MASTER DEVELOPMENT CONTRACT
EXHIBIT
10.17
This
contract by and between CSI Digital, Inc., identified as CSI, and AccessKey IP,
Inc., identified as AccessKey, collectively the parties, hereby enter into a
formal contract for the pursuit of having AccessKey develop products identified
as:
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A
proprietary IPTV middleware product (base source code to be supplied by
CSI) and dongle with encryption software, that collectively enable the
authorized delivery of video on demand and live streaming IPTV video to a
television via a CSI specified Set Top
Box
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The
proprietary IPTV middleware and dongle with encryption software
interoperating with a PC to deliver encrypted video on demand and live
streaming IPTV video
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The
dongle with encryption software interoperating with four CSI selected
middleware software products to be integrated with the CSI specified Set
Top Box to deliver encrypted video on demand and live streaming IPTV
video
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The
parties agree that this is the statement of work as of this date, May 15,
2008
CONTRACT
BASIS
CSI
desires to enter into a formal contract with AccessKey, wherein AccessKey will
develop its Middleware and dongle encryption software to be deployed on mutually
agreed third party Set Top Boxes. The deliverables will include miscellaneous
functionality in accordance CSI’s requirements. Specifically, AccessKey will
develop the following combinations of products as listed below:
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1.
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An
IPTV based proprietary middleware and dongle with encryption product for
use on CSI specified Set Top Boxes
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2.
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AccessKey
PC- better known as the ‘dongle’, a PC based version of the STB, that
includes the middleware software and a USB based device which together
allow viewing of video content securely via a client’s PC from a broadband
connection.
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1
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3.
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A
PC dongle and Set Top box product that is integrated with four other CSI
specified middleware software
products
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4.
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Proprietary
‘Middleware’ software which may be licensed to other STB providers and
their clients. Specific detail regarding the integration of the
STB and Dongle with the middleware is illustrated in Addendum
B.
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5.
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The
AccessKey Products developed for CSI will be able to be branded, or white
labeled, by both parties with full agreement and discussion as to the
marketability of said products, not with the intent of competing or
diluting either parties position in the marketplace. Third
party ‘white labeling’ will fall under the same general understanding and
discussion.
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6.
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All
products will by integrated and function with with Verimatrix, Inc.’s AES
encryption and meet their content security
standards. Additionally, AccessKey developed security functions
may be incorporated into all or some of the new
products.
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CONTRACT
AMOUNT
The
contract amount for this work is $1,500,000 paid by CSI to AccessKey for
engineering, development and the initial production of product. This
amount is to be repaid by AccessKey to CSI over the course of the first order of
approximately 150,000 Set Top Boxes to CSI as described in the subsequent
paragraphs.
FUNDING
Initial
funding will occur in traunches, $500,000 on execution of this contract, with
the remaining $1,000,000 payable in accordance with the cash flow schedule of
Addendum C, which is tied to Milestones. Each payment will be
accompanied by a list of completed tasks, in accordance with the milestone
events. The milestone events are tied to the Product requirements and Functional
Specifications of Addendum B. Checks for payment will only be issued
after milestones are satisfied for that particular period. If Milestones are
achieved in advance of the schedules, payments will be accelerated in accordance
with completion.
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PRODUCT
SPECIFICATIONS
Product
specifications and functionality will be jointly developed and mutually agreed
upon in writing by all parties. Subcontractors will be subject to the
terms and conditions of the contracts, NDA’s, and agreements mutually developed
by both CSI and AccessKey. All specifications and or modifications
will be strictly adhered to within the context of the original
agreements.
JURISDICTION
Any
disputes arising from the sub contractors or as a function of this initial
Master contract that cannot be resolved by mutual agreement of the senior
company officers, will be subject to binding arbitration in the state of Oregon
unless an unlawful action or breach of contract is alleged. Each
party will be bound by the decision of the arbitrator and each party will be
responsible for their own expenses.
Each of
the parties, not including the Subcontractors, will individually own separate,
full and undivided rights to all products designed specifically for these
applications, as well as any associated intellectual property and all associated
software developed under this Contract. AccessKey and its
Subcontractors will deliver to CSI copies of all relevant specifications,
schematics, drawings, processes and design documents, software source and object
codes at payment milestones or upon request from CSI. The intent is
to assure CSI of all working documentation and any relevant white paper
documents. Ownership and compensation terms for any products
developed after the term of this contract, utilizing the sum or part of this
mutually developed product, the terms of which will be negotiated separately
from this contract before they are taken to the market place.
ASSURANCES
This
contract is specifically intended to assure AccessKey that CSI will initially
purchase Set Top Boxes, the AccessKey PC, known as the ‘dongle’ and any
licensable middleware. This contract is non exclusive and allows CSI
to purchase alternative product from suppliers other than AccessKey if the
situation so warrants and with the expressed compliance of this contract and its
components.
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PRICING
Pricing
of the product is to be based upon the actual build costs, which include the
base line CSI specified set top box(es), any and all manufacturing costs, any
and all third party software royalties, packaging, shipping, import/export
documentation and any related costs as a portion of the completed
product. It is incumbent upon AccessKey to furnish complete
accounting records and documentation of all related costs of this project or sub
projects. CSI will receive favored nation pricing on all components
for the life of this agreement.
**
**
Quantity
price reductions, once the original repayment has been satisfied is as
follows: If CSI STB deliveries exceed 25,000 units in any given
quarter; the profit percentage will be reduced to 4.0%. Quantities
consisting of 35,000 or more will consist of a profit percentage of 0%. CSI may
accept the discount in the form of a rebate back to CSI or as a credit towards
future purchases.
REPAYMENT
Repayment
of the $1,500,000 will be rebated to CSI on all delivered CSI specified Set Top
Boxes. This repayment will take the form of the 10% profit percentage
via a rebate directly to CSI or a discount on the purchase
price. Rebates or discounts will no longer apply if the
repayment is not satisfied within a three year period of the signing of this
contract. The remaining repayment balance will be waived if not
satisfied by purchases within the aforementioned three year period.
AUDIT
RIGHTS
CSI will
maintain full audit rights with AccessKey for the duration of this contract
regarding to tooling, manufacturing and assembly pricing. Once the
initial contract amount has been repaid to CSI, CSI may establish alternate
sources for manufacturing and supply. However, continued product
upgrades and documentation to those upgrades will not be furnished to CSI should
they decide to utilize alternative sources.
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THIRD
PARTY SALES
The sale
of products, jointly developed by AccessKey and CSI, but sold exclusively by
AccessKey to a third party, during the tenure of this contract for the three
year period, will entitle CSI to a royalty fee of 50% of the net profit margin,
less any freight or taxes expense or out of pocket expenses relative to
non-production costs. This royalty can be in the form of an
additional discount on product purchased by CSI, a direct cash payment or a
negotiated instrument such as stock grants, warrants, or options in
AccessKey.
EXCLUSIVE
DISTRIBUTION
The
potential exists for CSI to become the exclusive distributor of the herein
contained products, negotiated separately from this contract.
PUBLIC
ANNOUNCEMENTS
Both
parties agree to mutually approve, on a timely basis, all press announcements
and investor relations announcements when they regard the joint efforts of
AccessKey and CSI. Each party will maintain their exclusive
identity. AccessKey, because of its public listing, will be required
to address all material events, sales, revenues, contracts, et al, and should
these involve CSI, CSI will have full rights of review.
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AGREED:
For CSI
Digital, Inc.
| /s/ Xxxxx X. Xxxxx | Date 5/22/2008 |
| Xxxxx X. Xxxxx, Chief Executive Officer |
| /s/ Xxxxxx X. Xxxxxxx | Date 5/22/2008 |
| Xxxxxx X. Xxxxxxx, Chairman |
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