Document:

<PAGE>

                                                                    EXHIBIT 10.6

                      TECHNOLOGY TRANSFER OPTION AGREEMENT
                      ------------------------------------

This Agreement is made as of the 5th day of January, 1998

BETWEEN:

                     The New Brunswick Telephone Company, Limited, a New
                     Brunswick business corporation (hereinafter called
                     "NBTel")

                                                              OF THE FIRST PART

                     and

                     506048 N.B. Ltd., a New Brunswick business corporation
                     (hereinafter called "506")

                                                              OF THE SECOND PART

                     and

                     imagicTV Inc., a corporation Incorporated under the laws
                     of Canada, (hereinafter called "imagic")

                                                               OF THE THIRD PART

WHEREAS NBTel and 506 intend to carry on research and development activities
directed toward the creation of commercially viable products relating to digital
broadcasting over Internet Protocol networks and supporting hardware of the
nature described in Schedule "A" hereto (the "Products"); and

WHEREAS in the course of such research and development activities, NBTel and 506
will produce and/or acquire NBTel and 506 Technology as defined herein; and

WHEREAS imagic is desirous of acquiring the right, exercisable at its option as
hereinafter provided, to purchase from NBTel and 506 all NBTel and 506
Technology as may be generated from such research and development activities on
the terms hereinafter contained; and

NOW THEREFORE in consideration of the sum of TEN DOLLARS ($10.00) in lawful
money of Canada and of the mutual covenants herein contained the receipt and
sufficiency of which is hereby acknowledged, the Parties agree with each other
as follows:
<PAGE>

                                      -2-

                                   ARTICLE I

                                  DEFINITIONS
                                  -----------

1.1  In this Agreement and in any amendment hereto, unless there is something in
the subject matter or context inconsistent therewith:

     (a)  "Business Day" means any day of the year other than a Saturday, Sunday
          or statutory holiday or any other day on which banks are required or
          authorized to close in Toronto, Ontario or Saint John, New Brunswick;

     (b)  "Completion Date" means the date specified in the Research Schedule
          being the earlier of either January 1,1999; such time as the Product
          has reached Market Trial Version 1.0; or such time as the total
          Contract Fee has been paid to imagic pursuant to the Development
          Agreement;

     (c)  "Conversion Event" has the meaning set out in Article IV of this
          Agreement whereby imagic shall issue and deliver Shares to NBTEL and
          506 in exchange for the conveyance of the NBTEL and 506 Technology to
          imagic.

     (d)  "Development Agreement" means the development agreement having an
          effective date of January 5,1998 between imagic and NBTel and 506;

     (e)  "License Agreement" means the license agreement having an effective
          date of January 5, 1998 between NBTel and 506 and imagic;

     (f)  "NBTel and 506 Technology" shall mean the NBTel and 506 Technology as
          defined in the Development Agreement;

     (g)  "Option" means the option of imagic to acquire the NBTel and 506
          Technology, in exchange for the issuance to each of NBTel and 506 of
          Shares, exercisable at the sole discretion of imagic as described more
          fully in Article IV of this Agreement;

     (h)  "Parties" means collectively, 506, NBTel, imagic and any other Person
          who becomes a Party to this Agreement in accordance with the
          provisions hereof, and "Party" means any one of them;

     (i)  "Person" means any individual, partnership, corporation (including a
          business trust), joint stock company, trust, unincorporated
          association, joint venture or other entity;

     (j)  "Products" means each of those Products described in Schedule "A"
          hereto;

     (k)  "Shares" means the Class A Share(s) of imagic but does not include any
          rights, warrants, options or other instruments entitling the holder,
          whether or not on a
<PAGE>

                                      -3-

          contingency, to acquire from treasury Class A Share(s) of imagic,
          and/or any instruments convertible, whether or not on a contingency,
          into any of the foregoing unless and until such rights of conversion
          have been exercised and such shares have been issued in respect
          thereto;

     (l)  "Technology Transfer Option Agreement" or "Agreement" means the terms
          and conditions of this Agreement and any written amendments or
          supplements executed by the Parties hereto;

1.2  Extended Meanings. In this Agreement, unless there is something in the
     -----------------
subject matter or context inconsistent therewith words importing the singular
number include the plural and vice versa and words importing gender include all
genders.

1.3  Headings. The division of this Agreement into articles, sections and
     --------
subsections and the insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation of this Agreement.

1.4  Applicable Law. This Agreement shall be construed in accordance with the
     --------------
laws of the Province of New Brunswick and the laws of Canada applicable therein
and shall be treated in all respects as a New Brunswick contract. Any action,
suit or proceeding arising out of or relating to this Agreement shall be brought
in the courts of the Province of New Brunswick and each of the Parties hereby
irrevocably submits to the jurisdiction of such courts.

1.5  Consent. Whenever a provision of this Agreement requires an approval or
     -------
consent by a Party to this Agreement and notification of such approval or
consent is not delivered within the applicable time limit, then, unless
otherwise specified, the Party whose consent or approval is required shall be
conclusively deemed to have withheld its approval or consent.

1.6  Currency. Unless otherwise expressly stated, references to sums of money
     --------
herein are to lawful money of Canada.

1.7  Computation of Time Periods. In this Agreement, in the computation of
     ---------------------------
periods of time from a specified date to a later specified date, unless
otherwise expressly stated, the word "from" means "from but excluding" and the
words "to" and "until" each mean "to and Including" and if the last day of any
such period is not a Business Day, such period shall end on the next Business
Day.

                                  ARTICLE II

                                   SCHEDULES
                                   ---------

2.1  The following is a list of schedules annexed to this Agreement:

     Schedule "A" - Description of Products
<PAGE>

                                      -4-

     Schedule "B" - Description of Development Stage of Products Required
                    to Achieve Market Trial Version 1.0

                                  ARTICLE III

                             DEVELOPMENT ACTIVITIES
                             ----------------------

3.1  NBTel and 506 have agreed with imagic to carry out research and development
activities in accordance with the Development Agreement with a view to NBTel and
506 achieving the stage of development of the Products described in Schedule "B"
hereto.

                                   ARTICLE IV

                                     OPTION
                                     ------

4.1  Conversion Event. imagic shall issue and deliver Shares to each of NBTel
     ----------------
and 506 in exchange for the conveyance by NBTel and 506 of the NBTCI and 506
Technology to imagic upon the occurrence of the earlier of one of the following
events:

     (a)  upon NBTel and 506's receipt of a written notice from imagic delivered
          at any time within six (6) months following the Completion Date,
          whereby Imagic agrees to purchase all, but not less than all, of the
          interest of each of NBTel and 506 in the NBTel and 506 Technology;

     (b)  a take-over bid, as defined in the Securities Act (Ontario), is made
          with respect to imagic;

     (c)  an acquisition of control of imagic, where control is as defined in
          the Canada Business Corporations Act; or

     (d)  on the day of closing of a public offering or listing on a stock
          exchange of imagic in either Canada or the United States.

Upon the occurrence of one of the foregoing events NBTel and 506 shall deliver
to imagic a conveyance pursuant to which NBTel and 506 sells, transfers, assigns
and sets over unto imagic the interest of each of NBTel and 506 in the NBTel and
506 Technology, and upon receipt of such conveyance, imagic shall cause Shares
to be issued to each of NBTel and 506.
<PAGE>

                                      -5-

                                   ARTICLE V

                            DISCLOSURE OF TECHNOLOGY
                            ------------------------

5.1   (a)   in the event of a Conversion Event pursuant to Article IV of this
            Agreement, NBTel and 506 shall disclose to imagic all of the NBTel
            and 506 Technology.

      (b)   Where disclosure of NBTel and 506 Technology is required as
            hereinbefore provided, such disclosure shall consist, in the case of
            physical items embodying the NBTel and 506 Technology, of delivery
            of same to imagic. Where such NBTel and 506 Technology consists of
            information and know-how, such disclosure shall consist of
            delivering to imagic all documents and other records (including
            computer discs and tapes) containing information relating to the
            NBTel and 506 Technology to be disclosed and making personnel of
            NBTel and 506 available to imagic for the purpose of explaining and
            disclosing such NBTel and 506 Technology. NBTel and 506 shall be
            entitled to retain copies of such documents and records only to the
            extent necessary to enable NBTel and 506 to carry out research and
            development activities on subsequent development stages of the
            Products.

                                   ARTICLE VI

                                 CONFIDENTIALITY
                                 ---------------

6.1   NBTel and 506 agrees that any NBTel and 506 Technology sold to imagic or
information disclosed to imagic pursuant to this Agreement is proprietary
property and confidential information and that NBTel and 506 shall not disclose
or use such technology following such sale except:

      (a)   as provided for in Article V hereof; or

      (b)   if the portion of such proprietary property and confidential
            information that is to be disclosed or used has become generally
            known to the trade or public, provided that such general knowledge
            is not the result of a breach by NBTel and 506 ; or

      (c)   if the portion of such proprietary property and confidential
            Information that is to be disclosed or used has been obtained by
            NBTel and 506 from a source other than pursuant to this Agreement
            and without breach of this Agreement; or

      (d)   such disclosure is required by compulsion of law.
<PAGE>

                                      -6-

                                  ARTICLE VII

                                  PATENT RIGHTS
                                  -------------

7.1   imagic, to the extent it acquires the NBTel and 506 Technology pursuant to
this Agreement, shall have the exclusive right to apply for any patents,
copyrights and industrial design registrations embodied in such NBTel and 506
Technology. If imagic requires an application for such patent to be made, NBTel
and 506, at the expense of imagic, shall take all steps within its power
necessary to assist imagic in filing such applications and prosecuting the same
until such patents are issued. in the event that NBTel and 506 alone or in
conjunction with imagic must apply for any such patent, NBTel and 506 shall hold
any rights it may acquire in any such patent in trust for imagic to be dealt
with in the manner specified by imagic.

                                  ARTICLE VIII

                               FURTHER ASSURANCES
                               ------------------

8.1   In the event that NBTel and 506 sells the NBTel and 506 Technology to
imagic pursuant to the provisions hereof, NBTel and 506 covenants and agrees
with imagic to execute all documents and take all steps as may be necessary or
desirable in the reasonable opinion of imagic to further and better assert and
confirm unto imagic the rights with respect to NBTel and 506 Technology acquired
by imagic through NBTel and 506.

                                   ARTICLE IX

                               SECTION 85 ROLLOVER
                               -------------------

9.1   In the event of a Conversion Event pursuant to Article IV of this
Agreement, NBTel and 506 and imagic agree to file jointly and in a timely
fashion an election in prescribed form pursuant to subsection 85 of the Income
Tax Act (Canada) in respect of such purchase and sale of NBTel and 506
Technology, whereby the amount that NBTel and 506 and imagic shall agree upon in
respect of the disposition of the subject NBTel and 506 Technology (hereinafter
called the "agreed amount") shall be $1.00, which agreed amount shall be deemed
to be the proceeds of disposition to NBTel and 506 of such NBTel and 506
Technology and the cost to imagic thereof for the purposes of the Income Tax Act
(Canada). NBTel and 506 shall be responsible for preparing the prescribed forms
for execution and filing in accordance with the Income Tax Act (Canada).

                                   ARTICLE X

                                    CLOSING
                                    -------

10.1  Upon the occurrence of a Conversion Event pursuant to Article IV hereof,
there shall
<PAGE>

                                      -7-

within seven (7) days be a closing. At the closing, (a) imagic shall deliver
share certificates to NBTel and 506 representing the number of Shares to be
issued upon occurrence of a Conversion Event together with such supporting
documentation as NBTel and 506 may reasonably require to establish that the
shares have been duly and properly issued as fully-paid and non-assessable
shares of imagic; and (b) NBTel and 506 shall deliver to imagic an assignment of
all right, title and interest in and to the relevant NBTel and 506 Technology,
free and clear of all liens, encumbrances and claims of any nature whatsoever,
together with all physical manifestations of such NBTel and 506 Technology and
the documentation therefor, including source code in machine-readable form, and
such additional documentation in connection with the transfer of such
technologies as imagic may reasonably require.

                                   ARTICLE XI

                              UNDERTAKING TO ADJUST
                              ---------------------

11.1   It is the intention of imagic and NBTel and 506 that the transaction
herein provided for shall take place at the fair market value of the NBTel and
506 Technology as of the date of the Conversion Event. Notwithstanding the
foregoing provisions, the Parties agree that if any taxing authority should
allege that the consideration, determined as provided for in Article IV hereof,
is not equal to the fair market value of the NBTel and 506 Technology or makes
or proposes to make an assessment on the basis that any benefit or advantage is
conferred on any person by reason of the sale herein provided for, then the
consideration shall be, and shall be deemed always to have been, the amount that
is determined to be the fair market value of the NBTel and 506 Technology by an
accountant mutually acceptable to NBTel and 506, after it has consulted with
such taxing authority, and the Parties shall make such adjustments and execute
such documentation as is necessary to give effect to such adjustment of the
consideration.

                                  ARTICLE XII

                                     GENERAL
                                     -------

12.1   Adjustment upon Changes in Capitalization. In the event of any change in
       -----------------------------------------
the number of issued and outstanding Shares of imagic by reason of any stock
dividend, split-up, amalgamation, merger, recapitalization, combination,
conversion, exchange of Shares or other change in the corporate or capital
structure of imagic that could have the effect of diluting or otherwise
affecting the consideration to be paid to NBTel and 506 hereunder, the number of
Shares issued upon exercise of the Option shall be appropriately adjusted.

12.2   Notices. Any notice, demand or other communication required or permitted
       -------
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;
<PAGE>

                                      -8-

          (c)  sent by prepaid telecopier, telex or similar method of electronic
               communication including facsimile transmission, which produces a
               paper record; or

          (d)  prepaid registered mall.

Any notice so given shall be sent to the Parties at their respective addresses
set out below:

          (a)  In the case of a notice to 506:

               506048 N.B. Ltd.
               c/o Kanata Research Park Corporation
               555 Legget Dr.
               Kanata, Ontario
               Canada
               K2K 2X3

               Attention: President
               Fax No.: (613) 591-0018

          (b)  In the case of a notice to NBTel:

               The New Brunswick Telephone Company, Limited.,
               One Brunswick Square
               Saint John, New Brunswick
               Canada
               E2L 4L4

               Attention: General Counsel
               Fax No.: (506) 694-2722

          (c)  In the case of a notice to imagic:

               imagicTV Inc.
               One Brunswick Square
               l4th Floor
               P.O. Box 303
               Saint John, New Brunswick
               Canada
               E2L 3Y2

               Attention: President
               Fax No.: (506) 631-3001
<PAGE>

                                      -9-

And in all cases so delivered personally or by courier or so sent by means of
electronic communication. Any notice so given is deemed conclusively to have
been given and received when so personally delivered or sent by telex,
telecopier, or other electronic communication or on the fifth business day
following the sending thereof by private courier or mail. Any Party hereto may
change any particulars of its address for notice by notice to the others in the
manner aforesaid.

12.4   Amendments. No supplement, modification, waiver, qualification or
       ----------
termination of this Agreement shall be binding unless executed in writing by the
Parties to be bound thereby.

12.5   Successors and Assigns. This Agreement shall be binding upon and enure to
       ----------------------
the benefit of the Parties hereto and their respective successors and permitted
assigns. Nothing herein, express or implied, is intended to confer on any
person, other than the Parties hereto and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.

12.6   Assignment. This Agreement shall not be assigned by imagic. Unless
       ----------
otherwise agreed by imagic, NBTel and 506 shall only assign this Technology
Transfer Option Agreement and corresponding Schedules to an Affiliate as defined
in the Canada business Corporations Act and further provided that NBTel or 506,
as the case may be, must concurrently assign to the same corporation, the
Development Agreement, License Agreement and corresponding Schedules to the same
corporation and such corporation agrees to be bound by the Development
Agreement, License Agreement and corresponding Schedules thereto. Any further
assignment by the Affiliate of NBTel or 506 shall be subject to the written
consent of NBTel or its Affiliate, or 506 or its Affiliate, as the case may be.

12.7   Severability. Each and every provision of this Agreement shall be treated
       ------------
as separate and distinct and in the event of any provision hereof being declared
invalid such provision shall be deemed to be severable and all other provisions
hereof shall remain in full force and effect.

12.8   Entire Agreement. This Agreement and the Schedules attached constitute
       ----------------
the entire agreement between the Parties relating to the subject matter hereof
and supersedes any and all prior agreements, discussions and representations.

12.9   Separate Counterparts. This Agreement may be executed by the Parties
       ---------------------
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.
<PAGE>

                                    - 10 -

12.10    Time of the Essence. Time shall be of the essence of this Agreement.
         -------------------

IN WITNESS WHEREOF, NBTel and 506 and imagic have caused this agreement to be
duly executed as of the 5th day of January, 1998.

                              506048 N.B. Ltd.

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              THE NEW BRUNSWICK TELEPHONE COMPANY, LIMITED

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              imagicTV Inc.

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

<PAGE>

                                 SCHEDULE "A"

Product(s) to be developed:

         The imagicTV Broadcast Distribution System. The integrated broadcast
         distribution systems is composed of a series of components that can be
         configured with various modules to allow residential users, via an
         Electronic Program Guide, to select and view audio/video content in
         their home over a broadband multicast IP network. All as more fully
         described in the Research Schedule to the Development Agreement between
         the Parties dated the 5th day of January, 1998.

         The Parties agree that the terms and conditions of this Schedule form
         part of and are incorporated into the Technology Transfer Option
         Agreement.

         IN WITNESS WHEREOF the Parties have executed this Schedule this 5th day
         of January, 1998.

                              506048 N.B. Ltd.

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              THE NEW BRUNSWICK TELEPHONE COMPANY, LIMITED

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------
<PAGE>

                                     - 2 -

                              imagicTV Inc.

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------
<PAGE>

                                 SCHEDULE "B"

                      Research Stage Required to Achieve
                     Market Trial Version 1.0 of Products.

The imagicTV Broadcast Distribution System research product consists of the
following phases:

Phase I -         System Architecture

January 98 - March 98
         Complete the overall system architecture.
         Determine the high level functional and technical architecture for the
              broadcast distribution systems.

Phase II -        Proof of Concept (Release 0.1):

February 98- March 98
         Complete prototype system which delivers IP multicast MPEG-1/MPEG-2
              content to a PC based hard coded Electronic Program Guide.
         Complete the analysis of scalability of technology.
         Begin end-to-end testing of the IP multicast broadcast distribution
              systems using the NBTel labs.

Phase III -       Development phase leading to Technical Trial (Release 0.5):

February 98- September 98
         Begin alpha testing of the Newbridge CSI in the imagicTV labs.
         Electronic Program Guide (EPG) - Deliver first generation EPG for field
              testing on both PC and TV.
         EPG database - Deliver first generation software for field testing.
         Live MPEG encoder - Deliver first generation component for field
              testing.
         Near Video-on-Demand Server - Deliver first generation component for
              field testing.
         Video-on-Demand Server - Deliver first generation component for field
              testing.
         Billing, Reporting and Statistics system - Deliver first generation
              software for field testing.
         Channel Offering Management system - Deliver first generation software
              for field testing.

Phase IV -        Development phase leading to Market Trial (Release 1.0):

September 98--January 99
         Begin end-to-end testing of the Newbridge CSI in the NBTel labs.
         Electronic Program Guide (EPG) - Enhance EPG based on customer feed
              back. Add ad insertion and conditional access system support.
         Ad Server - Deliver first generation software for field testing.
         Conditional Access System - Deliver first generation component for
              field testing.
         Customer profile management system - Deliver first generation software
              for field testing.
<PAGE>

                                     - 2 -

         Subscription management (including self service) system - Deliver first
              generation software for field testing.
         Service activation system - Deliver first generation software for field
              testing.
         End to End network management system - Deliver first generation
              software for field testing.
         EPG database - Correct any outstanding bugs.
         Live MPEG encoder - Correct any outstanding bugs.
         Near Video-on-Demand Server - Correct any outstanding bugs.
         Video-on-Demand Server - Correct any outstanding bugs.
         Billing, Reporting and Statistics system - Correct any outstanding
               bugs.
         Channel Offering Management system - Correct any outstanding bugs.

         The Parties agree that the terms and conditions this Schedule form part
         and are incorporated into the Technology Transfer Option Agreement.

         IN WITNESS WHEREOF the Parties have executed this Schedule this 5th day
         of January, 1998,

                              506048 N.B. Ltd.

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              THE NEW BRUNSWICK TELEPHONE COMPANY, LIMITED

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------
<PAGE>

                                     - 3 -

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              imagicTV Inc.

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------

                              By:
                                  -------------------
                              Name:
                                    -----------------
                              Title:
                                     ----------------<PAGE>

                                                                    Exhibit 10.7

                              DEVELOPMENT AGREEMENT
                              ---------------------

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
<PAGE>

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
                                 --------------

1.1 Definitions. In this Agreement and in any amendment hereto, unless there is
    ------------
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 John, 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;

                                      -2-
<PAGE>

(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;

                                      -3-
<PAGE>

(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
    ---------
lawful money of Canada unless otherwise specified.

1.3 Extended Meanings. In this Agreement, unless there is something in the
    ------------------
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
    ---------
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
    ---------------
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
    --------
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
    ----------------------------
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
    ---------------------------
purposes hereof, form an integral part of this Agreement

                                  ARTICLE II

                       PERFORMANCE OF SCIENTIFIC RESEARCH
                       ----------------------------------

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

                                      -4-
<PAGE>

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-mark 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.

                                      -5-
<PAGE>

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
                                  ------------

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

                                      -6-
<PAGE>

          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
                  --------------------------------------------

4.1      imagic hereby covenants with NBTCI and 506 that:

                                      -7-
<PAGE>

     (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
               ---------------------------------------------------

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

                                      -8-
<PAGE>

         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
                                    ---------

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

                                      -9-
<PAGE>

Technology infringes any patent, trade-mark, 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.

                                     -10-
<PAGE>

     (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:

                                     -11-
<PAGE>

          (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
                               ------------------

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
                                 ---------------

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

                                     -12-
<PAGE>

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

                                     -13-
<PAGE>

          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.
                            -------------------------

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

                                     -14-
<PAGE>

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;

                                     -15-
<PAGE>

     (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
          555 Legget Dr.
          Kanata, Ontario
          Canada
          K2K 2X3

          Attention: President
          Fax No.:   (613) 591-0018

     (b)  In the case of a notice to NBTel:

          The New Brunswick Telephone Company, Limited.,
          One Brunswick Square
          Saint John, New Brunswick
          Canada
          E2L 4L4

          Attention: General Counsel
          Fax No.:   (506) 694- 2722

     (c)  In the case of a notice to imagic:

          imagicTV Inc.
          One Brunswick Square
          14th Floor
          P.O. Box 303
          Saint John, New Brunswick
          Canada
          E2L 3Y2

          Attention: President
          Fax No.:   (506) 631-3001

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

                                     -16-
<PAGE>

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.

                                     -17-
<PAGE>

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:
                                         --------------------------
<PAGE>

                                   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.
<PAGE>

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.

                                      -2-
<PAGE>

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:
                                          --------------------------

                                      -3-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}]]