EXHIBIT 10.6
TECHNOLOGY TRANSFER OPTION AGREEMENT
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This Agreement is made as of the 5th day of January, 1998
BETWEEN:
The New Brunswick Telephone Company, Limited, a New
Brunswick business corporation (hereinafter called
"NBTel")
OF THE FIRST PART
and
506048 N.B. Ltd., a New Brunswick business corporation
(hereinafter called "506")
OF THE SECOND PART
and
imagicTV Inc., a corporation Incorporated under the laws
of Canada, (hereinafter called "imagic")
OF THE THIRD PART
WHEREAS NBTel and 506 intend to carry on research and development activities
directed toward the creation of commercially viable products relating to digital
broadcasting over Internet Protocol networks and supporting hardware of the
nature described in Schedule "A" hereto (the "Products"); and
WHEREAS in the course of such research and development activities, NBTel and 506
will produce and/or acquire NBTel and 506 Technology as defined herein; and
WHEREAS imagic is desirous of acquiring the right, exercisable at its option as
hereinafter provided, to purchase from NBTel and 506 all NBTel and 506
Technology as may be generated from such research and development activities on
the terms hereinafter contained; and
NOW THEREFORE in consideration of the sum of TEN DOLLARS ($10.00) in lawful
money of Canada and of the mutual covenants herein contained the receipt and
sufficiency of which is hereby acknowledged, the Parties agree with each other
as follows:
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ARTICLE I
DEFINITIONS
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1.1 In this Agreement and in any amendment hereto, unless there is something in
the subject matter or context inconsistent therewith:
(a) "Business Day" means any day of the year other than a Saturday, Sunday
or statutory holiday or any other day on which banks are required or
authorized to close in Toronto, Ontario or Saint Xxxx, New Brunswick;
(b) "Completion Date" means the date specified in the Research Schedule
being the earlier of either January 1,1999; such time as the Product
has reached Market Trial Version 1.0; or such time as the total
Contract Fee has been paid to imagic pursuant to the Development
Agreement;
(c) "Conversion Event" has the meaning set out in Article IV of this
Agreement whereby imagic shall issue and deliver Shares to NBTEL and
506 in exchange for the conveyance of the NBTEL and 506 Technology to
imagic.
(d) "Development Agreement" means the development agreement having an
effective date of January 5,1998 between imagic and NBTel and 506;
(e) "License Agreement" means the license agreement having an effective
date of January 5, 1998 between NBTel and 506 and imagic;
(f) "NBTel and 506 Technology" shall mean the NBTel and 506 Technology as
defined in the Development Agreement;
(g) "Option" means the option of imagic to acquire the NBTel and 506
Technology, in exchange for the issuance to each of NBTel and 506 of
Shares, exercisable at the sole discretion of imagic as described more
fully in Article IV of this Agreement;
(h) "Parties" means collectively, 506, NBTel, imagic and any other Person
who becomes a Party to this Agreement in accordance with the
provisions hereof, and "Party" means any one of them;
(i) "Person" means any individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated
association, joint venture or other entity;
(j) "Products" means each of those Products described in Schedule "A"
hereto;
(k) "Shares" means the Class A Share(s) of imagic but does not include any
rights, warrants, options or other instruments entitling the holder,
whether or not on a
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contingency, to acquire from treasury Class A Share(s) of imagic,
and/or any instruments convertible, whether or not on a contingency,
into any of the foregoing unless and until such rights of conversion
have been exercised and such shares have been issued in respect
thereto;
(l) "Technology Transfer Option Agreement" or "Agreement" means the terms
and conditions of this Agreement and any written amendments or
supplements executed by the Parties hereto;
1.2 Extended Meanings. In this Agreement, unless there is something in the
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subject matter or context inconsistent therewith words importing the singular
number include the plural and vice versa and words importing gender include all
genders.
1.3 Headings. The division of this Agreement into articles, sections and
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subsections and the insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation of this Agreement.
1.4 Applicable Law. This Agreement shall be construed in accordance with the
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laws of the Province of New Brunswick and the laws of Canada applicable therein
and shall be treated in all respects as a New Brunswick contract. Any action,
suit or proceeding arising out of or relating to this Agreement shall be brought
in the courts of the Province of New Brunswick and each of the Parties hereby
irrevocably submits to the jurisdiction of such courts.
1.5 Consent. Whenever a provision of this Agreement requires an approval or
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consent by a Party to this Agreement and notification of such approval or
consent is not delivered within the applicable time limit, then, unless
otherwise specified, the Party whose consent or approval is required shall be
conclusively deemed to have withheld its approval or consent.
1.6 Currency. Unless otherwise expressly stated, references to sums of money
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herein are to lawful money of Canada.
1.7 Computation of Time Periods. In this Agreement, in the computation of
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periods of time from a specified date to a later specified date, unless
otherwise expressly stated, the word "from" means "from but excluding" and the
words "to" and "until" each mean "to and Including" and if the last day of any
such period is not a Business Day, such period shall end on the next Business
Day.
ARTICLE II
SCHEDULES
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2.1 The following is a list of schedules annexed to this Agreement:
Schedule "A" - Description of Products
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Schedule "B" - Description of Development Stage of Products Required
to Achieve Market Trial Version 1.0
ARTICLE III
DEVELOPMENT ACTIVITIES
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3.1 NBTel and 506 have agreed with imagic to carry out research and development
activities in accordance with the Development Agreement with a view to NBTel and
506 achieving the stage of development of the Products described in Schedule "B"
hereto.
ARTICLE IV
OPTION
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4.1 Conversion Event. imagic shall issue and deliver Shares to each of NBTel
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and 506 in exchange for the conveyance by NBTel and 506 of the NBTCI and 506
Technology to imagic upon the occurrence of the earlier of one of the following
events:
(a) upon NBTel and 506's receipt of a written notice from imagic delivered
at any time within six (6) months following the Completion Date,
whereby Imagic agrees to purchase all, but not less than all, of the
interest of each of NBTel and 506 in the NBTel and 506 Technology;
(b) a take-over bid, as defined in the Securities Act (Ontario), is made
with respect to imagic;
(c) an acquisition of control of imagic, where control is as defined in
the Canada Business Corporations Act; or
(d) on the day of closing of a public offering or listing on a stock
exchange of imagic in either Canada or the United States.
Upon the occurrence of one of the foregoing events NBTel and 506 shall deliver
to imagic a conveyance pursuant to which NBTel and 506 sells, transfers, assigns
and sets over unto imagic the interest of each of NBTel and 506 in the NBTel and
506 Technology, and upon receipt of such conveyance, imagic shall cause Shares
to be issued to each of NBTel and 506.
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ARTICLE V
DISCLOSURE OF TECHNOLOGY
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5.1 (a) in the event of a Conversion Event pursuant to Article IV of this
Agreement, NBTel and 506 shall disclose to imagic all of the NBTel
and 506 Technology.
(b) Where disclosure of NBTel and 506 Technology is required as
hereinbefore provided, such disclosure shall consist, in the case of
physical items embodying the NBTel and 506 Technology, of delivery
of same to imagic. Where such NBTel and 506 Technology consists of
information and know-how, such disclosure shall consist of
delivering to imagic all documents and other records (including
computer discs and tapes) containing information relating to the
NBTel and 506 Technology to be disclosed and making personnel of
NBTel and 506 available to imagic for the purpose of explaining and
disclosing such NBTel and 506 Technology. NBTel and 506 shall be
entitled to retain copies of such documents and records only to the
extent necessary to enable NBTel and 506 to carry out research and
development activities on subsequent development stages of the
Products.
ARTICLE VI
CONFIDENTIALITY
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6.1 NBTel and 506 agrees that any NBTel and 506 Technology sold to imagic or
information disclosed to imagic pursuant to this Agreement is proprietary
property and confidential information and that NBTel and 506 shall not disclose
or use such technology following such sale except:
(a) as provided for in Article V hereof; or
(b) if the portion of such proprietary property and confidential
information that is to be disclosed or used has become generally
known to the trade or public, provided that such general knowledge
is not the result of a breach by NBTel and 506 ; or
(c) if the portion of such proprietary property and confidential
Information that is to be disclosed or used has been obtained by
NBTel and 506 from a source other than pursuant to this Agreement
and without breach of this Agreement; or
(d) such disclosure is required by compulsion of law.
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ARTICLE VII
PATENT RIGHTS
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7.1 imagic, to the extent it acquires the NBTel and 506 Technology pursuant to
this Agreement, shall have the exclusive right to apply for any patents,
copyrights and industrial design registrations embodied in such NBTel and 506
Technology. If imagic requires an application for such patent to be made, NBTel
and 506, at the expense of imagic, shall take all steps within its power
necessary to assist imagic in filing such applications and prosecuting the same
until such patents are issued. in the event that NBTel and 506 alone or in
conjunction with imagic must apply for any such patent, NBTel and 506 shall hold
any rights it may acquire in any such patent in trust for imagic to be dealt
with in the manner specified by imagic.
ARTICLE VIII
FURTHER ASSURANCES
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8.1 In the event that NBTel and 506 sells the NBTel and 506 Technology to
imagic pursuant to the provisions hereof, NBTel and 506 covenants and agrees
with imagic to execute all documents and take all steps as may be necessary or
desirable in the reasonable opinion of imagic to further and better assert and
confirm unto imagic the rights with respect to NBTel and 506 Technology acquired
by imagic through NBTel and 506.
ARTICLE IX
SECTION 85 ROLLOVER
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9.1 In the event of a Conversion Event pursuant to Article IV of this
Agreement, NBTel and 506 and imagic agree to file jointly and in a timely
fashion an election in prescribed form pursuant to subsection 85 of the Income
Tax Act (Canada) in respect of such purchase and sale of NBTel and 506
Technology, whereby the amount that NBTel and 506 and imagic shall agree upon in
respect of the disposition of the subject NBTel and 506 Technology (hereinafter
called the "agreed amount") shall be $1.00, which agreed amount shall be deemed
to be the proceeds of disposition to NBTel and 506 of such NBTel and 506
Technology and the cost to imagic thereof for the purposes of the Income Tax Act
(Canada). NBTel and 506 shall be responsible for preparing the prescribed forms
for execution and filing in accordance with the Income Tax Act (Canada).
ARTICLE X
CLOSING
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10.1 Upon the occurrence of a Conversion Event pursuant to Article IV hereof,
there shall
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within seven (7) days be a closing. At the closing, (a) imagic shall deliver
share certificates to NBTel and 506 representing the number of Shares to be
issued upon occurrence of a Conversion Event together with such supporting
documentation as NBTel and 506 may reasonably require to establish that the
shares have been duly and properly issued as fully-paid and non-assessable
shares of imagic; and (b) NBTel and 506 shall deliver to imagic an assignment of
all right, title and interest in and to the relevant NBTel and 506 Technology,
free and clear of all liens, encumbrances and claims of any nature whatsoever,
together with all physical manifestations of such NBTel and 506 Technology and
the documentation therefor, including source code in machine-readable form, and
such additional documentation in connection with the transfer of such
technologies as imagic may reasonably require.
ARTICLE XI
UNDERTAKING TO ADJUST
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11.1 It is the intention of imagic and NBTel and 506 that the transaction
herein provided for shall take place at the fair market value of the NBTel and
506 Technology as of the date of the Conversion Event. Notwithstanding the
foregoing provisions, the Parties agree that if any taxing authority should
allege that the consideration, determined as provided for in Article IV hereof,
is not equal to the fair market value of the NBTel and 506 Technology or makes
or proposes to make an assessment on the basis that any benefit or advantage is
conferred on any person by reason of the sale herein provided for, then the
consideration shall be, and shall be deemed always to have been, the amount that
is determined to be the fair market value of the NBTel and 506 Technology by an
accountant mutually acceptable to NBTel and 506, after it has consulted with
such taxing authority, and the Parties shall make such adjustments and execute
such documentation as is necessary to give effect to such adjustment of the
consideration.
ARTICLE XII
GENERAL
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12.1 Adjustment upon Changes in Capitalization. In the event of any change in
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the number of issued and outstanding Shares of imagic by reason of any stock
dividend, split-up, amalgamation, merger, recapitalization, combination,
conversion, exchange of Shares or other change in the corporate or capital
structure of imagic that could have the effect of diluting or otherwise
affecting the consideration to be paid to NBTel and 506 hereunder, the number of
Shares issued upon exercise of the Option shall be appropriately adjusted.
12.2 Notices. Any notice, demand or other communication required or permitted
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to be given to any Party hereunder shall be in writing and shall be either:
(a) personally delivered;
(b) sent by same-day or next-day courier or mail;
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(c) sent by prepaid telecopier, telex or similar method of electronic
communication including facsimile transmission, which produces a
paper record; or
(d) prepaid registered mall.
Any notice so given shall be sent to the Parties at their respective addresses
set out below:
(a) In the case of a notice to 506:
506048 N.B. Ltd.
c/o Kanata Research Park Corporation
000 Xxxxxx Xx.
Xxxxxx, Xxxxxxx
Xxxxxx
X0X 0X0
Attention: President
Fax No.: (000) 000-0000
(b) In the case of a notice to NBTel:
The New Brunswick Telephone Company, Limited.,
Xxx Xxxxxxxxx Xxxxxx
Xxxxx Xxxx, Xxx Xxxxxxxxx
Xxxxxx
X0X 0X0
Attention: General Counsel
Fax No.: (000) 000-0000
(c) In the case of a notice to imagic:
imagicTV Inc.
Xxx Xxxxxxxxx Xxxxxx
x0xx Xxxxx
P.O. Box 303
Saint Xxxx, New Brunswick
Canada
E2L 3Y2
Attention: President
Fax No.: (000) 000-0000
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And in all cases so delivered personally or by courier or so sent by means of
electronic communication. Any notice so given is deemed conclusively to have
been given and received when so personally delivered or sent by telex,
telecopier, or other electronic communication or on the fifth business day
following the sending thereof by private courier or mail. Any Party hereto may
change any particulars of its address for notice by notice to the others in the
manner aforesaid.
12.4 Amendments. No supplement, modification, waiver, qualification or
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termination of this Agreement shall be binding unless executed in writing by the
Parties to be bound thereby.
12.5 Successors and Assigns. This Agreement shall be binding upon and enure to
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the benefit of the Parties hereto and their respective successors and permitted
assigns. Nothing herein, express or implied, is intended to confer on any
person, other than the Parties hereto and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
12.6 Assignment. This Agreement shall not be assigned by imagic. Unless
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otherwise agreed by imagic, NBTel and 506 shall only assign this Technology
Transfer Option Agreement and corresponding Schedules to an Affiliate as defined
in the Canada business Corporations Act and further provided that NBTel or 506,
as the case may be, must concurrently assign to the same corporation, the
Development Agreement, License Agreement and corresponding Schedules to the same
corporation and such corporation agrees to be bound by the Development
Agreement, License Agreement and corresponding Schedules thereto. Any further
assignment by the Affiliate of NBTel or 506 shall be subject to the written
consent of NBTel or its Affiliate, or 506 or its Affiliate, as the case may be.
12.7 Severability. Each and every provision of this Agreement shall be treated
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as separate and distinct and in the event of any provision hereof being declared
invalid such provision shall be deemed to be severable and all other provisions
hereof shall remain in full force and effect.
12.8 Entire Agreement. This Agreement and the Schedules attached constitute
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the entire agreement between the Parties relating to the subject matter hereof
and supersedes any and all prior agreements, discussions and representations.
12.9 Separate Counterparts. This Agreement may be executed by the Parties
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hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
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12.10 Time of the Essence. Time shall be of the essence of this Agreement.
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IN WITNESS WHEREOF, NBTel and 506 and imagic have caused this agreement to be
duly executed as of the 5th day of January, 1998.
506048 N.B. Ltd.
By:
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Name:
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Title:
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By:
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Name:
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Title:
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THE NEW BRUNSWICK TELEPHONE COMPANY, LIMITED
By:
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Name:
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Title:
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By:
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Name:
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Title:
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imagicTV Inc.
By:
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Name:
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Title:
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By:
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Name:
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Title:
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SCHEDULE "A"
Product(s) to be developed:
The imagicTV Broadcast Distribution System. The integrated broadcast
distribution systems is composed of a series of components that can be
configured with various modules to allow residential users, via an
Electronic Program Guide, to select and view audio/video content in
their home over a broadband multicast IP network. All as more fully
described in the Research Schedule to the Development Agreement between
the Parties dated the 5th day of January, 1998.
The Parties agree that the terms and conditions of this Schedule form
part of and are incorporated into the Technology Transfer Option
Agreement.
IN WITNESS WHEREOF the Parties have executed this Schedule this 5th day
of January, 1998.
506048 N.B. Ltd.
By:
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Name:
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Title:
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By:
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Name:
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Title:
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THE NEW BRUNSWICK TELEPHONE COMPANY, LIMITED
By:
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Name:
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Title:
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By:
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Name:
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Title:
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imagicTV Inc.
By:
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Name:
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Title:
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By:
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Name:
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Title:
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SCHEDULE "B"
Research Stage Required to Achieve
Market Trial Version 1.0 of Products.
The imagicTV Broadcast Distribution System research product consists of the
following phases:
Phase I - System Architecture
January 98 - March 98
Complete the overall system architecture.
Determine the high level functional and technical architecture for the
broadcast distribution systems.
Phase II - Proof of Concept (Release 0.1):
February 98- March 98
Complete prototype system which delivers IP multicast MPEG-1/MPEG-2
content to a PC based hard coded Electronic Program Guide.
Complete the analysis of scalability of technology.
Begin end-to-end testing of the IP multicast broadcast distribution
systems using the NBTel labs.
Phase III - Development phase leading to Technical Trial (Release 0.5):
February 98- September 98
Begin alpha testing of the Newbridge CSI in the imagicTV labs.
Electronic Program Guide (EPG) - Deliver first generation EPG for field
testing on both PC and TV.
EPG database - Deliver first generation software for field testing.
Live MPEG encoder - Deliver first generation component for field
testing.
Near Video-on-Demand Server - Deliver first generation component for
field testing.
Video-on-Demand Server - Deliver first generation component for field
testing.
Billing, Reporting and Statistics system - Deliver first generation
software for field testing.
Channel Offering Management system - Deliver first generation software
for field testing.
Phase IV - Development phase leading to Market Trial (Release 1.0):
September 98--January 99
Begin end-to-end testing of the Newbridge CSI in the NBTel labs.
Electronic Program Guide (EPG) - Enhance EPG based on customer feed
back. Add ad insertion and conditional access system support.
Ad Server - Deliver first generation software for field testing.
Conditional Access System - Deliver first generation component for
field testing.
Customer profile management system - Deliver first generation software
for field testing.
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Subscription management (including self service) system - Deliver first
generation software for field testing.
Service activation system - Deliver first generation software for field
testing.
End to End network management system - Deliver first generation
software for field testing.
EPG database - Correct any outstanding bugs.
Live MPEG encoder - Correct any outstanding bugs.
Near Video-on-Demand Server - Correct any outstanding bugs.
Video-on-Demand Server - Correct any outstanding bugs.
Billing, Reporting and Statistics system - Correct any outstanding
bugs.
Channel Offering Management system - Correct any outstanding bugs.
The Parties agree that the terms and conditions this Schedule form part
and are incorporated into the Technology Transfer Option Agreement.
IN WITNESS WHEREOF the Parties have executed this Schedule this 5th day
of January, 1998,
506048 N.B. Ltd.
By:
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Name:
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Title:
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By:
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Name:
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Title:
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THE NEW BRUNSWICK TELEPHONE COMPANY, LIMITED
By:
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Name:
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Title:
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By:
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Name:
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Title:
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imagicTV Inc.
By:
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Name:
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Title:
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By:
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Name:
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Title:
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