERWISE, REGARDING THE HYBRID,
AND SONIC SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF FITNESS FOR A
PARTICULAR PURPOSE, MERCHANTABILITY, AND NONINFRINGEMENT.  SONIC DISCLAIMS ANY
WARRANTY THAT OPERATION OF THE HYBRID WILL BE UNINTERRUPTED OR ERROR-FREE.  ANY
OTHER REPRESENTATIONS OR WARRANTIES MADE BY ANY PERSON OR ENTITY, INCLUDING
EMPLOYEES OR REPRESENTATIVES OF SONIC, THAT ARE INCONSISTENT HEREWITH SHALL BE
DISREGARDED AND SHALL NOT BE BINDING UPON SONIC.

8.        EXCHANGE OF DATA; GOVERNMENTAL APPROVAL.
          ---------------------------------------

          8.1  Exchange.  Starkey shall promptly provide to Sonic all [technical
               --------
and/or clerical] data made, developed, or acquired by or for Starkey with
respect to the Hybrid.  Sonic shall provide to Starkey access to data from
Hybrid studies that Sonic possesses as of the Effective Date, or develops or
acquires during the Term, and that is reasonably necessary for Starkey to obtain
those

                                      -5-
<PAGE>

governmental approvals that Starkey is responsible for obtaining pursuant to
this Article 8 below, to the extent that Sonic has the right to disclose such
data to Starkey for the foregoing purposes and subject to Article 13 below.

          8.2  Disclosure.  Starkey will only use, reference, and disclose Data
               ----------
relating to the Hybrid to third parties as required to obtain governmental
approval to market and distribute Products pursuant to this Article 8, as
required by law, or, to the extent Sonic has the right to authorize Starkey to
do so and only with Sonic's prior written approval which shall not be
unreasonably withheld, to market and promote the Products, in each case subject
to Article 13 below.

          8.3  Health Regulatory Approval.  Starkey, at Starkey's expense, shall
               --------------------------
be responsible for obtaining regulatory approvals from [the U.S. Food and Drug
Administration] and its foreign equivalents in the Territory to the extent
required by the foregoing regulatory authorities to sell and distribute the
Products in the Territory.

          8.4  Registrations, Licenses and Permits.  Starkey, at Starkey's
               -----------------------------------
expense, shall obtain all registrations, licenses, and permits required to
comply with the laws and regulations within the Territory for sale and
distribution of the Products.

9.        ADDITIONAL OBLIGATIONS OF STARKEY.
          ---------------------------------

          9.1  Translation.  Starkey shall at its cost provide any and all
               -----------
resources necessary to translate all manuals, instructions, literature, and
package insert data sheets relating to the Hybrid for use in the Territory.

          9.2  Business Obligations.  Any and all obligations associated with
               --------------------
Starkey's business shall remain the sole responsibility of Starkey.  Any and all
sales and other agreements between Starkey and its customers are and shall
remain Starkey's exclusive responsibility and shall have no effect on Starkey's
obligations pursuant to this Agreement.

          9.3  Foreign Corrupt Practices Act.  In conformity with the United
               -----------------------------
States Foreign Corrupt Practices Act, Starkey and its employees and agents shall
not directly or indirectly make any offer, payment, promise to pay, or authorize
payment, or offer a gift, promise to give, or authorize the giving of anything
of value for the purpose of influencing an act or decision of an official of any
government within the Territory or the United States Government (including a
decision not to act) or inducing such official to use his influence to affect
any such governmental act or decision in order to assist Sonic in obtaining,
retaining, or directing any such business.

          9.4  Custom Fitting.  Except as otherwise permitted in this Agreement,
               --------------
Starkey shall not, nor allow any third party to, make any use of or otherwise
attempt to copy Sonic's proprietary Best Fit Fast/TM/ and ExpressFit/TM/ custom
fitting system.

                                      -6-
<PAGE>

          9.5  Advertising and Promotions.  Starkey shall not make any reference
               --------------------------
in its marketing or sales literature to the following:  Natura/TM/, Sonic
innovations, or Best Fit Fast/TM/, ExpressFit/TM/ or any other promotional
materials used by Sonic in the sales and marketing of the Natura/TM/.

          9.6  Product Packaging, Patent Marking, and Labeling.  Starkey shall
               -----------------------------------------------
label the Products with the Starkey tradename and trademarks and the Starkey
tradename and trademarks only, and Starkey shall not label the Products with any
of the following proprietary Sonic marks:  Natura/TM/, Sonic innovations, or
Best Fit Fast/TM/, ExpressFit/TM/ or any other trademark of Sonic unless
required by applicable law.  Starkey shall mark all Products it sells or
distributes pursuant to this Agreement in accordance with the applicable patent
statute or regulations in the country or countries of manufacture and sale
thereof, including with those patent numbers listed on Exhibit B.

          9.7  No Reverse Engineering.  Starkey shall not, nor shall it allow
               ----------------------
any third party to, disassemble or reverse engineer the Hybrid or decompile or
otherwise attempt to obtain to the source code from the object code of any
software embedded on any Hybrid.

10.       REPORTS. Pursuant to the FDA's Medical Device Reporting (MDR)
          -------
Regulations, Sonic and/or Starkey may be required to report to the FDA
information that reasonably suggests that a Hybrid may have caused or
contributed to a death or serious injury or has malfunctioned and that the
device would be likely to cause or contribute to a death or serious injury if
the malfunction were to recur. The Parties agree to supply to each other any
such information regarding Hybrids used in Products promptly after becoming
aware of it so that each party can comply with its own governmental reporting
requirements.

11.       TERM AND TERMINATION.
          --------------------

          11.1  Term.  The term of this Agreement shall commence on the
                ----
Effective Date and continue in full force and effect until three (3) years from
the Effective Date, unless earlier terminated pursuant to this Article 11 (such
period, the "Term"); provided that after the Term, the Agreement will
             ----
automatically renew for additional one (1) year periods unless either Party
provides written notice of its intent not to renew at least one hundred eighty
(180) days prior to the expiration of the Term or such additional one (1) year
period.

          11.2  Termination for Convenience.  Either party may terminate this
                ---------------------------
Agreement for its convenience upon one hundred eighty (180) days written notice
to the other.

          11.3  Termination for Cause.  Either Sonic or Starkey may terminate
                ---------------------
this Agreement by written notice stating its intent to terminate in the event
the other shall have breached or defaulted in the performance of any of its
material obligations hereunder, and such default shall have continued for sixty
(60) days after written notice thereof was provided to the breaching party by
the non-breaching party.  In addition, Sonic may terminate this Agreement by
written notice in the event Starkey does not pay Sonic in accordance with the
provisions of Section 3.2 and such failure shall have continued for ten (10)
days after written notice thereof was provided to Starkey by Sonic.

                                      -7-
<PAGE>

Further, Sonic may terminate this Agreement immediately upon written notice in
the event of any breach or threatened breach by Starkey of any of Sections 2,
9.4, 9.5, 9.6, or 9.7.

          11.4  Termination for Infringement. Starkey may terminate this
                ----------------------------
Agreement immediately upon notice if (i) a court of competent jurisdiction
determines in a non-appealable final judgment that the Hybrid infringes the
Intellectual Property rights of a third party, or (ii) the use, manufacture,
sale, offer for sale or import of Hybrids is enjoined as the result of such
Hybrid's infringement of a third party's Intellectual Property rights.

          11.5  Termination for Bankruptcy.  Either party may terminate this
                --------------------------
Agreement effective upon written notice to the other party in the event the
other party declares bankruptcy or becomes the subject of any voluntary or
involuntary proceeding under the U.S. Bankruptcy Code or any state insolvency
proceeding, and such proceeding is not terminated within one hundred twenty
(120) days of its commencement.

          11.6  Effect of Termination.
                ---------------------

               (a) Expiration or termination of this Agreement for any reason
shall not release any party hereto from any liability which, at the time of such
termination, has already accrued to the other party or which is attributable to
a period prior to such termination nor preclude either party from pursuing any
rights and remedies it may have hereunder or at law or in equity with respect to
any breach of this Agreement. It is understood and agreed that monetary damages
may not be a sufficient remedy for any breach of this Agreement and that the
non-breaching party may be entitled to injunctive relief as a remedy for any
such breach. Such remedy shall not be deemed to be the exclusive remedy for any
such breach of this Agreement, but shall be in addition to all other remedies
available at law or in equity.

               (b) Within thirty (30) days after the effective date of
termination of this Agreement, Starkey shall use its reasonable efforts to
provide Sonic with a complete inventory of Hybrids in Starkey's possession, in
transit to Starkey from Sonic or otherwise in Starkey's control. Starkey's
rights under Article 2 shall survive to the extent reasonably necessary for
Starkey to dispose of all such Hybrids pursuant to the terms and conditions of
this Agreement. Upon any expiration or other termination of this Agreement,
Sonic may inspect Starkey's Hybrid inventory. [Sonic may at cost repurchase any
inventory of Hybrids in Starkey's possession.]

               (c) Repairs or Replacement. Upon termination of this Agreement
                   ----------------------
and for five (5) years thereafter, Sonic shall agree to provide repair or
replacement Hybrids for sale to Starkey; provided that, (i) such repair or
replacement Hybrid is distributed to Starkey or a Starkey Affiliate end-user
customer who purchased a Product prior to the end of the Term and solely for the
purpose of repairing, replacing or servicing such Product.

          11.7  No Renewal, Extension or Waiver.  Acceptance of any order from,
                -------------------------------
or sale of, any Hybrid to Starkey after the date of termination of this
Agreement or pursuant to Section 11.6(c) shall not be construed as a renewal or
extension hereof, or as a waiver of termination by Sonic.

                                      -8-
<PAGE>

    11.8  Limitation of Liability Upon Termination.  In the event of termination
          ----------------------------------------
by either party in accordance with any of the provisions of this Agreement,
neither party shall be liable to the other, because of such termination, for
compensation, reimbursement or damages on account of the loss of prospective
profits or anticipated sales or on account of expenditures, inventory,
investments, leases or commitments in connection with the business or goodwill
of Sonic or Starkey.

    11.9  Survival of Certain Terms.  The provisions of Articles 7, 12, 13, 14,
          -------------------------
15, and Sections 11.6, 11.8, and 11.9 shall survive termination for any reason.

12.  LIMITATION OF LIABILITY.
     -----------------------

     SONIC'S ENTIRE LIABILITY ARISING OUT OF THIS AGREEMENT AND/OR THE SALE OF
HYBRIDS SHALL BE LIMITED TO THE AGGREGATE AMOUNTS PAID BY STARKEY TO SONIC FOR
THE PRODUCTS UNDER THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
COSTS OF PROCUREMENT OF SUBSTITUTE GOODS BY ANYONE. IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY OR ANY OTHER PERSON FOR ANY SPECIAL,
CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF
LIABILITY ARISING OUT OF THIS AGREEMENT, AND WHETHER OR NOT SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THESE LIMITATIONS SHALL APPLY
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED
HEREIN. NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS ARTICLE 12, THE
FOREGOING LIMITATIONS OF LIABILITY SET FORTH IN THIS ARTICLE 12 SHALL NOT APPLY
TO LIABILITY ARISING UNDER ARTICLES 13 OR 14 OR SECTION 2.3, AND SHALL NOT
DIMINISH THE REMEDIES EXPRESSLY PROVIDED IN ARTICLE 7.

13.  CONFIDENTIALITY.
     ---------------

     13.1  Confidential Information.  Except as expressly provided herein, the
           ------------------------
parties agree that, for the Term of this Agreement and for seven (7) years
thereafter, the receiving party shall not publish or otherwise disclose and
shall not use for any purpose, except as expressly permitted herein any
information furnished to it by the other party hereto pursuant to this Agreement
which if disclosed in tangible form is marked "Confidential" or with other
similar designation to indicate its confidential or proprietary nature, or if
disclosed orally is confirmed as confidential or proprietary by the party
disclosing such information at the time of such disclosure or within thirty (30)
days thereafter ("Confidential Information"). Notwithstanding the foregoing, it
is understood and agreed that Confidential Information shall not include
information that, in each case as demonstrated by written documentation:

                (a) was already known to the receiving party, other than under
an obligation of confidentiality, at the time of disclosure;

                                      -9-
<PAGE>

                (b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving party;

                (c) became generally available to the public or otherwise part
of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement; or

                (d) was subsequently lawfully disclosed to the receiving party
by a person other than a party hereto or developed by the receiving party
without reference to any information or materials disclosed by the disclosing
party.

          13.2  Confidentiality of Agreement.  Each Party agrees that the terms
                ----------------------------
and conditions, but not the existence, of this Agreement shall be treated as the
other's Confidential Information and that no reference to the terms and
conditions of this Agreement or to activities pertaining thereto can be made in
any form of public or commercial advertising without the prior written consent
of the other Party; provided, however, that each Party may disclose the terms
                    --------  -------
and conditions of this Agreement:  (i) as required by any court or other
governmental body; (ii) as otherwise required by law; (iii) to legal counsel of
the Parties; (iv) in connection with the requirements of an initial public
offering or securities filing; (v) in confidence, to accountants, banks, and
financing sources and their advisors; (vi) in confidence, in connection with the
enforcement of this Agreement or rights under this Agreement; or (vii) in
confidence, in connection with a merger or acquisition or proposed merger or
acquisition, or the like.

          13.3  Compelled Disclosure.  If a Receiving Party believes that it
                --------------------
will be compelled by a court or other authority to disclose Confidential
Information of the Disclosing Party, it shall give the Disclosing Party prompt
written notice so that the Disclosing Party may take steps to oppose such
disclosure.

14.  INDEMNIFICATION.
     ---------------

          14.1  Indemnification of Starkey.
                --------------------------

                (a) Sonic shall indemnify, defend, and hold harmless Starkey and
the Starkey Affiliates and their respective directors, officers, employees, and
agents, and the successors and assigns of any of the foregoing (the "Starkey
Indemnitees") from and against all claims, losses, costs, and liabilities
(including, without limitation, payment of reasonable attorneys' fees and other
expenses of litigation), and shall pay any damages (including settlement
amounts) finally awarded with respect to claims, suits, or proceedings (any of
the foregoing, a "Claim") brought by third parties against a Starkey Indemnitee,
caused by (a) a failure by Sonic to manufacture the Hybrid in accordance with
the Specifications, (b) breach of any representation made by Sonic hereunder, or
(c) the negligence or willful misconduct of Sonic, except to the extent such
Claim is covered under Section 14.2 below or is caused by the negligence or
willful misconduct of a Starkey Indemnitee.

                                     -10-
<PAGE>

          (b) Starkey agrees that Sonic has the right to defend, or at its
option to settle, and Sonic agrees, at its own expense, to defend or at its
option to settle, any claim, suit or proceeding brought against Starkey by any
third party for infringement of any U.S. or foreign patents or copyright by the
Hybrid arising out of or in connection with this Agreement, and Sonic agrees to
indemnify, defend and hold harmless the Starkey Indemnitees (as defined in
Section 14.1(a) above) from and against any and all claims, losses, damages,
costs and liabilities (including payment of reasonable attorneys fees and other
expenses of litigation) arising from such infringement claim and shall pay any
damages finally awarded with respect to such a claim, suit or proceeding.
Notwithstanding the provisions of this Section 14.1(b), Sonic assumes no
liability for (i) any combination of Hybrid with other products not provided by
Sonic, which infringement would not arise from the Hybrid standing alone, or
(ii) the modification of the Hybrid by Starkey or any third party where such
infringement would not have occurred but for such modifications.
Notwithstanding the foregoing, if it is adjudicatively determined that the
Hybrid infringes, or in Sonic's sole opinion, may be found to infringe a third
party's patent or copyright, or if the sale or use of the Products is, as a
result of such infringement, enjoined, then Sonic may, at its sole option and
expense either:  (i) replace the Hybrid with other noninfringing functionally
equivalent integrated circuits; or (ii) modify the Hybrid to make the Hybrid
functionally equivalent and noninfringing; or (iii) if (i) - (ii) are deemed
commercially impracticable by Sonic, discontinue sales of the Hybrid to Starkey
under this Agreement.  THE FOREGOING PROVISIONS OF THIS SECTION 14.1(b) STATE
THE ENTIRE LIABILITY OF SONIC AND THE EXCLUSIVE REMEDY OF STARKEY WITH RESPECT
TO ANY ALLEGED INFRINGEMENT OF THIRD PARTY PATENTS, COPYRIGHTS, TRADEMARKS OR
OTHER INTELLECTUAL PROPERTY RIGHTS BY THE HYBRID OR ANY PART THEREOF OR THE USE
OF EITHER.

          14.2  Indemnification of Sonic.  Starkey shall indemnify, defend, and
                ------------------------
hold harmless Sonic, and its Affiliates and their respective directors,
officers, employees and agents, and the successors, and assigns of any of the
foregoing (the "Sonic Indemnitees") from and against all claims, losses, costs,
and liabilities (including, without limitation, payment of reasonable attorneys'
fees and other expenses of litigation), and shall pay any damages (including
settlement amounts) finally awarded with respect to a Claim brought by third
parties against a Sonic Indemnitee, arising out of or relating to (a) acts or
omissions of Starkey in the distribution or marketing of Products; (b) breach of
any of the representations or warranties made by Starkey hereunder, (c) a claim
that the Product infringes any intellectual property rights of a third party,
except in each case to the extent such claim is covered under Section 14.1, (d)
any failure by Starkey to obtain any applicable governmental approvals or
licenses required for the marketing and distribution of the Products, (e) a
claim relating to the manufacture or operation of the Product to the extent that
such claim is not due solely to a manufacturing defect in the Hybrid, or (f) the
negligence or willful misconduct of Starkey, except, in each case, to the extent
such claim is covered under Section 14.1 or is caused by the negligence or
willful misconduct of a Sonic Indemnitee.

          14.3  Indemnification Procedures.  A party (the "Indemnitee") that
                --------------------------
intends to claim indemnification under this Article 14 shall promptly notify the
other party (the "Indemnitor") in writing of any claim in respect of which the
Indemnitee or any of its directors, officers, employees,

                                     -11-
<PAGE>

agents, successors, or assigns intends to claim such indemnification, and the
Indemnitor shall have sole control of the defense and/or settlement thereof,
provided that the indemnified party may participate in any such proceeding with
counsel of its choice at its own expense. The indemnity agreement in this
Article 14 shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. The failure to deliver written notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
Indemnitor of any liability to the Indemnitee under this Article 14, but the
omission to so deliver written notice to the Indemnitor shall not relieve the
Indemnitor of any liability that it may otherwise have to any Indemnitee than
under this Article 14. The Indemnitee under this Article 14, its employees and
agents, shall cooperate fully with the Indemnitor and its legal representatives
and provide full information in the investigation of any Claim covered by this
indemnification. Notwithstanding anything to the contrary contained in this
Article 14, neither party shall be liable for any costs or expenses incurred
without its prior written authorization.

15.  MISCELLANEOUS PROVISIONS.
     ------------------------

     15.1  Independent Contractors.  The relationship of Sonic and Starkey
           -----------------------
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to (i) give either party the
power to direct or control the day-to-day activities of the other, (ii)
constitute the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking, or (iii) allow a party to create
or assume any obligation on behalf of the other party for any purpose
whatsoever.

     15.2  Governing Law.  This Agreement and all acts and transactions
           -------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Utah, without reference to rules of conflicts or choice of laws.  This Agreement
shall not be governed by the 1980 United Nations Convention on Contracts for the
International Sale of Goods.

     15.3  Arbitration.  If a dispute arises between the parties relating to the
           -----------
interpretation or performances of this Agreement or the grounds for the
termination thereof, representatives of the parties with decision-making
authority shall meet to attempt in good faith to negotiate a resolution of the
dispute prior to pursuing other available remedies. If within thirty (30) days
after such meeting the parties have not succeeded in negotiating a resolution of
the dispute, such dispute shall be submitted to final and binding arbitration
under the then current Commercial Arbitration Rules of the American Arbitration
Association ("AAA") by one (1) arbitrator in Salt Lake City, Utah. Such
arbitrator shall be selected by the mutual agreement of the parties or, failing
such agreement, shall be selected according to the aforesaid AAA rules. The
arbitrator will be instructed to prepare and deliver a written, reasoned opinion
stating his decision within thirty (30) days of the completion of the
arbitration. Such arbitration shall be concluded within nine (9) months
following the filing of the initial request for arbitration. The parties shall
bear the costs of arbitration equally and shall bear

                                     -12-
<PAGE>

their own expenses, including professional fees. The decision of the arbitrator
shall be final and non-appealable and may be enforced in any court of competent
jurisdiction.

          15.4  Notices.  Any notice required or permitted by this Agreement
                -------
shall be in writing and shall be sent by prepaid registered or certified mail,
return receipt requested, internationally recognized courier or personal
delivery, or by fax with confirming letter mailed or otherwise delivered under
the conditions described above in each case addressed to the other party at the
address shown below or at such other address for which such party give notice
hereunder.  Such notice shall be deemed to have been given when delivered:

          If to Starkey:  Starkey Laboratories, Inc.
                          6600 Washington Ave., South
                          Eden Prairie, Minnesota 55344
                          Attn: Jerome Ruzicka
                          Tel.: (612) 941-6401
                          Fax: (612) 828-9262

          If to Sonic:    Sonic Innovations, Inc.
                          5330 S 900 East, Ste. 240
                          Salt Lake City, Utah 84117
                          Attn.: Jorgen Heide
                          Tel.: (801) 288-0993
                          Fax: (801) 288-0998

          15.5  Force Majeure.  Nonperformance of any party hereto (except for
                -------------
payment obligations) shall be excused to the extent that performance is rendered
impossible by strike, fire, earthquake, flood, governmental acts or orders or
restrictions, delay or failure of suppliers, or any other reason where failure
to perform is beyond the reasonable control and not caused by the gross
negligence or willful misconduct of the nonperforming party.

          15.6  Assignment.  This Agreement shall not be assignable by either
                ----------
party to any third party hereto without the written consent of the other party
hereto, except that either party may assign this Agreement without the other
party's consent to an entity that acquires all or substantially all of the
business or assets of the assigning party pertaining to the subject matter
hereof, in each case whether by merger, acquisition, or otherwise.  Any assignee
shall agree to perform the obligations of the assignor of this Agreement, and
this Agreement shall be binding on and inure to the benefit of any permitted
assignee.

          15.7  Partial Invalidity.  If any provision of this Agreement is held
                ------------------
to be invalid by a court of competent jurisdiction, then the remaining
provisions shall remain, nevertheless, in full force and effect.  The parties
agree to renegotiate in good faith any term held invalid and to be bound by the
mutually agreed substitute provision in order to give the most approximate
effect originally intended by the parties.

                                     -13-
<PAGE>

          15.8   Publicity.  The parties may agree upon a press release to
                 ---------
announce the execution of this Agreement, together with a corresponding question
and answer outline for use in responding to inquiries about the Agreement;
thereafter, Sonic and Starkey may each disclose to third parties the information
contained in such press release and question and answer outline without the need
for further approval by the other.  From time to time during the term of this
Agreement, the Parties may agree upon additional press releases.
Notwithstanding the foregoing, neither party may issue any press release or
other publicity or use the name of the other party without both parties' express
written consent.

          15.9   Export Laws.  Notwithstanding anything to the contrary
                 -----------
contained herein, all obligations of Sonic and Starkey are subject to prior
compliance with United States and foreign export regulations and such other
United States and foreign laws and regulations as may be applicable, and to
obtaining all necessary approvals required by the applicable agencies of the
government of the United States and the governments in the Territory. Sonic and
Starkey shall cooperate with each other and shall provide assistance to the
other as reasonably necessary to obtain any required approvals.

          15.10  No Waiver.  No waiver of any term or condition of this
                 ---------
Agreement shall be valid or binding on either party unless agreed in writing by
the party to be charged.  The failure of either party to enforce at any time any
of the provisions of the Agreement, or the failure to require at any time
performance by the other party of any of the provisions of this Agreement, shall
in no way be construed to be a present or future waiver of such provisions, nor
in any way affect the validity of either party to enforce each and every such
provision thereafter.

          15.11  Counterparts.  This Agreement may be executed in two or more
                 ------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

          15.12  Entire Agreement.  This Agreement, including the Exhibits
                 ----------------
attached hereto, constitutes the entire agreement of the parties with respect to
the subject matter hereof, and supersedes all prior or contemporaneous
understandings or agreements, whether written or oral, between Sonic and Starkey
with respect to such subject matter.  The terms of any purchase order are
expressly excluded.  No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by the duly
authorized representatives of both parties.

                                     -14-
<PAGE>

          IN WITNESS WHEREOF, the undersigned are duly authorized to execute
this Agreement on behalf of Sonic and Starkey as applicable.

SONIC INNOVATIONS, INC.                        STARKEY LABORATORIES, INC.

("Sonic")                                      ("Starkey")

By:  /s/ Jorgen Heide                          By:  /s/ Jerome C. Ruzicka
     --------------------------------------         --------------------------

Print Name:  Jorgen Heide                      Print Name:  Jerome C. Ruzicka
             ------------------------------                -------------------

Title:  Vice President Business Development    Title:  President
        -----------------------------------            -----------------------

                                     -15-
<PAGE>

                                   EXHIBIT A
                                   ---------

                                 SPECIFICATION

                                      [*]
<PAGE>

                                   EXHIBIT B
                                   ---------

                                 Patent Numbers

                       United States Patent No. 5,500,902

                       United States Patent No. 5,848,171
<PAGE>

                                   EXHIBIT C

                           RELIABILITY SPECIFICATION
<PAGE>

TITLE: Solder Stress testing                               SPEC.NO.99012-006

                                    Purpose
1.0  Purpose
-----------

     This document describes the test methods for performing soldering stress
simulation on hearing aid amplifiers.  This test simulates thermal shock effects
subjected to amplifiers during hearing aid production.  Thermal shock effects
can cause delamination of encapsulation epoxy on thickfilm hybrids, cause
blistering or delamination in FR4 epoxy boards, or cause failure due to poor
electrical connections.  This testing determines if the amplifier under test is
prone to the above types of failures or any other type of failure.

2.0  Equipment/Materials
------------------------

          Soldering iron
          Solder pot
          Flux
          Tweezers
          Microscope with range of 30X-200X
          Amplifier print (for reference)

3.0  Procedure
--------------

     Check that all test circuits have been electrically tested and an
electrical response representing each is available for later review.  Mark the
test circuits so they may be easily identified after solder stress testing and
submitted for electrical re-test.

     Method 1 (Glencoe wiring simulation)
     ------------------------------------

     Hybrid amplifier circuits: Inspect closely under 200X magnification for any
     evidence of delamination.

     Surface Mount amplifiers: Inspect closely at 30X for any evidence of kapton
     separation or FR4 damage.

     Do not perform Glencoe wiring simulation on any test sample that exhibits
     any evidence of delamination or damage.  Report results to QE before
     continuing test.

     Set-up
     ------

     .    Install new tip into soldering iron.
     .    Set soldering iron tip to approximately 700F.
     .    Apply flux (as needed) to amplifier circuit.
<PAGE>

TITLE: Solder Stress testing                             SPEC.NO.99012-006

     Glencoe Solder Stress test:
     --------------------------

     .    Apply soldering iron to solder pad #1 on test circuit #1 and dwell for
     about three seconds. Remove iron for about three seconds. Repeat
     solder/desolder cycle twice more for a total of three cycles.

     .    Apply soldering iron to solder pad #1 on test circuit #2 and dwell for
     about three seconds. Remove iron for about three seconds. Repeat
     solder/desolder cycle twice more for a total of three cycles.

     .    Return to test circuit #1 and apply soldering iron to solder pad #2
     and apply three cycles of solder/desolder, as described in the previous
     step. Repeat procedure on test circuit #2 with pad #2.

     .    Repeat three cycles of solder/desolder as described in the steps above
     for every pad on all test circuits.

     Note:  Any sequence of applying three cycles of solder/desolder is
     acceptable as long as the circuit under test does not encounter consecutive
                                                                     -----------
     applications of solder/desolder cycling to different pads on the same
     circuit.  Using circuit pairs for the test, as described in this procedure,
     is the simplest and most time effective method.

     Post-test visual inspection:
     ---------------------------

     Hybrid circuits:  Inspect closely at 200X for any evidence of delamination.

     Surface Mount circuits:  Inspect closely at 30X for any evidence of damage.

     Electrical re-test
     ------------------

     Submit all samples to hybrid lab for electrical retest.  Compare post-test
     response with pre-test response for each test circuit.  Note any
     significant shift in response.

     Method 2 (Solder pot method)
     ----------------------------

     Note:  This method applies only to hybrid thickfilm circuit amplifiers.

     Inspect closely under 200X magnification for any evidence of delamination.
     Do not perform Glencoe wiring simulation on any test sample that exhibits
     any evidence of delamination or damage.  Report result to QE before
     continuing test.

     .    If not otherwise directed by QE, set solder pot temperature to
     approximately 238C.

     .    Use tweezers and dip hybrid into solder pot for a duration of three
     seconds. Allow to cool for about thirty seconds, and repeat solder pot
     dips.

     .    After three dips, look closely for delamination at 200X magnification.
     Observe for any evidence of delamination. Three dips is the minimum
     exposure required for method 2 of Solder Stress Testing.
<PAGE>

TITLE: Solder Stress testing                               SPEC.NO.99012-006

     .    If required, remove any solder bridges with soldering iron.

     Electrical re-test
     ------------------

     Submit all samples to hybrid lab for electrical test.  Compare post-test
     response with pre-test response for each test circuit.  Note any
     significant shift in response.

4.0  Reference Documents
------------------------

     None

5.0  Records
------------

     Test Information compiled in reliability lab evaluation report.
<PAGE>

                Amendment to OEM Agreement Dated April 19, 1999
                                    Between
                     SONIC Innovations, Inc. ("SONIC") and
                    Starkey Laboratories, Inc. ("Starkey")

     SONIC and Starkey agree to amend their OEM Agreement as follows:

     DATE OF AMENDMENT
     ------------------
     December 14, 1999

          19.1 GENERAL

     Starkey agrees to provide SONIC a two-year, guaranteed, non-cancelable
     blanket purchase order for the purchase of SONIC Hybrids.

     TERM
     ----
     January 1, 2000 through December 31, 2001.

     QUANTITY
     --------
     Starkey agrees to purchase a minimum of [ * ] Hybrids per calendar year in
     each of 2000 and 2001.

     CURRENT GENERATION HYBRID PRICING
     ---------------------------------

     For the current generation Hybrid, part number 2000444, the pricing for the
     first [ * ] Hybrids ordered shall be $[ * ] each.

     For quantities above [ * ] Hybrids, pricing shall be $[ * ] each.

          21.2 NEW GENERATION HYBRID PRICING
     For new generation Hybrids, the pricing for the first [ * ] Hybrids shall
     be [ * ] each.

     For Hybrid quantities [ * ]  through [ * ], pricing shall be $[ * ]  each.

     For Hybrid quantities [ * ]  through [ * ], pricing shall be $[ * ]  each.

     For Hybrid quantities [ * ]  through [ * ], pricing shall be $[ * ]  each.

     For Hybrid quantities greater than [ * ], pricing shall be negotiated.

/s/ Jorgen Heide                           /s/ Jerome C. Ruzicka
---------------------------                ---------------------
Jorgen Heide                               Jerome C. Ruzicka
VP International & Licensing Division      President, Starkey Laboratories, Inc.
SONIC Innovations, Inc.

[ * ]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.<PAGE>

                                                                    EXHIBIT 10.7

                                 [ATMEL LOGO]

                      LICENSE AND MANUFACTURING AGREEMENT

     This License and Manufacturing Agreement (the "Agreement") is entered into
on February 20, 1997 by and between ATMEL CORPORATION, a California corporation
("Atmel") and SONIX TECHNOLOGIES, INC., a Utah corporation ("Sonix").

                                   RECITALS

     A. Sonix is in the business of designing, developing and selling certain
products for hearing applications which incorporate integrated circuits;

     B. Atmel is in the business of designing, developing, manufacturing and
selling various types of integrated circuits; and

     C. Sonix and Atmel desire to enter into this Agreement for the purposes
of setting forth the terms and conditions under which Atmel will be granted
the right to make or have made certain integrated circuits, for sale to Sonix
and other customers of Atmel, and Atmel will provide manufacturing services
to Sonix with respect to certain of Sonix integrated circuits.

                                   AGREEMENT

     NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING AND THE MUTUAL COVENANTS
CONTAINED HEREIN, THE PARTIES AGREE AS FOLLOWS:

                                   SECTION 1

                                  DEFINITIONS

     For purposes of this Agreement the following terms shall have the meanings
set forth below:

     1.1 Sonix Patents.  "Sonix Patents" shall mean all patents, patent
applications, and additions, continuations, continuations-in part, divisions,
reissues or extensions based thereon, if any, in all countries of the world,
which are owned by Sonix now or at any time during the term of this Agreement,
or which are licensed by Sonix from a third party with the right to grant sub
licenses of the scope granted herein, and which are required for the
manufacture, use and sale of Products.

     1.2 Effective Date.  "Effective Date" shall mean the date first set forth
above.

[ * ]= CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.

<PAGE>

     1.3     Licensed Technology. "Licensed Technology" shall mean those
integrated circuits and any Updates which are delivered by Sonix to Atmel,
comprising Sonix's core DSP, audio processing algorithm, low power/low voltage
technology and related circuit techniques and architecture.

     1.4     Hearing Applications. "Hearing Applications" shall mean all
applications involving hearing assistance, hearing restoration, hearing
enhancement, hearing protection, hearing simulation or hearing replacement
relating to personal hearing aids or similar types of devices.

     1.5     Non-Hearing Applications. "Non-Hearing Applications" shall mean all
applications other than Hearing Applications, including but not limited to
telephone and personal audio entertainment products.

     1.6     Sonix Know-How. "Sonix Know-How" shall mean Sonix's processes,
designs, know-how, trade secrets and other information owned by Sonix or
licensed to Sonix from a third party with the right to grant sub-licenses of the
scope granted herein that are necessary or useful to manufacture, use and sell
Products.

     1.7     Products. " Product(s)" shall mean one or more integrated circuit
products, developed or manufactured by or for Atmel using all or a portion of
the Licensed Technology, Sonix Patents or Sonix Know-How.

     1.8     Net Selling Price. "Net Selling Price" shall mean the invoiced
price, F.O.B. Atmel's factory, to its customer, less any quantity and trade
discounts, independent sales representative or independent distributor
commissions, and/or product returns, and excluding charges for handling,
freight, taxes or duties of any kind, C.O.D. charges, insurance, and the like.

     1.9     Updates. "Updates" shall mean any updates, modifications,
corrections, or improvements made after the date hereof to the Licensed
Technology made during the term of the Agreement.

                                   SECTION 2

                                   LICENSES

     2.1     License Grant. Sonix hereby grants to Atmel a worldwide, non-
exclusive license, non-sublicensable, under the Licensed Technology, Sonix
Patents and Sonix Know-How, to make, have made, modify, use, market and sell the
Products for Non-Hearing Applications.

     (a)     The licenses granted to Atmel by Sonix pursuant to Section 2.1
             hereof, may be transferred by Atmel to a majority-owned
             subsidiary or parent, or pursuant to a merger, reincorporation or
             other transfer, but may not be transferred separately except to a
             subsidiary of Atmel, provided however that such subsidiary or
             parent agrees to be bound by the terms of this Agreement. The
             license granted above may not otherwise be transferred except as
             set forth in this Section 2.1 (a). Any such transfer shall not
             relieve Atmel of its obligations hereunder.

[ * ]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                       2
<PAGE>

     2.2   License to Sonix. Atmel hereby grants to Sonix a perpetual,
worldwide, non- exclusive, non-transferable-license, to make, use and sell
products that include minor improvements or enhancements made by Atmel to the
Licensed Technology for use by Sonix solely in Hearing Applications. If Atmel
makes a major or substantial improvement or enhancement to the Licensed
Technology, Atmel and Sonix shall meet to discuss a license to such major
improvements to Sonix for Hearing Applications.

     2.3   Intellectual Property Rights. Atmel agrees that Sonix will retain
sole ownership and complete intellectual property rights to the Licensed
Technology, Sonix Patents and Sonix Know- How licensed to Atmel hereunder and to
any enhancements, modifications, improvements, changes or derivative products
thereto made by or for Sonix. Sonix agrees that Atmel will retain sole ownership
and complete intellectual property rights to all masks, test hardware/software
and other tooling generated to the extent that any or all the foregoing are
generated by or for Atmel to manufacture the Products and to any enhancements,
modifications, improvements, changes or derivative products made by Atmel with
respect to the Products.

                                   SECTION 3

                          OBLIGATIONS OF THE PARTIES

     The Parties respectively agree to perform the following tasks with respect
to the Products:

     (a) Atmel shall make available to Sonix its design, electrical and layout
rule set for Atmel's AT19760 Process.

     (b) Atmel shall make available to Sonix, in a format compatible with
Sonix's design platform, the AT19760 digital cell library; transistor level
Hspice models (level 42 or level 49); 1/0 pad library and gate level and
transfer transistor level representations for the EEPROM.

     (c) A preliminary design review will be held at Atmel. Atmel and Sonix
shall review and agree on the scope of the work, (for example, Sonix's product
specification, test specification and test plan) begin the design.

     (d) Sonix shall design, simulate, layout, run DRC and LVS on the circuit
and generate a GDSII tape for the complete chip, except for the EEPROM bit-cell.
Sonix will not be given EEPROM bit-cell information.

     (e) ATMEL shall integrate the EEPROM bit-cell into the EEPROM, run DRC's
and LVS, and generate mask data.

     (f) A final design review will be held at Atmel before masks are made.

     (g) Atmel shall generate masks, and start one (1) 24 wafer lot for design
verification (hold-12 @ poly; hold-6 @ contact.) 6 wafers will be completed and
delivered to Sonix. A number of the completed wafers (to be mutually agreed)
will be delivered without passivation. The remainder of the lot will be
completed after evaluation of the initial 6 wafers, possibly with mask changes
as provided for in Exhibit A.

     (h) Atmel shall generate a test program (probe) from customer
supplied,test specification and test vectors.

     (i) Atmel shall perform qualification (per Sonix's specification) and
characterization for release of the Product to production.

     (j) Atmel shall make available to Sonix any applicable future fabrication
process that Atmel installs into its fabrication facility in Colorado
Springs, Colorado.

[ * ] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                       3
<PAGE>

                                   SECTION 4

                                   ROYALTIES

     4.1    Payments. In consideration for the grant of licenses and other
rights by Sonix to Atmel hereunder, Atmel agrees to pay Sonix a royalty in
the amount of five percent (5%) of the Net Selling Price of each Product sold by
Atmel or its transferee under Section 2.1 (a) to p arties other than Sonix.

     4.2    Statement and Payment. Within forty-five (45) days after the end of
each calendar quarter, Atmel shall finish to Sonix a statement showing for
each Product the number of each such Product which were sold by Atmel or its
transferee under Section 2.1 (a) during such quarter and the royalty due to
Sonix, which statement shall be accompanied by payment of such royalties in U.S.
Dollars. Late payments shall be subject to a service charge of 1.5% per month or
the maximum rate permitted by applicable law. Atmel shall keep records of
royalty bearing events for two years. Sonix may have an independent third party
audit such records of Atmel upon reasonable notice and no more than once a
year. If the audit reveals an underpayment of royalties of 10% or more, then
Atmel shall pay all costs of the audit in addition to the amount of the
underpayment plus reasonable interest.

                                   SECTION 5

                                 MANUFACTURING

5.1  Manufacturing. Atmel agrees to manufacture and sell Products to Sonix on
the terms and conditions set forth herein. The terms and conditions of this
Agreement shall control all sales of Products by Atmel to Sonix, and any
additional or different terms or conditions in either party's purchase order,
acknowledgment, or similar document shall be of no effect.

5.2  Pricing. Sonix shall pay Atmel for Product and engineering services as
set forth in Exhibit A.

5.3  Payment.

     (a)  Payment for Products shall be made by Sonix in U.S. Dollars within
thirty (30) days following receipt of Atmel's invoice. In the event Sonix
fails to make any payment here-under when due, Atmel may require, as a
condition to shipping any additional Products to Sonix, prepayment by Sonix for
such shipment or other assurance of payment by Sonix at Atmel's discretion.
Amounts past due will be subject to a monthly charge at the rate of 1.5% per
month or the maximum rate permitted by law, whichever is less, to cover
Atmel's costs of servicing such past due amounts.

     (b)  Any purchase by Sonix of any product shall be subject to reasonable
review and approval by Atmel's credit department.

     (c)  Sonix shall pay, in addition to the prices quoted or invoiced, the
amount of any sales, use, excise or other similar tax or duty applicable to the
sale to Sonix of any Products, or Sonix shall supply Atmel with an appropriate
tax exemption certificate.

[ * ]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                       4
<PAGE>

5.4  Forecasts and Orders.

     (a)  Forecast. Commencing upon Atmel's commercial production of the
Products Sonix shall provide to Atmel a eighteen (18) month rolling forecast
setting forth its estimated requirements for shipment by month for Products, and
Sonix and Atmel agree that the current six (6) months of the rolling forecast
is a firm minimum and may be increased for months beyond the cycle time, which
is currently three (3) months, but may change from time to time. Sonix shall
submit purchase orders for products forecasted to be shipped in such six month
period, but shall in any event be liable for payment and Atmel for shipment
with respect to such products even if Sonix fails to submit such an order to
Atmel provided, however, if Sonix does not place a purchase order, or cancels
a purchase order prior to completion of the Products, Sonix shall only be liable
for costs incurred to the date of cancellation plus Atmel's profit for such
Product. This forecast shall be updated monthly. Such purchase orders may be
changed as mutually agreed to by the parties hereto.

     (b)  Minimums. Notwithstanding any other provisions of this Agreement,
Sonix agrees to purchase and Atmel agrees to supply a minimum of the following
quantities:

        i)     *   die per month (  *   die per year) beginning one year
after production release of the first Product manufactured for Sonix;

        ii)    *   die per month (  *   die per year) beginning two years
after production release of the first Product manufactured for Sonix;

        iii)   *   die per month (  *   die per year) beginning three years
after production release of the first Product manufactured for Sonix; and

        iv)    *   percent (  *  %) of all Product sold by       to
parties other than Sonix shall be counted as applying to the minimums set forth
above.

     (c)  Orders. All Agreement purchases and sales between Atmel and Sonix
shall be initiated by Sonix's issuance of written purchase orders sent via
courier or facsimile. Such orders shall state unit quantities, unit
descriptions, requested delivery dates, and shipping instructions. The
acceptance by Atmel of an order shall be indicated by written acknowledgment
thereof by Atmel. All orders placed by Sonix and accepted by Atmel shall be
non-cancelable except as set forth in Section 5.4 (a). If in conformance with
this Agreement Atmel shall accept the purchase order or if not in conformance
with this Agreement, Atmel shall notify Sonix reasonably promptly to the
extent it does not accept any order placed by Sonix. The terms and conditions of
this Agreement shall prevail over and supersede any conflicting or contravening
terms or condition of any purchase order or acknowledgment for the Product.

     5.5  Shipping. All Products delivered pursuant to the terms of this
Agreement shall be suitably packed for shipment in Atmel's standard
containers, marked for shipment at Sonix's address set forth above or specified
in Sonix's purchase order, and delivered to a carrier or forwarding agent chosen
by Sonix. Should Sonix fail to designate a carrier, forwarding agent or type of
conveyance, Atmel shall make such designation in conformance with its standard
shipping practices. Shipment will be F.O.B. Atmel's factory, at which time
risk of loss (other than loss or damage due to Atmel's failure to properly
package the Products) and title shall pass to Sonix, and all freight, insurance
and other shipping expenses, as well as any special packing expenses, shall be
bome by and charged separately to Sonix. Sonix shall have fifteen days to
inspect the Products and reject any Product that does not meet the applicable
specifications.

[ * ]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                       5
<PAGE>

5.6  Warranty.

     (a)  Atmel warrants that goods delivered hereunder shall conform to the
applicable specifications and shall be free from defects in material and
workmanship under normal use and service for a period of one year from the
applicable date of invoice. For products which are not standard products, such
as dice and wafers, Atmel warrants to Sonix that such products shall conform
to the applicable specifications and shall be free from defects in material and
workmanship under normal use and service for a period of ninety (90) days from
the date code as set forth on Sonix's end Product. Products which are "samples"
and/or "prototypes" are sold "AS IS", "WITH ALL FAULTS," and with no warranty
whatsoever.

If during such warranty period, (i) Atmel is notified promptly in writing upon
discovery of any defects in the goods, including a detailed description of such
defect; (ii) such goods are returned to Atmel, FCA

Atmel's facility accompanied by Atmel's Returned Material Authorization; and
(iii) Atmel's reasonable examination of such goods discloses to Atmel's
satisfaction that such goods are defective and such defects are not caused by
accident, abuse, misuse, neglect, alteration, improper installation, repair, or
alteration by someone other than Atmel, improper testing, or use contrary to
any instructions issued by Atmel within a reasonable time, Atmel shall (at
its sole option) promptly either repair, replace or if not commercially
reasonable for the prior options, credit Sonix the purchase price of such goods.

Prior to any return of goods by Sonix pursuant to this clause, Sonix shall
afford Atmel the opportunity to inspect such goods at Sonix's location, and
any such goods so inspected shall not be returned to Atmel without its prior
written consent.

Atmel shall return any goods repaired or replaced under this warranty to Sonix
transportation prepaid, and reimburse Sonix for the transportation charges paid
by Sonix for such goods. The performance of this warranty shall be tolled during
such repair, replacement and transportation period however the total warranty
period for any goods shall not be beyond that period applicable to the goods
originally delivered.

THE FOREGOING WARRANTY CONSTITUTES ATMEL'S EXCLUSIVE LIABILITY, AND THE
EXCLUSIVE REMEDY OF SONIX, FOR ANY BREACH OF WARRANTY OR OTHER NONCONFORMITY OF
GOODS COVERED BY THIS AGREEMENT. THIS WARRANTY IS EXCLUSIVE, AND IN LIEU OF ALL
OTHER WARRANTIES. ATMEL MAKES NO OTHER WARRANTIES, EXPRESS, IMPLIED, OR
STATUTORY, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. THE SOLE AND EXCLUSIVE REMEDY FOR ANY BREACH
OF THIS WARRANTY SHALL BE AS EXPRESSLY PROVIDED HEREIN.

                                   SECTION 6

                             TERM AND TERMINATION

     6.1  Term. This Agreement shall become effective upon the Effective Date
and shall remain in force until five (5) years from the Effective Date, and
thereafter shall be automatically extended for additional one (1) year periods,
unless either party gives ninety (90) days written notice prior to the
expiration of the Agreement.

     6.2  Termination for Breach. If either party breaches any term or condition
of this Agreement in any material respect and fails to cure that breach within
ninety (90) days after receiving written notice

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THE OMITTED PORTIONS.

                                       6
<PAGE>

of the breach, the other party shall have the right to terminate this Agreement
by written notice after the end of such ninety (90) day period.

     6.3  Bankruptcy. Either party may terminate this Agreement if the other
becomes the subject of a voluntary or involuntary petition in bankruptcy or any
administrative or legal proceeding relating to insolvency, receivership,
liquidation or composition for the benefit of creditors.

     6.4  Survival of Provisions. The provisions of Sections 5, 6, 7, 8, 9 and
10 shall survive the termination of this Agreement for any reason. All other
rights and obligations of the parties shall cease upon termination of this
Agreement, except that in the event of the expiration or the termination of this
Agreement by Atmel following a material breach by Sonix, the license granted
to Atmel in Section 2 hereof shall survive and remain in ftill force and
effect, and such license shall thereafter be perpetual, but Atmel shall
continue to pay royalties as set forth in Section 4 provided, however, that
Atmel may offset any amounts owed to Sonix by Atmel against any damage or
costs it occurs because of such breach. In the event of a termination of this
Agreement by Sonix following a material breach by Atmel, the license granted
to Atmel in Section 2 shall terminate upon the sale of the Products Atmel
has on its backlog as of the date of termination of the Agreement, and Atmel
shall pay Sonix royalties for such Products and the licensed granted to Sonix in
Section 2.2 shall survive the termination or expiration of the Agreement.
Atmel shall have no rights to any Updates made to the Licensed Technology
after the expiration of the Agreement.

                                   SECTION 7

                                   INDEMNITY

     7.1  Indemnification by Sonix. Sonix represents and warrants that it has
full right and authority to enter into this Agreement and to grant the licenses
granted by it to Atmel herein and that no third party has any rights of any
kind with respect to the Licensed Technology, the Sonix Patents or the Sonix
Know-How that would conflict with such licenses. Except as set forth in Section
7.2 hereof, Sonix further agrees to defend and indemnify Atmel against any
actions brought against Atmel or its customers to the extent based upon a
claim that the Licensed Technology infringes any patent, trade secret or other
intellectual property right of any third party, and to pay any settlements
entered into or damages awarded against Atmel or its customers to the extent
based upon such a claim; provided, that Sonix is provided reasonably prompt
notice of any such action and reasonable assistance in connection with the
defense thereof (at Sonix's expense) and allows Sonix full control of the
defense and settlement thereof. This Section 7 sets forth Atmel's sole remedy
for any infringement claims it may have against Sonix or any breach by Sonix of
the above warranty.

     7.2  Indemnification by Atmel. Except as set forth in Section 7.1 hereof,
Atmel agrees to defend and indemnify Sonix against any actions brought against
Sonix or its customers to the extent based upon a claim that a Product or a
process used to manufacture a Product infringes any patent, trade secret or
other intellectual property right of any third party as a result of information
or processes provided to Sonix by Atmel, and agrees to pay any settlements
entered into or damages awarded against Sonix or its customers to the extent
based upon such a claim; provided that Atmel is provided reasonably prompt
notice of any such action and reasonable assistance in connection with the
defense thereof (at Atmel's expense) and allows Atmel full control of the
defense and settlement

[ * ]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                       7
<PAGE>

thereof. This Section 7 sets forth Sonix's sole remedy for any infringement
claims it may have against Atmel.

     7.3  Remedies. If a Product is or becomes the subject of any claim demand,
suit or proceeding for any infringement of any third party patent, trade secret
or other intellectual property right, or if it is adjudicatively determined that
such Product infringes any third party patent, trade secret or other
intellectual property right, then indemnifying party shall, at its option and
expense, either (i) procure for indemnified party and its customers the right
under such third party intellectual property to manufacture, sell or use, as
appropriate, the infringing technology; (ii) replace or modify the infringing
technology with other suitable and reasonably equivalent non-infringing
technology; or (iii) if neither of the foregoing is commercially practical
refund any amounts already paid with respect to those particular Products that
may no longer be sold or otherwise distributed. Sonix's total liability under
this Section 7 shall not exceed the amount of cumulative payments of royalties
Sonix has received from Atmel pursuant to this Agreement. Atmel's total
liability under this Section 7 shall not exceed ten percent (10%) of the Net
Selling Price of each such Product found to be infringing.

     7.4  Disclaimer. THE FOREGOING STATES BOTH PARTIES ENTIRE LIABILITY AND
OBLIGATION (EXPRESS, IMPLIED, STATUTORY OR OTHERWISE) WITH RESPECT TO
INTELLECTUAL PROPERTY INFRINGEMENT OR CLAIMS THEREFOR REGARDING ANY OF THE
PRODUCTS OR TECHNOLOGY DEVELOPED, MANUFACTURED OR SOLD PURSUANT TO THIS
AGREEMENT.

                                   SECTION 8

                                CONFIDENTIALITY

     8.1  Confidential Information.

     (a)  As used in this Section 8. 1, the term "Confidential Information"
shall mean any information disclosed by one party to the other pursuant to this
Agreement which is in written, graphic, machine readable or other tangible form
and is marked "Confidential", "Proprietary" or in some other manner to indicate
its confidential nature. Confidential Information may also include oral
information disclosed by one party to the other pursuant to this Agreement,
provided that such information is designated as confidential at the time of
disclosure and reduced to a written summary by the disclosing party, within
thirty (30) days after its oral disclosure, which is marked in a manner to
indicate its confidential nature and delivered to the receiving party. In
addition, all technical and confidential information exchanged prior to the
Effective Date shall be subject to the terms of this Section 8 after the
Effective Date.

     (b)  Each party shall treat as confidential all Confidential Information of
the other party, shall not use such Confidential Information except as expressly
set forth herein or otherwise authorized in writing, shall implement reasonable
procedures to prohibit the disclosure, unauthorized duplication, misuse or
removal of the other party's Confidential Information and shall not disclose
such Confidential Information to any third party except as may be necessary and
required in connection with the rights and obligations of such party under this
Agreement, and subject to confidentiality obligations in writing at least as
protective as those set forth herein.

[ * ]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                       8
<PAGE>

Without limiting the foregoing, each of the parties shall use at least the same
procedures and degree of care which it uses to prevent the disclosure of its own
confidential information of like importance to prevent the disclosure of
Confidential Information disclosed to it by the other party under this
Agreement, but in no event less than reasonable care.

     (c)   Notwithstanding the above, neither party shall have liability to the
other with regard to any Confidential Information of the other which:

     (i)   was generally known and available in the public domain at the time it
           was disclosed or becomes generally known and available in the public
           domain through no fault of the receiver;

     (ii)  was known to the receiver at the time of disclosure;

     (iii) is disclosed with the prior written approval of the disclosure;

     (iv)  was independently developed by the receiver without any use of the
           Confidential Information;

     (v)   becomes known to the receiver from a source other than the disclosure
           without breach of this Agreement by the receiver and otherwise not in
           violation of the disclosure's rights; or

     (vi)  is disclosed pursuant to the order or requirement of a court,
           administrative agency, or other governmental body; provided, that the
           receiver shall provide prompt, advanced notice thereof to enable the
           disclosure to seek a protective order or otherwise prevent such
           disclosure.

     (d)   Each party shall obtain the execution of proprietary non-disclosure
agreements with its employees, agents and consultants having access to
Confidential Information of the other party, and shall diligently enforce such
agreements, or shall be responsible for the actions of such employees, agents
and consultants in this respect.

     8.2   Publicity. All publicity regarding the announcement of this Agreement
shall be coordinated by both parties. Neither party shall disclose the terms of
this Agreement without the prior written approval of the other party, except as
required as a matter of law or to attorneys, accountants or investment bankers,
if necessary for Sonix to operate or raise funds but each such disclosure shall
have executed a non-disclosure agreement similar in content to Section 8 hereof.

     8.3   Return of Information. Upon the written request by either party
following the termination of this Agreement, each party shall return to the
other party any Confidential Information of the other party in its possession,
except that Atmel shall be permitted to retain any Confidential Information
relating to Sonix Know-How in the event this Agreement is terminated by Atmel
as a result of a breach by Sonix, but must keep all Confidential Information as
set forth in this Section 8.

[ * ]= CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                       9
<PAGE>

                                   SECTION 9

                            LIMITATION OF LIABILITY

EXCEPT IN THE CASE OF AN INTENTIONAL OR GROSSLY NEGLIGENT ACT OR OMISSION OF A
PARTY, NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT,
OR INCIDENTAL DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY AND WHETHER OR
NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING IN
ANY WAY OUT OF THIS AGREEMENT OR THE DESIGNS, PRODUCTS, INFORMATION OR OTHER
TECHNOLOGY PROVIDED PURSUANT TO THIS AGREEMENT.

                                  SECTION 10

                                 MISCELLANEOUS

     10.1 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California.

     10.2 Force Majeure. If the performance of this Agreement or any obligations
hereunder is prevented, restricted or interfered with by reason of fire or other
casualty or accident, strikes or labor disputes, yield problems, war or other
violence, any law, order, proclamation, ordinance, or demand or requirement of
any government agency, the party so affected upon giving prompt notice to the
other party shall be excused from such performance during such prevention,
restriction or interference.

     10.3 Assignment. Except as set forth in Section 2, neither party may assign
or delegate this Agreement or any of its licenses, rights or duties under this
Agreement without the prior written consent of the other, except to a person or
entity into which it has merged or which has otherwise succeeded to all or
substantially all of its business and assets, and which has assumed in writing
or by operation of law its obligations under this Agreement.

     10.4 Arbitration. Any dispute or claim arising out of or relating to this
Agreement, or the interpretation, making, performance, breach or termination
thereof, shall be finally settled by binding arbitration in Santa Clara County,
California, under the Rules for Commercial Arbitration of the American
Arbitration Association, by three arbitrators (or such lesser number of
arbitrators as the parties hereto shall agree) appointed in accordance with said
Rules. Judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof. Notwithstanding the foregoing, the parties
may apply to any court of competent jurisdiction for a temporary restraining
order, preliminary injunction, or other interim or conservatory relief, as
necessary, without breach of this arbitration agreement and without any
abridgment of the powers of the arbitrators.

     10.5 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand, by messenger or by
telecommunications addressed to the addresses first set forth above or at such
other address furnished with a notice in the manner set forth herein. Such
notices

                                       10
<PAGE>

shall be deemed to have been served when delivered or, if delivery is not
accomplished by reason of some fault of the addressee, when tendered.

     10.6  Partial Invalidity. If any paragraph, provision, or clause the of
shall be found or be held to be invalid or unenforceable in any jurisdiction in
which this Agreement is being performed, the remainder of this Agreement shall
be valid and enforceable and the parties shall negotiate, in good faith, a
substitute, valid and enforceable provision which most nearly effects the
parties' intent in entering into this Agreement.

     10.7  Counterparts. This Agreement may be executed in counterparts which,
taken together, shall be regarded as one and the same instrument.

     10.8  Waiver. The failure of either party to enforce at any time the
provisions of this Agreement shall in no way be constituted to be a present or
future waiver of such provisions, nor in any way affect the validity of either
party to enforce each and every such provision thereafter.

     10.9  Entire Agreement. The terms and conditions herein contained
constitute the entire agreement and supersede all previous agreements and
understandings, whether oral or written, including without limitation the Non-
Disclosure Agreement previously entered into by the parties, between the parties
hereto with respect to the subject matter hereof and no agreement or
understanding varying or extending the same shall be binding upon either party
hereto unless in a written document signed by the party to be bound thereby.

     10.10 Section Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by duly authorized officers or representatives as of the date first above
written.

ATMEL CORPORATION                       SONIX TECHNOLOGIES, INC.

By:  /s/ George Perlegos                By: /s/ A. Raguskus
     -----------------------                ----------------------------
         George Perlegos                Name: A. Raguskus
                                              --------------------------
       President and CEO                Title: President and CEO
                                               -------------------------

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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                       11
<PAGE>

                                   EXHIBIT A
                                   (Pricing)

Non-recurring Engineering (NRE) Charges
---------------------------------------
<TABLE>
<CAPTION>
New Designs
-----------
<S>                       <C>                                                                     <C>
1.  Design Support        EEPROM Cell + Interface Circuits, ESD structures,                       $[ * ]
                          final DRC/LVS, Frame, FDR
2.  Masks                 AT19760 process [ * ] masks at [ * ] per layer                          $[ * ]
3.  Test Hardware         Design and Build Probe Card and Load Board
                          -Supply Sonix with two Probe Cards @ $[ * ] each                        $[ * ]
4.  Test Program          Sonix to provide digital test vectors and test specs. Jointly debug     $[ * ]
5.  Wafers                Sonix to receive [ * ] wafers with at least [ * ] wafers being without
                          passivation                                                             $[ * ]
                                                                                                  ------

    Total                                                                                         $[ * ]
</TABLE>

Design Revisions
----------------
Wafer lots are $[ * ] for [ * ] wafers. Masks are $[ * ] per layer. Engineering
support [ * ]*

Qualifications
--------------
6.  Qualification         [ * ]*
7.  Characterization      [ * ]*

Unit Pricing
------------
8.  Prototypes are $[ * ] each (Min and Max quantities [ * ]*)
9.  Productions Units are $[ * ]  each.
             Assumptions  a)  Die Size 100mils x 150mils on AT19760 process;
                          b)  Wafer Sort Test time is 5 seconds; and
                          c)  Deliver tested die (bumping and price adder TBD*).

[ * ]

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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

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