EXHIBIT 10.4
THIS LOAN AGREEMENT made as of this day of , 1999.
BETWEEN:
NEWBRIDGE NETWORKS CORPORATION, a body
corporate, duly incorporated under and by
virtue of the laws of Canada (hereinafter
called "Newbridge")
OF THE FIRST PART
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IMAGICTV INC., a corporation incorporated
under the laws of Canada (hereinafter called
the "Corporation")
OF THE SECOND PART
WHEREAS under the authority of Order-in-Council 98-332 made pursuant to the
Economic Development Act, Acts of New Brunswick, 1975, Chapter E-1.11, the
Minister of Economic Development, Tourism & Culture for the Province of New
Brunswick (the "Minister") has granted or has agreed to grant financial
assistance to Newbridge by way of a repayable loan and a forgivable loan for the
purpose of assisting Newbridge and its Affiliates to create research and
development jobs in the Province of New Brunswick, including without limitation,
such jobs in relation to the ImagicTV Project (as hereinafter defined)
undertaken or to be undertaken by the Corporation.
AND WHEREAS Newbridge and the Minister have entered into a loan agreement
dated February 10, 1999 (the "Provincial Loan Agreement");
AND WHEREAS subject to the terms and conditions of the Provincial Loan
Agreement Newbridge has agreed to grant financial assistance to the Corporation
by way of a Repayable Loan in an amount not exceeding $2,560,000 and a
Forgivable Loan in an amount not to exceed $640,000 to assist in the ImagicTV
Project;
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of Newbridge
making the aforesaid loans to the Corporation and in consideration of the sum of
Ten Dollars ($10.00) paid by each of the parties hereto to the other of them,
the receipt whereof by each of them is hereby acknowledged and in consideration
of the mutual covenants and agreements herein contained, the parties agree as
follows:
DEFINITIONS
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1. For the purposes of this Agreement and the recitals hereto, unless there is
something in the subject matter or the context necessarily inconsistent
therewith:
(a) "Affiliate" means a body corporate, 20% or more of the voting shares
of which are held by Newbridge;
(b) "Budget" means a budget in a form and content satisfactory to
Newbridge and the Minister submitted by the Corporation to Newbridge
on the ImagicTV Project, setting out details of proposed research and
development and capital expenditures including expenditures related to
the relocation of employees and operations to the Province, as well as
proposed employment projections;
(c) "Employment Year" means a one (1) year period commencing on the 1st
day of March of each year;
(d) "Event of Default" means any event referred to in Clause 11 of this
Agreement;
(e) "Financial Statements" means a balance sheet, income statement,
statement of retained earnings and statement of changes in financial
position (including the notes and schedules thereto), all fairly
reflecting the financial condition of the entity or entities to which
the same relate and all prepared in accordance with generally accepted
accounting principles and on a basis consistent with that used in the
preparation thereof for the immediately preceding fiscal year or part
thereof, as the case may be, or on such other basis as is acceptable
to Newbridge and the Minister.
(f) "Forgivable Advances" means in relation to the ImagicTV Project, the
amount equal to 20% of the amount of all financial assistance advanced
from time to time by Newbridge to the Corporation under this
Agreement.
(g) "Forgivable Loan" means the aggregate of all Forgivable Advances made
or advanced from time to time by Newbridge to the Corporation under
this Agreement;
(h) "Full Time Employee" means an employee of the Corporation who is
ordinarily resident in the Province and whose terms of engagement
require such employee to work a minimum of 37.5 hours per week and who
has worked or is engaged to work for a minimum of one (1) year;
(i) "ImagicTV Project" means the project undertaken or to be undertaken by
the Corporation, as submitted by the Corporation to Newbridge, and
approved from time to time by Newbridge and the Minister;
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(j) "Net Revenue" means the income from the sale of a product developed
with a Forgivable Advance or a Repayable Advance after deduction of
all taxes, duties, freight and insurance charges, refunds, discounts,
allowances, credits, rebates and distributor commissions. Income shall
not include amounts arising from or related to support, maintenance,
training or other services for a developed product or other products;
(k) "Province" means the Province of New Brunswick;
(l) "Qualifying Expenditures" means one-half (1/2) of all amounts incurred
or paid by the Corporation to parties with whom it deals at arm's
length on or after March 1, 1998, which in the reasonable opinion of
Newbridge and the Minister are in respect of research and development
conducted or to be conducted in the Province for the ImagicTV Project,
capital expenditures in respect of property necessary for such
research and development and relocation expenditures necessary for the
conduct of research and development in the Province, to the extent
that the foregoing are set out in the Budget;
(m) "Repayable Advances" means, in relation to the ImagicTV Project, such
of the amounts of financial assistance advanced pursuant to this
Agreement by Newbridge if any that are not Forgivable Advances;
(n) "Repayable Loan" means the aggregate of all Repayable Advances made or
advanced from time to time by Newbridge to the Corporation under this
Agreement;
(o) "Sales Year" means the year that commences on the 1st day of March of
one year and ends on the last day of February of the following year;
(p) "Supporting Documentation" means such evidence and documentation as
Newbridge deems necessary in relation to the provisions of this
Agreement.
DISBURSEMENT OF FINANCIAL ASSISTANCE
------------------------------------
2. Financial assistance relating to the ImagicTV Project shall be advanced
from time to time by Newbridge to the Corporation in an amount equal to the
amount received by Newbridge from the Minister relating to the ImagicTV
Project; PROVIDED ALWAYS that in relation to the ImagicTV Project;
(a) Newbridge has received and is satisfied with all relevant
documentation;
(b) Newbridge has received and is satisfied with the Budget relating to
the ImagicTV Project;
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(c) Newbridge has received a written claim submitted, not more frequently
than quarterly, by the Corporation setting out particulars of costs
for the period of time budgeted that have been or are to be paid or
incurred by the Corporation as Qualifying Expenditures;
(d) Newbridge has received and is satisfied with a statement setting out
all Qualifying Expenditures that have been incurred or paid during the
previous claim period; and
(e) Newbridge is satisfied the Corporation is observing and performing all
of its obligations under this Agreement.
MAXIMUM AMOUNT OF FINANCIAL ASSISTANCE
--------------------------------------
3. Notwithstanding anything contained herein to the contrary:
(a) the maximum amount of financial assistance advanced by Newbridge under
this Agreement in relation to the ImagicTV Project shall not exceed
$3,200,000 of which $640,000 shall constitute Forgivable Advances and
$2,560,000 shall constitute Repayable Advances hereunder;
(b) the maximum amount of the Forgivable Loan advanced by Newbridge under
this Agreement shall not exceed the lesser of $640,000 and the amount
equal to 20% of the amount of all financial assistance advanced by
Newbridge under this Agreement; and
(c) the maximum amount of the Repayable Loan advanced by Newbridge under
this Agreement shall not exceed the lesser of $2,560,000 and the
amount equal to 80% of all financial assistance advanced by Newbridge
under this Agreement.
APPLICATION OF FINANCIAL ASSISTANCE
-----------------------------------
4. All amounts advanced by Newbridge as financial assistance hereunder in
respect of the ImagicTV Project shall be utilized by the Corporation to
satisfy Qualifying Expenditures relating to the ImagicTV Project and for no
other purpose.
INTEREST ON REPAYABLE LOAN
--------------------------
5. The Repayable Loan shall bear no interest until the earlier of the date of
an Event of Default or the 25th day of February 2006 and thereafter the
Repayable Loan, or that portion thereof which is from time to time
outstanding, shall bear interest payable on the 25th day of August and
February in each year at the rate of six and three-tenths percent (6-3/10%)
per annum, calculated half-yearly, not in advance, with interest payable on
the
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aforesaid days at the aforesaid rate on amounts of interest which are past
due, calculated half-yearly, not in advance, until paid.
REPAYMENT OF REPAYABLE LOAN
---------------------------
6. The portion of the Repayable Loan that reflects Repayable Advances in
relation to the ImagicTV Project shall become due and be paid by the
Corporation to Newbridge by instalments payable on the 25th day of February
of each and every year commencing on the 25th day of February in the year
that next follows the year in which the first of such Repayable Advances
was made, each such instalment shall be in an amount equal to 1.5% of the
Net Revenue of the Corporation for the Sales Year ending on the last day of
February immediately preceding the year in which the instalment is due and
payable hereunder, and the balance of the Repayable loan, if any, shall be
paid or repaid to Newbridge on the 25th day of February, 2006.
7. In addition to the amounts payable from time to time under the provisions
of Clause 6 hereof, a further payment or repayment on or in respect of the
Repayable Loan shall become due and be paid by the Corporation to Newbridge
on the last day of February, 2002 in the event that the number of Full Time
Employees employed in the Province on the ImagicTV Project on the last day
of February 2002 is less than 92. Such further payment or repayment shall
equal the amount by which the aggregate of the Repayable Advances exceeds
the amount obtained from Multiplying the number of Full Time Employees by
the quotient which arises from dividing $2,560,000 by 92.
FORGIVENESS OF FORGIVABLE LOAN
------------------------------
8. The Forgivable Loan shall be fully forgiven as it is advanced hereunder.
PRIOR CONDITIONS
----------------
9. Notwithstanding anything else contained in this Agreement, the Corporation
acknowledges that Newbridge shall not be called upon, nor shall Newbridge
be required to make any advances under this Agreement;
(a) until this Agreement and each of the other documents and agreements
required by Newbridge in connection with the said advances have been
fully executed;
(b) if or while there exists an Event of Default;
(c) if the Corporation is not an Affiliate; or
(d) if Newbridge does not receive advances from the Minister pursuant to
the Provincial Loan Agreement.
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REPRESENTATIONS AND WARRANTIES
------------------------------
10. The Corporation represents and warrants to Newbridge that:
(a) the Corporation is a business corporation duly incorporated and
validly existing under the laws of Canada with its registered office
located in Saint ▇▇▇▇, New Brunswick, and in good standing under the
laws of the Province of New Brunswick;
(b) the Corporation has all necessary corporate power, authority and
capacity to enter into this Agreement and to carry out its obligations
under this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated under this Agreement
have been duly authorized by all necessary corporate action of the
Corporation;
(c) this Agreement constitutes a valid and binding obligation of the
Corporation enforceable against it in accordance with the terms of
this Agreement; and
(d) The Corporation is an Affiliate.
ACCELERATION OF REPAYMENT UPON DEFAULT
--------------------------------------
11. The Repayable Loan shall, at the option of Newbridge or the Minister,
become due and payable by the Corporation on the sixtieth (60th) day
following receipt of notice from Newbridge that one or more of the
following events have occurred that in the opinion of Newbridge or the
Minister materially affects the viability of the ImagicTV Project and that
has not before the aforementioned sixtieth (60th) day been cured by the
Corporation to the satisfaction of Newbridge and the Minister, that it is
to say if
(a) the Corporation has failed to make any of the payments in the amount
or amounts and at the time or times specified in this Agreement;
(b) the Corporation has failed to perform or observe any covenants (other
than a covenant to pay) contained in this Agreement or in any other
agreement from time to time entered into between the parties hereto;
(c) in respect of any of the first four Employment Years commencing on the
1st day of March, 1998, the number of Full Time Employees at any time
during any such Employment Year is fewer than the numbers set out as
follows:
Employment Year 1 18
Employment Year 2 30
Employment Year 3 60
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Employment Year 4 92
(d) unless relied on by the Corporation as having been obtained from a
third party which the Corporation reasonably believed to be true and
correct, any information, representation, warranty, certificate,
statement or report given or made by or on behalf of the Corporation
to Newbridge or to any of its representatives in connection with this
Agreement or in connection with the Forgivable Loan or the Repayable
Loan or any advances in respect of the Forgivable Loan or the
Repayable Loan is false, erroneous or misleading in any material
respect;
(e) the Corporation becomes insolvent or bankrupt or subject to the
provisions of the Winding-up Act or the Bankruptcy and Insolvency Act
(Canada) or goes into liquidation, either voluntarily or under an
order of a court of competent jurisdiction or makes a general
assignment for the benefit of its creditors or otherwise acknowledges
itself insolvent; and
(f) the Corporation abandons all or any substantial part of its
undertaking and property and assets or threatens to commit any act of
bankruptcy.
APPROPRIATION OF MONEY
----------------------
12. Newbridge may from time to time appropriate any moneys received by
Newbridge from the Corporation in or towards payment or repayment of the
Repayable Loan and the interest thereon, if any, as Newbridge in its sole
discretion may see fit, and the Corporation shall not have the right to
require any other appropriation; PROVIDED that any such funds which have
been received and have been designated by the Corporation as being a
payment of principal or interest or both of the Repayable Loan may only be
applied in accordance with such designation.
COVENANTS OF THE CORPORATION
----------------------------
13. The Corporation does hereby covenant and agree to pay or repay the
Repayable Loan, together with all interest thereon, if any, at the time or
times and in the manner and amounts set forth in this Agreement.
14. The Corporation shall maintain at locations within Canada proper and
accurate books of account and records (including Supporting Documentation)
concerning all costs incurred and all costs paid with respect to the
Qualifying Expenditures made by the Corporation.
15. (a) Newbridge or the Minister shall be entitled, no more than once a year,
to engage an independent firm of chartered accountants or other
person(s) (the "Auditor") to
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inspect the books and records of the Corporation which is necessary to
verify the amounts or that no amounts were payable by the Corporation
pursuant to Clauses 5, 6 and 7 hereof. Neither Newbridge nor the
Minister is entitled to engage an Auditor to verify amounts that were
payable or not payable, as the case may be, for any period that
preceded two years before the Auditor's engagement.
(b) The Auditor shall provide the Corporation with reasonable advance
written notice of such inspection (but not less than two weeks), and
the inspection shall be conducted expeditiously in a manner that is
not unreasonably disruptive of the normal business of the Corporation.
(c) The Auditor shall execute a written agreement with the Corporation not
to disclose any information learned in the audit to anyone, nor to use
such information, except for providing Newbridge with a statement of
the amounts due for the period(s) in question.
(d) The cost of the audit, including the fees and expenses of the Auditor,
shall be borne by Newbridge unless the audit discloses an underpayment
by the Corporation in the aggregate in excess of ten percent (10%) of
the amount actually due for the period(s) being audited. The fees and
expenses associated with such inspection shall not be calculated on a
basis contingent on the results of the inspection.
(e) If the audit discloses an underpayment by the Corporation, the
Corporation shall promptly make payment to Newbridge of such
underpayment. If the audit discloses an overpayment by the
Corporation, Newbridge shall at the Corporation's discretion, either
credit the overpayment to the Corporation's account or promptly
provide the Corporation with a refund of such overpayment.
16. The Corporation shall deliver to Newbridge and the Minister within thirty
(30) days of receipt of a request therefor the most recent annual Financial
Statement of the Corporation, such Financial Statement to be accompanied by
the report of the auditor or other professional person responsible for
reviewing the Financial Statement if no auditor was engaged.
17. The Corporation shall deliver to Newbridge and the Minister a written
report as at the last day of February in each and every year while the
Repayable Loan or any part thereof remains outstanding, which report shall
be signed by an official representative of the Corporation and shall
contain information concerning the amount of Net Revenue for the Sales Year
immediately preceding and the number of Full Time Employees for the same
period. The Corporation shall upon the reasonable request, deliver to
Newbridge or the Minister such additional written reports and statements,
in form and content satisfactory
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to Newbridge or the Minister as Newbridge or the Minister may from time to
time request concerning any operation of the Corporation that relies upon a
Qualifying Expenditure.
18. The Corporation shall pay, before any of the following become overdue, all
taxes, rates and other impositions (including local improvement rates)
imposed by any government or authority in respect of and that would
materially and adversely affect any property or asset owned by the
Corporation in its New Brunswick operations. The non-payment of any such
taxes, rates or other impositions during any period for which, in relation
thereto, a bona fide objection or appeal is outstanding shall not be a
contravention of this covenant.
NOTICES
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19. Any notice, consent, waiver, certificate, statement or other document or
moneys that Newbridge may be required or may desire to give, deliver or
(with the exception of a facsimile transmission) pay to the Corporation or
that the Corporation may be required or may desire to give, deliver or
(with the exception of a facsimile transmission) pay to Newbridge shall be
conclusively deemed validly given, delivered or (with the exception of
facsimile transmissions) paid to and received by the addressee, if
delivered personally, on the date of delivery, or if mailed, on the third
business day after the mailing of the same in Canada by prepaid post
addressed, or if sent by facsimile transmission, on the date of such
transmission,
(a) if directed to the Corporation, to:
ImagicTV Inc.
P. O. ▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: The President
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if directed to Newbridge to:
Newbridge Networks Corporation
Corporate Headquarters
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
P. O. Box 13600
▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: Legal Department
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
20. Newbridge and the Corporation may at any time give written notice to the
other of any change in the address set out in Clause 19 hereof and, after
giving such notice, the
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address specified therein shall, for the purposes of that Clause, be
conclusively deemed to be the present address of the Corporation and
Newbridge as the case may be.
OWNERSHIP OF DEVELOPMENT
------------------------
21. Newbridge and the Corporation do hereby agree that the Corporation shall
own all right, title and interest (including all intellectual property
rights) in and to anything developed by the Corporation (as the case may
be) from the ImagicTV Project.
ACCESS BY NEWBRIDGE OR MINISTER
-------------------------------
22. The Corporation shall upon reasonable notice provide Newbridge or the
Minister or both free and unrestricted access to any part of the operation
of the Corporation in the Province as it relates to the ImagicTV Project,
provided such access shall not materially interfere with the operation of
the Corporation.
NO PARTNERSHIP
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23. The relationship between the Corporation and Newbridge under this Agreement
is not and is not intended to be and shall not be deemed to be that of
partner of, agent or representative of, or a joint venture with, the other.
INTERPRETATION
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24. It is agreed and understood that in the event of any discrepancy of
conflict between the provisions of this Agreement and the provisions of any
letter of other correspondence or agreement between or entered into between
the parties hereto, the provisions of this Agreement and of any amendment
made to this Agreement shall prevail.
25. This Agreement shall be governed by and construed in accordance with the
applicable laws of the Province of New Brunswick and of Canada.
26. This Agreement shall be binding on and enure to the benefit of Newbridge
and the Corporation, and their respective successors and assigns, except
that the Corporation shall not, without the prior consent of Newbridge
(which shall not unreasonably be withheld) and the Minister, assign any
rights or obligations with respect to this Agreement.
27. Any provision of this Agreement which is or becomes prohibited or
enforceable in any jurisdiction shall not invalidate or impair the
remaining provisions of this Agreement which shall be deemed severable from
the prohibited of unenforceable provision and any prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable that provision in any other jurisdiction.
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28. No term or condition of this Agreement and no breach by the Corporation or
Newbridge of any such term or condition shall be deemed to have been waived
unless such waiver is in writing signed by Newbridge, or the Corporation,
as the case may be.
29. The written waiver by Newbridge or the Corporation of any breach by the
Corporation or Newbridge, as the case may be, of any term or condition of
this Agreement shall not be deemed a waiver of such term or condition or of
any subsequent breach by the Corporation or Newbridge, as the case may be,
of the same or any other term of condition of this Agreement.
30. No amendment of any provision of this Agreement or any other agreements
provided for or contemplated hereby, nor any consent to any departure by
the Corporation or Newbridge shall in any event be effective unless it
shall be in writing and signed by Newbridge or the Corporation, as the case
may be, and then the consent shall be effective only in the specific
instance for the specific purpose for which it has been given.
31. Time shall be of the essence of this Agreement.
32. This Agreement constitutes the entire agreement between the parties with
regard to matters dealt with herein and therein, and cancels and supersedes
any prior agreements, undertakings, declarations or representations,
written or verbal, in respect of such matters.
33. The headings appearing in this Agreement have been inserted for reference
and as a matter of convenience and in no way define, limit or enlarge the
scope of any provision of this Agreement.
34. Any reference to a statute in this Agreement, whether or not that statute
has been defined, is a reference to a statute of the Province, unless
otherwise stated, and includes all regulations at any time made under or
pursuant to that statute and any amendment to that statute.
35. In this Agreement wherever the singular or masculine is used it shall be
construed as if the plural or feminine or neuter, as the case may be, had
been used where the context so required.
FURTHER ACTS AND ASSURANCES
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36. Each of the parties shall, upon the reasonable request of the other, make,
do, execute, or cause to be made, done or executed all further and other
lawful acts, deeds, things, devices, documents, instruments and assurances
whatever as may be reasonably necessary to effect the purpose of this
Agreement and to carry out its provisions.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed by
their respective officers duly authorized in that behalf as of the day and year
first above written.
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SIGNED, SEALED AND DELIVERED )
NEWBRIDGE NETWORKS CORPORATION in the presence of:
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IMAGICTV INC.
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