Filed by Automated Filing Services Inc. (604) 609-0244 - Ikona Gear International, Inc. - Exhibit 10.1







Exhibit 10.1 



VIA FACSIMILE & COURIER 



April 8, 2003


 Magna Advanced Technologies 

  375 Magna Drive 

  Aurora, Ontario 

  L4G 7L6 

 Attention:           Paul
  Gingl  


Dear Sirs:


 Re:           Gear Development
  Program for Automotive Applications  

 This letter agreement is intended to set forth the terms on
  which Ikona Gear International, Inc. (“Ikona”) is prepared to allow
  Magna Advanced Technologies and certain of its affiliates (collectively “MAT”),
  a division of Magna International Inc., to examine and develop automotive applications
  for patented planetary gear technology owned by Ikona. Wherever used in this
  letter agreement, the term “Technology” means all intellectual and
  industrial property (whether registered, applied for or unregistered), patents,
  inventions, inventor’s rights, copyrights, moral rights, utility models,
  industrial or other designs, trade secrets, scientific knowledge, know-how,
  show-how, processes, procedures, formulae, products, blue prints, drawings and
  specifications for materials, processes and equipment, and all other technical
  data, documents or information relating to the manufacture of gears using Ikona’s
  planetary gear technology, including the patents listed on Schedule “A”
  to this letter agreement (collectively, the “Technology”). 

 In the first phase of the development program for the Technology,
  MAT will examine the Technology in detail, build and test prototypes and determine
  the commercial feasibility of the Technology in one or more automotive applications,
  all in accordance with the terms set forth below. Assuming MAT’s satisfaction
  with the first phase of the development program, Ikona will license the Technology
  to MAT on a sole, exclusive and global basis for automotive applications, in
  accordance with the terms set forth below. 

 MAT and Ikona have executed a confidentiality agreement dated
  January 21, 2003 (the “Confidentiality Agreement”), which agreement
  is expressly extended to the development program contemplated in this letter
  agreement and the terms of which are incorporated by reference herein. For greater
  certainty, notwithstanding anything contained in the Confidentiality Agreement,
  the Confidentiality Agreement will terminate on the date which is the later
  of three (3) years from: (i) the date MAT terminates its development program
  under Phase 1; or (ii) the expiration or termination of the license relating
  to the Technology resulting from Phase 2 of the development program, as detailed
  below. 

 In consideration of the mutual covenants and other consideration
  (the receipt and sufficiency of which are hereby acknowledged), MAT and Ikona
  hereby agree as follows: 








 Phase 1: Technology Development, Protoyping and Testing; Market Research

	1.  	MAT will engage in a development, prototyping and
        testing phase commencing May 1, 2003 and ending on April 30, 2004 (“Phase
        1”), during which MAT will have the right, on a sole and exclusive
        basis with respect to automotive applications, to build and test prototypes
        of automotive modules incorporating the Technology. These modules may
        include one or more automotive applications, including, without limitation,
        electric power steering; seat recliners; sunroof and window movement systems;
        wiper systems; power door, liftgate and tonneau systems; folding hardtops;
        power running boards; power brakes; and brake-by-wire technology. MAT
        does not offer any assurance or guarantee that it will develop the Technology
        for application in any or all of these areas; this list is merely illustrative.
        During Phase 1, MAT will assess the commercial feasibility of the Technology
        in one or more automotive applications. For purposes of this agreement,
        the term “automotive applications” means all applications of
        the Technology in passenger cars and light trucks, the latter of which
        includes sports-utility vehicles, pick-up trucks, minivans, cross-utility
        vehicles and similar vehicles. Medium and heavy trucks are expressly excluded
        from the scope of the term “automotive applications”. 

	 	 
	2.  	During Phase 1, Ikona will not seek any business,
        contracts or orders incorporating the technology into any component for
        automotive application. Ikona confirms it has previously had discussions
        with Delphi, ZF and TRW regarding automotive applications for the Technology
        and agrees to facilitate contact between MAT and any such party, at MAT’s
        request. 

	 	 
	3.  	Ikona will make available to (a) MAT, and (b) if
        necessary (determined on a commercially reasonable basis), to potential
        customers and suppliers of MAT, all applicable know-how, designs, inventions,
        processes, methods, drawings, techniques, formulae, patterns, computations,
        customer information, supplier information, distribution information,
        computer or other data or other records and information relevant to the
        Technology and any automotive applications of the Technology. All such
        information provided by Ikona will be held in confidence by MAT and its
        employees in accordance with the terms of the Confidentiality Agreement
        between the parties. MAT may only disclose such information to potential
        customers and suppliers pursuant to a confidentiality agreement which
        is substantially similar to the Confidentiality Agreement. 

	 	 
	4. 	Ikona will, on request by MAT, provide MAT with engineering
        support services relating to the Technology. In consideration for the
        engineering support services provided by Ikona during Phase 1, MAT agrees
        to pay Ikona a fixed fee of Cdn.$15,000 per month (the “Engineering
        Fee”) commencing May, 2003 and payable in arrears on the first day
        of each month thereafter during Phase 1. MAT shall also pay the reasonable
        travel expenses of applicable Ikona personnel provided that such travel
        has been pre-approved by MAT and all expenses are incurred in accordance
        with MAT’s travel expense policy. 

	 	 
	5.  	Any intellectual property relating to the Technology
        in existence at the date hereof shall belong exclusively to Ikona. Any
        intellectual property arising during Phase 1 as a result of the development
        efforts of MAT (collectively, “Improvements”) will be jointly
        owned by MAT and Ikona. Ikona agrees that it will not license any such
        Improvements to any third party for any automotive application as long
        as this letter agreement or the License Agreement (defined below) is in
        force. MAT agrees that Ikona may, without payment of royalty to MAT, license
        any Improvements to third parties for applications other than automotive
        applications. 

	 	 
	6.  	By the end of Phase 1, MAT will deliver to Ikona
        notice of MAT’s intention to proceed to Phase 2 (as defined below)
        or terminate its relationship with Ikona. If MAT elects to proceed to
        Phase 2, the parties will negotiate a license agreement relating to the
        Technology in mutually 










	 	acceptable form, the terms of which will be consistent
        with those set forth below (the “License Agreement”). 

	 	 
	7.  	MAT may immediately terminate this letter agreement
        at any time on or after November 1, 2003, provided however that MAT will
        pay Ikona: (i) all amounts due and payable in respect of the Engineering
        Fee for months prior to the month of termination, and (ii) a termination
        fee equal to Cdn.$15,000 (the “Termination Fee”). Ikona expressly
        agrees that the Termination Fee is in lieu of all fees or amounts which
        would have been payable had MAT proceeded under this letter agreement
        until the end of Phase 1 or Phase 2. MAT will not be liable for damages
        of any kind, including lost profits, if it terminates this letter agreement
        during Phase 1 or elects not to proceed to Phase 2. 

	 	 
	8.  	Upon termination of this letter agreement pursuant
        to paragraphs 6 or 7 hereof, MAT will cease to have (a) any further Engineering
        Fee or other payment obligations to Ikona, (b) any further rights arising
        from this letter agreement except any rights acquired in respect of Improvements
        pursuant to paragraph 5 of this letter agreement. Upon either such termination,
        (a) the provisions in section 3 of the Confidentiality Agreement regarding
        the delivery of Confidential Information shall take effect and be equally
        applicable with respect to Improvementst, and (b) Ikona may purchase the
        rights acquired by MAT pursuant to paragraph 5 of this letter agreement
        by payment to MAT of an amount equal to the amount spent by MAT in developing
        the Technology during Phase 1, such amount not to exceed $300,000. Such
        amount may be paid on the same basis as the royalties proposed by MAT
        to be paid to Ikona as provided under Phase 2 herein. Upon receipt of
        final payment, MAT shall execute such documents as may be reasonably required
        in order to transfer its interest in the Improvements to Ikona. 

	 	 
	Phase 2: Sole & Exclusive Licensing of
      Technology for Automotive Applications 
	 	 
	9.  	Following the completion of Phase 1 and upon notifying
        Ikona of its intention to proceed to Phase 2, MAT will continue developing
        the Technology with the intent of commercializing any automotive applications
        of the Technology. In conjunction with such continued development activities,
        MAT will seek purchase orders from OEMs and/or automotive suppliers for
        automotive components or modules incorporating the Technology. Ikona acknowledges
        that securing purchase orders for components or modules incorporating
        the Technology could take several years. MAT will pay Ikona a fee of Cdn.$20,000
        per month for each month to, but excluding, the first month in respect
        of which MAT makes a royalty payment to Ikona for any automotive application
        of the Technology pursuant to a fully executed License Agreement. 

	 	 
	10. 	Upon acceptance by MAT of a production purchase order
        for the supply of components or modules incorporating the Technology,
        the parties will execute the License Agreement. The License Agreement
        will include the following terms: 





	 	a. 	payment by MAT of the sum of Cdn.$1,000,000, payable
        in four (4) equal installments as follows: (i) Cdn.$250,000 payable within
        thirty (30) days of acceptance by MAT of the first production purchase
        order for components or modules incorporating the Technology; (ii) Cdn.$250,000
        payable on the 90-day, 180-day and 270-day anniversaries of the first
        payment in this sub-paragraph; 

	 	 	 
	 	b. 	royalties payable (i) on a sliding scale of 1-3%
        of the gross selling price of the plano-centric gear sub-assembly incorporating
        the Technology for any original equipment production program, and (ii)
        on a sliding scale of 3-6% of the gross selling price of the plano-centric
        gear sub-assembly incorporating the Technology in any after-market production
        program (collectively, the “Royalty”). For greater certainty,
        the Royalty will not be calculated on the selling price to the OEM or
        supplier of the entire component or 










	 	 	module incorporating the Technology. For purposes
        of determining the gross selling price of the plano-centric gear sub-assembly
        incorporating the Technology in a situation where MAT has received a purchase
        order that does not price such sub-assembly separately from the automotive
        module in which it is incorporated, the gross selling price will be deemed
        to be either (i) the actual price paid by MAT to third-party supplier(s)
        for the plano-centric gear sub-assembly or (ii) if the components comprising
        the plano-centric gear sub-assembly are manufactured by MAT, MAT’s
        cost of production of such components plus a margin thereon mutually agreed
        to by the parties. Ikona expressly acknowledges that the Royalty, as a
        dollar amount, paid to it in respect of any particular program will decline
        over time as a result of cost-downs or price “give-backs”;

	 	 	 
	 	c. 
	a mutually agreeable minimum Royalty in respect of
        each of the first three years of commercial production will be payable
        by MAT, following which, no minimum Royalty will be payable by MAT; 

	 	 	 
	 	d. 
	Royalties will be paid within sixty (60) days of
        the end of each financial year of MAT on the basis of gross sales of gear
        sub-assemblies (as provided in sub-paragraph 10(b) above) in the immediately
        preceding financial year; 

	 	 	 
	 	e. 
	a term equal to the last to expire of the patents
        relating to the Technology, including the Improvements; and 

	 	 	 
	 	f. 
	other customary license terms mutually agreed to
        by the parties. 

	 	 	 
	11. 	MAT may, in its sole discretion,
        refuse to accept a purchase order for a component or module incorporating
        the Technology, including without limitation for any of the following
        reasons: (i) the expected volume of components or modules would not generate
        sufficient sales to enable MAT to pay the minimum Royalty set forth in
        sub-paragraph 10(c) above; (ii) the selling price of the product or module
        would not enable MAT to achieve a sufficient rate of return on the component
        or module after payment of the Royalty thereon; or (iii) any other technical,
        production or economic reason in MAT’s judgment. 

	 	 
	12. 	The “Ikona” name
        will appear on all gear sub-assemblies incorporating the Technology, unless
        otherwise approved in writing by Ikona. 

	 	 
	13. 	Neither party will, without
        the prior written consent of the other party, publicly disclose by way
        of press release or publication in any media, including publication on
        an internet website or an offering memorandum or prospectus, the relationship
        between the parties under this letter agreement. A party from whom consent
        is requested under this paragraph will use best efforts to respond within
        four (4) business days and neither party will unreasonably withhold its
        consent hereunder. Notwithstanding the foregoing, Ikona may disclose the
        generalities of its relationship with MAT in discussions with, or presentations
        to, investors, analysts or other third parties in connection with a private
        or public offering of Ikona securities. Neither party may use the trademarks
        of the other party without express written consent of such party. 

	 	 
	14. 	If MAT has failed to secure
        a purchase order for a component or module incorporating the technology
        within twenty-four (24) months of the commencement of Phase 2, MAT will
        forfeit its rights to be the exclusive licensee of the Technology for
        automotive applications, unless it pays to Ikona a further Cdn.$250,000
        to extend its rights hereunder for a further twelve (12) months. 

	 	 
	15. 	Throughout the term of this
        letter agreement, the parties will engage in the exchange of information
        regarding the Technology and Improvements with the objective of maximizing
        the development potential of the underlying Technology. 










	16. 	This letter agreement, which includes
        the recitals hereof, will be governed by the laws of the Province of Ontario
        and will be treated in all respects as an Ontario contract. 

	 	 
	17. 	The parties agree to resolve any disputes
        hereunder by commercial arbitration by a single mutually-acceptable arbitrator,
        or a panel of three arbitrators, one of whom will be selected by each
        party and the third of whom will be selected by the other two arbitrators.
        Any such arbitration will be conducted in accordance with the provisions
        of the Arbitrations Act (Ontario), except to the extent the parties otherwise
        agree. 



If you are in agreement with the foregoing, please sign the acceptance portion
  of this letter and return one original to the undersigned. 


Regards,



IKONA GEAR INTERNATIONAL, INC.


 By: ____________________________________________

                    Laith
  Nosh 


The undersigned accepts and agrees to the foregoing terms.


  

MAGNA ADVANCED TECHNOLOGIES, 

  A division of Magna International Inc. 

  

   By: ____________________________________________

                      Paul
    Gingl 








SCHEDULE A



PATENTS AND PATENT APPLICATIONS 


	Jurisdiction	Patent No.
	 	 
	Canada	2,129,188
	United States	5,505,668
	Europe	0770192