Exhibit 10.7
DEVELOPMENT AGREEMENT
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THIS AGREEMENT made effective 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 imagic is in the business of conducting scientific research and
experimental development in digital broadcasting over Internet Protocol networks
and supporting hardware products (the "Products") and possesses substantial
experience, capacity and expertise in relation thereto;
AND WHEREAS the business of each of NBTel and 506 includes scientific research
and experimental development in the area of digital broadcasting over Internet
Protocol networks;
AND WHEREAS each of NBTel and 506 from time to time may wish to jointly embark
on projects which have as their goal the creation and development of
commercially viable products of the nature described in the Research Schedule
(as hereinafter defined), and desire to engage the services of imagic to perform
the necessary scientific research and experimental development to create such
commercially viable products; and
AND WHEREAS imagic and NBTel and 506 wish to establish the terms and conditions
on which NBTel and 506 will request imagic to perform the said scientific
research and experimental development for and on behalf of NBTel and 506.
NOW THEREFORE, in consideration of the mutual promises and agreements
hereinafter contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto
mutually covenant and agree with each other as follows:
ARTICLE I
INTERPRETATION
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1.1 Definitions. In this Agreement and in any amendment hereto, unless there is
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something in the subject matter or context inconsistent therewith.
(a) "Act" means the Canada Business Corporations Act, as now enacted or as the
same may from time to time be amended, re-enacted or replaced, and the
regulations thereto and any regulations that may be substituted therefor,
as from time to time amended;
(b) "Affiliate" of a Party has the meaning specified in the Act;
(c) "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;
(d) "Completion Date" means the date specified in the Research Schedule being
the earlier of either January 1, 1999; such time as the Product, as defined
in the License Agreement, 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;
(e) "Contract Fee" means the amount specified in the Research Schedule as the
Contract Fee;
(f) "Commencement Date" means the date specified in the Research Schedule and
shall be the date on which the activities relating to the Research Project
commence;
(g) "Development Agreement" or "Agreement" means the terms and conditions of
this Development Agreement and the Research Schedule executed by the
Parties which incorporates the terms and conditions of this Development
Agreement and any amendments or supplements thereto;
(h) "Income Tax Act" means the Income Tax Act (Canada) as amended;
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(i) "License Agreement" means the license agreement having an effective date of
January 5, 1998 between NBTel and 506 and imagic;
(j) "License Schedule" means a licensing rights schedule entered into between
NBTel and 506 and imagic pursuant to the License Agreement, which licensing
rights schedule shall be executed by the Parties concurrently with the
Research Schedule;
(k) "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;
(l) "Person" means any individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity;
(m) "Research Project" means the research project which has as its goal the
creation and development of commercially viable products of the nature
described in the Research Schedule;
(n) "Research Schedule" means Schedule "A" attached hereto, any subsequent
amendments thereto as mutually agreed by the Parties, which describes the
Research Project, the Contract Fee, the Commencement Date, the required
Completion Date of the Research Project, and any other specific
requirements of the Research Project to be carried out under the Research
Schedule;
(o) "NBTel and 506 Technology" shall mean without limitation any intellectual
property of whatever kind developed by imagic pursuant to the Research
Schedule executed by the Parties pursuant to this Development Agreement and
any products developed therefrom and any intellectual property related
thereto including all hardware and software architecture, interfaces and
designs and other tangible and intangible property produced and or acquired
including all unpublished know-how, technical data, techniques, manuals,
documentation, reports, records, formulae, processes, descriptions,
evaluations, computer programs (source code and object code), computations,
schematics, specifications, designs, design criteria, sketches,
photographs, plans, drawings, samples, reports, studies, findings,
inventions, prototypes and ideas, whether patentable or not, whether trade
secrets or not and in any media whatsoever whether in electronic, written,
graphic or oral form relating to the products or any part thereof; their
research, design, development, construction, assembly, testing, production,
marketing, consultation, installation and operation, and all industrial and
intellectual property rights therein, including without limitation all
copyrights, patents, trade secrets, trade marks, mask works and industrial
designs; and any enhancements, revisions, improvements, upgrades,
translations, completions, modifications, adaptations, derivatives and new
versions of any of the foregoing;
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(q) "Technology Transfer Option Agreement" means the technology transfer
option agreement having an effective date of January 5, 1998 between
NBTel and 506 and magic;
1.2 Currency. All references to monetary amounts shall be construed to refer to
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lawful money of Canada unless otherwise specified.
1.3 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.
1.4 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.
1.5 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.
1.6 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.
1.7 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.
1.8 Incorporation of Schedules. Each Schedule annexed hereto shall, for all
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purposes hereof, form an integral part of this Agreement
ARTICLE II
PERFORMANCE OF SCIENTIFIC RESEARCH
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2.1 Subject to the terms and conditions of this Agreement, NBTel and 506,
jointly engage the services of imagic to carry out the Research Project and
imagic undertakes
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and agrees to carry out the Research Project for the consideration specified in
Article III of this Agreement provided that such consideration shall not exceed
the Contract Fee.
2.2 NBTel and 506 will jointly have complete, sole and absolute discretion as to
the conduct, control and direction of the performance of the research activities
to be carried out by imagic on behalf of NBTel and 506.
2.3 NBTel and 506 shall appoint a mutually acceptable person to act as project
coordinator to co-ordinate research activities with imagic. Such project
coordinator shall have the authority and power to act for and on behalf of NBTel
and 506 in all matters connected with, arising out of or relating to this
Agreement. NBTel and 506 may change the person who acts as project coordinator
by notice given to imagic in the manner provided herein. The project coordinator
shall: establish product definitions, milestones and project outlines, and such
other related reports as required; contact or meet with the imagic development
team on an as needed basis; and generally supervise the activities undertaken as
part of the Research Project.
2.4 Subject to the terms of this Agreement, all NBTel and 506 Technology
developed by or for imagic pursuant to this Agreement shall be the property of
NBTel and 506, to be owned by them jointly. imagic shall at the expense of NBTel
and 506, take any and all steps which may be required to register such NBTel and
506 Technology in the joint names of NBTel and 506, including, without
limitation, obtaining patent protection, copyright and trade-xxxx registrations,
mask work registrations and industrial design registrations on behalf of NBTel
and 506. It is further agreed that all documents, drawings, specifications and
other such pertinent papers prepared by imagic in carrying out the terms of this
Agreement shall become the property of NBTel and 506, to be owned by them
jointly and shall be used by NBTel and 506, without accounting therefor to
imagic, but only as mutually agreed upon by 506 and NBTel in writing. In the
event that imagic creates or uses any compositions, processes or methods owned
or controlled by it in carrying out the terms of this Agreement, imagic, insofar
as it is able, hereby grants to each of NBTel and 506, a license in accordance
with the terms and conditions set out in the License Agreement and License
Schedule for NBTel and 506 to use, exploit, develop, enhance, improve and market
such compositions, processes or methods, together with the right to extend such
license to purchasers or licensees of the NBTel and 506 Technology.
2.5 Any use of the NBTel and 506 Technology by NBTel and 506, shall be on a
joint basis and shall be subject to a joint-use agreement that establishes the
terms and conditions for revenue and cost sharing, such agreement to be entered
into between NBTel and 506 if either such Party wishes to use the NBTel and 506
Technology and then on terms and conditions as are mutually agreeable, both
Parties acting reasonably. For greater certainty, neither NBTCI or 506 will
independently enhance, revise, modify, improve, upgrade or otherwise modify the
NBTel and 506 Technology unless NBTel and 506 otherwise mutually agree in
writing.
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2.6 imagic will commence work on the performance of the Research Project on the
Commencement Date, as specified in the Research Schedule, and will devote its
best efforts to completing the Research Project by the Completion Date specified
in the Research Schedule.
2.7 It is further stipulated and agreed that the rights and obligations granted
to and imposed upon the Parties hereto, shall not be so construed as to derogate
from the subsisting rights of any third party under any grant, conveyance, or
agreement made or entered into by imagic prior to the effective date of this
Agreement.
ARTICLE III
CONTRACT FEE
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3.1 In consideration of the performance by imagic of its obligations under
Article II hereof, NBTel and 506 shall make payments to imagic in the amounts
invoiced by imagic to NBTel and 506 for expenditures made, or to be made, by
imagic to conduct the research and development work herein. imagic shall deliver
single invoices in the joint names of NBTel and 506. NBTel and 506 shall each be
responsible for payment of one half of all such invoice amounts provided that
neither NBTel or 506 shall be liable for payments in excess of one half of the
Contract Fee. All payments are due thirty (30) days after receipt of invoices by
NBTel and 506. For greater certainty it is acknowledged and agreed that the
amounts invoiced by imagic to NBTel and 506 shall be based on actual costs
incurred by imagic and shall not, in the aggregate, exceed the Contract Fee.
3.2 Notwithstanding any other provision of this Agreement, any duties,
obligations or liabilities of each of NBTel and 506 hereunder, including any
payments pursuant to section 3.1 hereof, are several and shall not be or be
construed to be either joint or joint and several.
3.3 Notwithstanding any other provision of this Agreement, in the event that
either of NBTel or 506 fails to pay its proportionate share of the invoice
tendered pursuant to section 3.1, within the thirty (30) day period following
receipt of such invoice the other Party may, by notice, demand payment. If no
payment is made within the period of five (5) days next succeeding the receipt
of the demand notice the other Party may elect to increase its contribution to
satisfy the shortfall, require imagic to curtail or abandon the Research
Project, or may elect to terminate this Agreement with respect to the Research
Project In the event that the non-defaulting Party elects to increase its
contribution to satisfy the shortfall:
(a) sections 2.2, 2.3 and 12.10 shall no longer be applicable and the
non-defaulting Party shall have complete control and absolute
discretion over any decisions to be made hereunder, including the
research activities to be carried out by imagic with respect to the
Research Project and/or appointment of the project coordinator, and
with respect to any decisions
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regarding the License Agreement, Technology Transfer Option Agreement
and any Schedules thereto;
(b) section 2.4 shall no longer be applicable and the NBTel and 506
Technology shall thereafter be owned in accordance with the
proportionate share of the Party's contributions to the total
contributions made hereunder by all Parties, however, the Party whose
interest in the NBTel and 506 Technology has been reduced shall be
entitled to receive details of and shall be required to contribute to
future invoices in accordance with section 3.1 hereof
(c) the revenue and cost sharing provisions of any joint-use agreement
pursuant to section 2.5 hereof, or the entitlement to royalties
pursuant to the License Agreement and applicable Licence Schedule,
shall be deemed amended to reflect that the Parties interests are no
longer joint but are proportionate to the proportionate share of each
Party's contributions to the total Contract Fee; and
(d) the defaulting Party may at any time cure its default hereunder by
paying to the non-defaulting Party an amount equal to the amount of
the contributions that the defaulting Party has failed to make
hereunder plus interest at prime plus five percent (5.0%).
3.4 imagic will maintain proper records for the purpose of confirming the
amounts invoiced to NBTel and 506 including timesheets and payroll summaries,
paid invoices, vouchers, receipts and other supporting documents. imagic further
agrees that it shall notify NBTel and 506, in writing, promptly upon discovery
of any inaccuracy in documentation submitted by imagic to NBTel and 506 and
reimburse NBTel and 506 respectively for any overpayment made by NBTel and 506
to imagic as a result thereof.
3.5 NBTel and 506, or their authorized agent shall, each at their own expense,
have the right at any time and from time to time to enter upon the premises of
imagic to perform a review or audit of the books and records of imagic including
all supporting documentation, to confirm the amount invoiced to NBTel and 506.
In the event that any inaccuracy or error is found imagic shall immediately
reimburse NBTel and 506 for any overpayment or shall immediately invoice NBTel
and 506 for any underpayment. In the event an overpayment has been found to have
occurred imagic shall pay the costs incurred by NBTel and 506 for the
performance of such audit.
ARTICLE IV
RESEARCH AND DEVELOPMENT COVENANTS OF imagic
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4.1 imagic hereby covenants with NBTCI and 506 that:
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(a) the research expenditures made by imagic hereunder will, to the best
of imagic's ability:
(i) constitute "scientific research and experimental development"
expenditures as that term is defined in Section 248(1) of the
Income Tax Act and Regulation 2900 of the Income Tax Act;
(ii) constitute "qualified expenditures" as that term is defined in
Section 127(9) of the Income Tax Act;
(iii) not be for work that is either defined in Regulation 2900(l)(e)
to (k) of the Income Tax Act or in Subsection 127(9) of the
Income Tax Act, paragraphs (c) to (h), inclusive, of the
definition of "qualified expenditures";
(b) imagic will, upon the request of either NBTel or 506, provide NBTel
and 506 with a written report setting out:
(i) the amount of expenditures incurred in connection with carrying
out the Research Project to the date of the Report; and
(ii) the amount of such expenditures which constitute "qualified
expenditures" and which constitute "scientific research and
experimental development expenditures" as defined in Section
4.1(a) hereof; and
(c) imagic will, upon the request of either NBTel or 506, provide NBTel
and 506 with a written technical description of the Research Project
and such other information, reports or filings as may be required from
time to time to enable either of NBTel or 506 to claim any and all
credits, deductions or other benefits pursuant to the Income Tax Act
for such scientific research and experimental development expenditures
hereunder.
ARTICLE V
REPRESENTATIONS. WARRANTIES AND COVENANTS OF imagic
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5.1 imagic hereby represents, warrants and covenants with NBTel and 506:
(a) that imagic is a corporation duly incorporated, organized and validly
subsisting under the laws of Canada and is duly authorized to carry on
its business as presently carried on by it;
(b) that it is in the business of conducting scientific research and
experimental development in respect to digital broadcasting over
Internet Protocol networks
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and supporting hardware products and possesses substantial experience,
capacity and expertise in relation thereto;
(c) that it will promptly acquire the facilities and employees necessary
to carry out the research and development activities required of it
pursuant to this Agreement;
(d) that it has full capacity, power and authority to enter into this
Development Agreement and all other agreements and instruments to be
entered into by it pursuant to this Agreement and to carry out its
obligations under this Agreement and all other agreements and
instruments to be entered into by it pursuant to this Agreement;
(e) that the execution and delivery of this Agreement and all other
agreements and instruments to be executed by it pursuant to this
Agreement and the performance of its obligations under this Agreement
and such other agreements and instruments have been duly authorized by
all necessary corporate action on the part of imagic and will not
violate any right of any third party, including but not restricted to,
rights arising from any agreement between imagic and any third party;
(f) that it has not entered into and will not enter into any agreement with
any other party inconsistent with this Agreement;
(g) that this Agreement constitutes or will constitute valid and binding
obligations upon imagic enforceable against imagic in accordance with
its terms and conditions;
(h) that it will maintain proper records and documentation in connection
with the Research Project as described in Information Circular 86-4R3
relating to the Income Tax Act and as issued by Revenue Canada,
Taxation from time to time; and
(i) that the NBTel and 506 Technology will be designed and implemented in a
proper and workmanlike manner; and except as disclosed in writing to
NBTel and 506, will be original and will not contain components
belonging to IPTC or any third party; and will not infringe any patent
copyright or any other proprietary right.
5.2 The warranties herein shall survive the Termination of this Agreement.
ARTICLE VI
INDEMNITY
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6.1 imagic will defend NBTel and 506 and their successors and assigns and any
representative of NBTel and 506 or such successor or assign (collectively the
"Group") against any claim that the use or exploitation of all or any part of
the NBTel and 506
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Technology infringes any patent, trade-xxxx, copyright, trade secret, or other
proprietary right of any kind whatsoever, and imagic will indemnify and hold
harmless the Group in respect of all costs, expenses, penalties, fines, charges,
losses, damages, accountings for profits, and legal fees which the Group may
incur or for which they may become liable in connection with any such claim as
aforesaid.
6.2 Provisions relating to Indemnity Claims. The following provisions will apply
to any claim for indemnification pursuant to Section 6.1 hereof (an "Indemnity
Claim").
(a) Promptly after becoming aware of any matter that may give rise to an
Indemnity Claim, either or both of NBTel and 506 will provide to
imagic written notice of the Indemnity Claim specifying (to the extent
that information is available) the factual basis for the Indemnity
Claim and the amount of the Indemnity Claim or, if an amount is not
then determinable, an estimate of the amount of the Indemnity Claim,
if an estimate is feasible in the circumstances.
(b) If an Indemnity Claim relates to an alleged liability to any person
other than NBTel or 506 (a "Third Party Liability"), including without
limitation any governmental or regulatory body or any taxing
authority, which is of a nature such that either or both of NBTel and
506 are required by applicable law to make a payment to a third party
before the relevant procedure for challenging the existence or quantum
of the alleged liability can be implemented or completed, then NBTel
and 506 may, upon mutual agreement of NBTel and 506, and
notwithstanding the provisions of the paragraphs (c) and (d) of this
section, make such payment and forthwith demand reimbursement for such
payment from imagic in accordance with this agreement; provided that,
if the alleged Third Party Liability as finally determined on
completion of settlement negotiations or related legal proceedings is
less than the amount which is paid by imagic in respect of the related
Indemnity Claim, then NBTel and 506 shall forthwith following the
final determination pay to imagic the amount by which the amount of
the Third Party Liability as finally determined is less than the
amount which is so paid by imagic.
(c) NB Tel and 506 shall not negotiate, settle, compromise or pay (except
in the case of payment of a judgment) any Third Party Liability as to
which it proposes to assert an Indemnity Claim, except with the prior
consent of imagic (which consent shall not be unreasonably withheld or
delayed), unless there is a reasonable possibility that such Third
Party Liability may materially and adversely affect either of NBTel
and 506, in which case NBTel and 506 shall, upon mutual agreement of
NBTel and 506 acting reasonably and having regard to each other's
business and reputation, have the right, after notifying imagic, to
negotiate, settle, compromise or pay such Third Party Liability
without prejudice to its rights of indemnification hereunder.
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(d) With respect to any Third Party Liability, provided imagic first
admits NBTel and 506's right to indemnification for the amount of such
Third Party Liability which may at any time be determined or settled,
then, in any legal, administrative or other proceedings in connection
with the matters forming the basis of the Third Party Liability, the
following procedures will apply:
(i) except as contemplated by subparagraph (iii) of this paragraph,
imagic will have the right to assume carriage of the compromise
or settlement of the Third Party Liability and the conduct of
any related legal, administrative or other proceedings, subject
always to the mutual agreement of NBTel and 506 as to imagic's
carriage, compromise or conduct thereof and without limiting the
foregoing, NBTel and 506 shall, upon mutual agreement of NBTel
and 506, have the right and shall be given the opportunity to
participate in the defence of the Third Party Liability, to
consult with imagic in the settlement of the Third Party
Liability and the conduct of related legal, administrative and
other proceedings (including consultation with counsel) and to
disagree on reasonable grounds with the selection and retention
of counsel, in which case counsel satisfactory to all of the
Parties shall be retained by imagic;
(ii) imagic will co-operate with NBTel and 506 in relation to the
Third Party Liability, will keep NBTel and 506 fully advised
with respect thereto, will provide NBTel and 506 with copies of
all relevant documentation as it becomes available, will provide
NBTel and 506 with access to all records and files relating to
the defence of the Third Party Liability and will meet with
representatives of NBTel and 506 at all reasonable times to
discuss the Third Party Liability; and
(iii) notwithstanding subparagraphs (i) and (ii) of this paragraph,
imagic will not settle the Third Party Liability or conduct any
legal, administrative or other proceedings in any manner in
which there is a reasonable possibility that such settlement may
materially and adversely affect either of NBTel and 506, except
with the prior written consent of each of NBTel and 506 acting
reasonably and having regard to each other's business and
reputation.
(e) If, with respect to any Third Party Liability, imagic does not admit
NBTel and 506's right to indemnification or declines to assume
carriage of the settlement or of any legal, administrative or other
proceedings relating to the Third Party Liability, then the following
provisions will apply:
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(i) NBTel and 506, upon mutual agreement of NBTel and 506 and at
their discretion, may assume carriage of the settlement or of
any legal, administrative or other proceedings relating to the
Third Party Liability and may defend or settle the Third Party
Liability on such terms as NBTel and 506, acting in good faith,
consider advisable; and
(ii) any cost, loss, damage or expense incurred or suffered by NBTel
and 506 in the settlement or defence of such Third Party
Liability or the conduct of any legal, administrative or other
proceedings shall be added to the amount of the Indemnity Claim.
6.3 In the event a claim of the type contemplated in section 6.1 arises in
connection with the use or exploitation of the NBTel and 506 Technology, in
combination or conjunction with other technology not developed by imagic, the
responsibilities of imagic under section 6.1 shall be confined to those parts or
aspects of such claim (if any) arising from the presence of the NBTel and 506
Technology developed by imagic in the combined or conjoined technology.
6.4 Right of set-off. NBTel and 506 shall each have the right to satisfy any
amount from time to time owing by it to imagic by way of set-off against any
amount from time to time owing by imagic to either of NBTel and 506, including
any amount owing to either of NBTel and KRPC pursuant to imagic's
indemnification pursuant to Article VI hereof.
6.5 imagic's obligations of indemnification will survive any termination of this
Agreement.
ARTICLE VII
FURTHER ASSURANCES
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7.1 Each Party hereto agrees to make, execute and deliver to the other Party all
such lawful instruments and documents, and do or cause to be done all such
lawful acts as may reasonably be requested by the other Party for the purposes
of implementing and giving effect to the transaction set forth in this
Development Agreement and the Research Schedule.
ARTICLE VIII
CONFIDENTIALITY
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8.1 It is acknowledged by the Parties that the making and implementation of this
Development Agreement and the Research Schedule may result in one or more of the
Parties having knowledge or custody of confidential information or proprietary
property
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belonging to the other. In the event that the making or implementation of this
Development Agreement or the Research Schedule results in one or each Party
hereto having knowledge or custody of confidential information or proprietary
property belonging to the other Party hereto:
(a) imagic acknowledges and agrees that NBTel and 506, jointly have the
exclusive unlimited right and privilege to use, exploit, develop,
enhance, improve and market the NBTel and 506 Technology. NBTel and
506 agree that any such use shall be in accordance with section 2.5
hereof. In addition, imagic grants to NBTel and 506, in accordance
with the terms of the License Agreement and the License Schedule, the
right privilege and license to use any confidential information or
proprietary property belonging to imagic which is reasonably required
by NBTel and 506 in order for NBTel and 506 to use, exploit, develop,
improve, enhance or market the NBTel and 506 Technology. NBTel and 506
agree that any such use shall be in accordance with section 2.5
hereof. imagic acknowledges and agrees that information relating to
the NBTel and 506 Technology is confidential information and
proprietary property which imagic shall keep in strict confidence,
will not disclose to any third party without the prior joint written
authorization of NBTel and 506 and will take all reasonable
precautions to ensure that no such confidential information or
proprietary property is revealed or disclosed to, or discovered or
used by, any unauthorized third party. imagic agrees that it will not
use confidential information or proprietary property belonging to
NBTel and 506 for any purpose other than the purpose for which such
information or property was disclosed or provided to imagic and it
will not induce, assist, or be party to any use of such confidential
or proprietary property by a third party for any purpose not
previously authorized in writing by NBTel and 506.
(b) Subject to paragraph 8.1(a) NBTel and 506 acknowledge and agree that
they will keep all confidential information and proprietary property
belonging to imagic in strict confidence, will not disclose any such
confidential information to any third party without the prior written
authorization of imagic and will take all reasonable precautions to
ensure that no confidential information or proprietary property is
revealed or disclosed to, or discovered or used by, any unauthorized
third party. Subject to Section 8.1(a), NBTel and 506 agree that
neither will use confidential information or proprietary property
belonging to imagic for any purpose other than the purpose for which
such information was disclosed or licensed to NBTel and 506 and they
will not induce, assist, or be party to any use of such confidential
information by a third party for any purpose not previously authorized
in writing by imagic.
(c) imagic acknowledges that the NBTel and 506 Technology is a trade
secret and constitutes a valuable asset of the NBTel and 506. imagic
agrees that
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it shall exercise at least the same degree of care and discretion with
respect to the NBTel and 506 Technology as it exercises in protecting
its own confidential information; that it shall not disclose, or
otherwise make available, without the prior written consent of the
NBTel of 506, the NBTel and 506 Technology or any copies of it to
other persons; and that it shall not copy or reproduce the NBTel and
506 Technology except to the extent necessary to perform its
obligations under this Agreement.
8.2 Section 8.1 shall survive the termination of this Agreement.
ARTICLE IX
BANKRUPTCY, DEFAULT, ETC.
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9.1 Subject to the provisions of this Article, this Agreement shall, unless
otherwise terminated in accordance with the terms of this Agreement, remain in
force until the completion of all research and development activities by imagic,
the payment of all amounts due to imagic hereunder and the written
acknowledgment by NBTel and 506 that no further research will be undertaken
pursuant to this Agreement.
9.2.1 In the event that any Party to this Development Agreement passes a
resolution to wind-up, or suffers a winding-up order to be made for any reason,
or is dissolved, or becomes bankrupt or insolvent, or takes the benefit of any
act now or hereafter in force for bankrupt or insolvent debtors or if a receiver
or a receiver manager (temporary or permanent) is appointed over or in respect
of any Party or any of its property or assets, or in the event any of the goods
and chattels of any Party shall be at any time seized in execution or attachment
by any creditors, or in the event of a bulk sale or if any Party performs an act
of bankruptcy, or is adjudicated bankrupt by a court of competent jurisdiction,
or ceases to carry on business or threatens to cease carrying on business or
terminates its corporate existence for any reason whatsoever the other Parties
hereto may by written notice delivered to the defaulting Party, elect to treat
this Development Agreement as terminated and any and all continuing or executory
obligations to such Party on the part of the other Parties hereto under this
Development Agreement and Research Schedule shall forthwith cease and be
terminated.
9.2.2 In the event that any Party to this Development Agreement commits a breach
of or default in its material obligations under this Development Agreement, and
fails to remedy same within sixty (60) days of receiving notice thereof from the
another Party hereto, the other Parties hereto may, by written notice to the
defaulting Party, elect to treat this Development Agreement and the Research
Schedule as terminated, in which case any and all continuing or executory
obligations under this Development Agreement and the Research Schedule shall
forthwith cease and be terminated.
9.2.3 In the event of expiration or early termination of this Agreement, the
licenses granted by imagic to NBTel and 506 contained in sections 2.4 and 8.1(a)
and the
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provisions of Articles VI and VIII of this Agreement shall survive such
termination, provided that if a Conversion Event occurs as defined in the
Technology Transfer Option Agreement, such licenses shall terminate on the date
of acquisition of the NBTel and 506 Technology by imagic.
9.2.4 In the event of expiration or early termination of this Agreement, the
Parties shall own the NBTel and 506 Technology jointly in accordance with
Article II, or in proportion to their then respective proportionate interests
therein in accordance with Article III, as the case may be.
ARTICLE X
TERMINATION
-----------
10.1 imagic and NBTel and 506 agree that NBTel and 506 may suspend performance
of the scientific research under Research Schedule upon seven (7) days notice to
imagic.
10.2 imagic and NBTel and 506 acknowledge and agree that NBTel and 506 may
terminate the Development Agreement or Research Schedule upon thirty (30) days
written notice to imagic.
ARTICLE XI
BOOKS ANI) RECORDS
------------------
11.1 imagic shall keep proper, accurate and complete business records and books
of account showing all transactions relevant to this Development Agreement,
shall maintain the records and accounts pertaining to each such transaction and
shall allow NBTel and 506, or its authorized representative, to inspect such
books and records and to make copies and extracts therefrom, upon reasonable
notice and during normal business hours.
ARTICLE XII
GENERAL
-------
12.1 Time of the Essence. Time shall be of the essence of this Agreement.
-------------------
12.2 Notices. Any notice, demand or other communication required or permitted 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 mail.
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.: (506) 000- 0000
(c) In the case of a notice to imagic:
imagicTV Inc.
Xxx Xxxxxxxxx Xxxxxx
00xx Xxxxx
P.O. Box 303
Saint Xxxx, New Brunswick
Canada
E2L 3Y2
Attention: President
Fax No.: (000) 000-0000
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
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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.
12.3 Amendment. No supplement, modification, waiver, qualification or
---------
termination of this Agreement shall be binding unless executed in writing by the
Parties to be bound thereby.
12.4 Separate Counterparts. This Agreement may be executed by the Parties 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.
12.5 Severability. Each and every provision of this Agreement shall be treated
------------
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.
12.6 No Partnership. Nothing in this Agreement shall be deemed in any way or for
--------------
any purpose to constitute any Party as partner of or a joint venturer with any
other Party.
12.7 Successors and Assigns. This Agreement shall be binding upon and enure to
----------------------
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.
12.8 Assignment. This Development Agreement and the Research Schedule shall not
----------
be assigned by imagic. Unless otherwise agreed by imagic, NBTel and 506 shall
only assign this Development Agreement and Research Schedule to an Affiliate of
either of them as defined in the Act and further provided that NBTel and 506
must concurrently assign to the same corporation, the License Agreement and
Technology Transfer Option Agreement and Schedules thereto to the same
corporation and such corporation agrees to be bound by the License Agreement,
Technology Transfer Option 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.
12.9 Entire Agreement and Amendments. This Agreement and the Research Schedule
-------------------------------
contain the entire agreement between the Parties with respect to the subject
matter thereof and shall not be modified or amended in any manner except by an
instrument in writing executed by the Parties hereto.
12.10 Consents. Subject to Section 3.3, any consent or decision to be made or
--------
required of NBTel and 506 under this Agreement must be made jointly and
unanimously by NBTel and 506.
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IN WITNESS WHEREOF the Parties hereto have executed this Development Agreement
this 5th day of January, 1998.
506048 N.B. Ltd.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
THE NEW BRUNSWICK TELEPHONE COMPANY, LIMITED
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
imagic TV Inc.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
SCHEDULE A
RESEARCH SCHEDULE
-----------------
This Research Schedule is entered into between imagicTV Inc.("imagic") and The
New Brunswick Telephone Company, Limited, ( "NBTel") and 506048 N.B. Ltd.
("506") attached to and forming part of the Development Agreement between the
Parties having an effective date of January 5th, 1998.
Any defined terms shall have the meaning ascribed thereto in the Development
Agreement.
Products to be Developed. The research and development activities to be
------------------------
performed by imagic for NBTel and 506 pursuant to this Research Schedule shall
consist of the following Research Project:
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.
Product development will include the following components.
1. Electronic Program Guide (EPG) - This client software will operate in
both a Windows 95 and set top environment, and will link to the client
MEPG-l/MEPG-2 decoder and client conditional access module. This
software will provide the residential user interface to all broadcast
content on the broadband multicast IP network
2. EPG database - This server software will provide the broadcast content
schedules to the client EPG software based on customer location and
customer profile. The server software will be responsible to extract
broadcast content schedules from various existing data sources on the
Internet.
3. Live MPEG encoder - This component will provide real-time MEPG-1 or
MEPG-2 encoding. It encodes analog video and audio inputs to produce
MEPG-1 system or MPEG-2 Transport Streams for delivery via an IP
multicast network.
4. Ad Server - This server software will provide scheduled ad insertion
into the client EPG based on time of day, the customer location and
customer profile.
5. Near Video-on-Demand Server - This component will provide scheduled
managed delivery of pre-recorded material via an IP multicast network.
6. Video-on-Demand Server - This component will provide the client access
to VOD playback using interactive VCR controls for optimal control. It
provides all the tools necessary to store, manage and deliver
real-time, full-screen video and audio content.
7. Conditional Access System - This component consists of a both a source
and destination module and is responsible for the encryption of data
between the source and destination to protect copyrights.
8. Customer profile management system - This software will store and track
customer preferences, usage patterns, billing status, mailing
addresses, client devices, service subscription, etc. It will provide
the core data for many of the other components.
9. Subscription management (including self service) system - This user
interface will allow the end user to view, add and delete channels from
their service subscription and check their usage.
10. Service activation system - This software will link the service
subscription process to all network components which require
provisioning to add or remove service.
11. Billing, Reporting and Statistics system - This software will track
usage and allow the generation of custom reports, including BAF reports
which may be used for telco billing.
12. Channel Offering Management system - This software will provide an
information database of broadcast content unique to the broadcast
distribution system provider to feed the EPG database.
13. End to End network management system - The imagicTV management software
integrates the control of all the broadcast distribution systems
components into a networked management framework including QOS
management and usage collection.
Commencement Date: January 5th, 1998.
-----------------
Contract Fee: Four Million Dollars ($4,000,000) in the aggregate. The sum of
------------
Five Hundred Thousand Dollars ($500,000) for the commencement of the research
and development on the components described above shall be advanced upon the
execution of the Development Agreement and this Research Schedule.
Required Completion Date: The earlier of January 1, 1999; such time as the
------------------------
Product, as defined in the License Agreement, has reached Market Trial Version
1.0; or such time as the total Contract Fee has been paid to imagic hereunder.
Specific Requirements (if any): None
---------------------
The Parties agree that the terms and conditions this Research Schedule form part
of and are incorporated into the Development Agreement.
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IN WITNESS WHEREOF the Parties hereto have executed this Research Schedule this
5th day of January, 1998.
506048 N.B. Ltd
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
THE NEW BRUNSWICK TELEPHONE COMPANY, LIMITED
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
imagic TV Inc.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
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