EXIHBIT 10.15
SpeechWorks International, Inc. has omitted from this Exhibit 10.15 portions of
the Agreement for which SpeechWorks International, Inc. has requested
confidential treatment from the Securities and Exchange Commission. Omitted
language is indicated by brackets (i.e. [ ]). The portions of the Agreement for
which confidential treatment has been requested have been filed separately with
the Securities and Exchange Commission.
June 29, 2000
SpeechWorks International, Inc.
000 Xxxxxxxx Xxx.,
Xxxxxx, XX 00000
Attention: Xxx Xxxxxx
Dear Xxx;
This letter ("Letter") will serve to confirm that NET2PHONE, INC. ("N2P")
and SPEECHWORKS INTERNATIONAL, INC. ("SWI") are entering into a business
relationship whereby:
(i) N2P has agreed to invest $4.0 million in SWI pursuant to the terms of that
certain Common Stock Purchase Agreement dated as of even date herewith
(together with the other agreements contemplated thereby);
(ii) SWI will provide to N2P certain software as described in Exhibit A-1,
attached and made a part of this Letter;
(iii) SWI will provide certain professional services, including but not limited
to, (a) platform integration and (b) application development in connection
with N2P's global VoIP network; and
(iv) the parties may pursue certain joint marketing efforts as further agreed
upon in an executed License Agreement proposed in this Letter.
Part I of this Letter is intended by the parties to be binding and Part II
of this Letter shall be non-binding and expressly subject to the execution and
delivery of (1) a definitive Professional Services Agreement (the "PSA") and
Statement(s) of Work ( an "SOW") which shall be executed and delivered no later
than [ ], or a subsequent date as extended and mutually agreed upon by the
parties (the "Contract Date"). If for any reason the parties are unable to
consummate the License Agreement (as defined below) and the PSA, by the Contract
Date, the obligations set forth in this Letter, including but not limited to
Part I, and in that certain Non-Disclosure Agreement dated as of 2000 ("NDA"),
by and between the parties, the terms of such NDA which by their nature survive,
then either party may, upon written notice to the other, terminate this Letter,
and in the event of such termination, the parties agree that Net2Phone's sole
obligation and SWI's sole and exclusive remedy shall be that Net2Phone shall pay
SWI the License Fee as described in Paragraph A below in the amount of [ ] US
Dollars ($[ ]) and all reasonable professional service fees accrued hereunder as
of the date of such termination, under the current fee schedule as described in
Exhibit C, attached and made a part hereof.
Part I. BINDING TERMS.
A. License Fees.
(1) Initial Order. N2P hereby agrees to pay to SWI an amount equal to [ ]
Dollars ($[ ]) in consideration for the grant of a license (the "License
Fee") to N2P of the SpeechWorks software set forth on Exhibit A (the "SWI
Software"). The terms of the license would be contained in a mutually
agreed upon Master Software License Agreement ("License Agreement"), a
draft form of which has been provided to N2P and which the parties agree to
negotiate the terms of such License Agreement in good faith with the intent
to execute and deliver said License Agreement no later than the Contract
Date. The License Agreement would have a term of three (3) years (the
"Term"). The $[ ] License Fee described in this paragraph A is a guaranteed
and non-refundable payment.
(1) Subsequent Orders. Notwithstanding SWI's then-current fee schedule ,
SWI agrees that for the Term of the License Agreement, for all
subsequent orders received during the initial three year term
(counting the one thousand (1000) Ports ordered in the initial
order), the following per port discount schedule shall apply:
AGGREGATE NUMBER OF PORTS IN THE INITIAL TERM PRICE PER PORT
[ ] - [ ] $[ ]
[ ] - [ ] $[ ]
[ ] - [ ] $[ ]
[ ] - [ ] $[ ]
more than [ ] $[ ]
B. Revenue Share. In addition to the provisions described above, the
parties hereby agree that the License Agreement shall contain the
following provisions regarding the sharing of revenue.
GENERAL
N2P and SWI will share net revenue, as defined hereunder generated by
or through the Facilities Services (defined below), as further defined
in the proposed License Agreement and as outlined below. In accordance
with the License Agreement revenue will only be comprised of those
fees due to N2P generated from joint offerings brought to market by
SWI and N2P in a joint endeavour.
In addition to the foregoing license fees, N2P agrees to pay to SWI
the following fees (the "Utilization Fees") for each customer of N2P
utilizes the SWI Software in connection with the services provided by
N2P (the "Facilities Services").
(1) [ ] percent ([ ]) of any net revenue N2P derives directly from
selling products or services via the N2P speech system ("e-
commerce"); and
(2) [ ] percent ([ ]) (net of the costs outlined in Exhibit B;
"Infrastructure Costs") for all revenue derived from minutes (or
partial minutes rounded up to the next whole minute).
Page 2
Further, in the event that either of the following conditions occur
(in a manner to be verified under procedures to be agreed to in the
License Agreement) the applicable revenue sharing terms set forth
below would apply:
1. SWI brings N2P into an opportunity that N2P has not been
involved with before; or
2. SWI and N2P agree to co-develop a product or application for a
specific industry or market with either party incurring their
associated costs.
In the event that the applicable condition precedent above is
satisfied, N2P would pay to SWI an amount equal to:
(1) [ ] percent ([ ]) of any net revenue N2P derives directly from
selling products or services via the N2P speech system ("e-
commerce"); and
(2) the lesser of (x) $[ ] per minute and (y) [ ] (net of the costs
outlined in Exhibit B; "Infrastructure Costs") for all revenue derived
from minutes (or partial minutes rounded up to the next whole minute).
Each N2P customer-specific revenue share transaction would provide for
three (3) years of payments to SWI and such obligation may survive the
expiration of the three (3) year term of the License Agreement.
Page 3
C. Most Favored Pricing
The following fee provisions shall apply to the License Fees, SWI
professional services fees requested by N2P, and text-to-speech (TTS)
(if and when available) licenses which may be contracted by N2P in the
License Agreement or in any mutually agreed upon agreements. During
the term of the License Agreement or any other agreement mutually
agreed upon between the parties, SWI agrees that it shall provide the
[ ] to N2P [ ] in a transaction (considering all relevant
material terms) in which [ ] or [ ]. In the event that SWI [
], it shall thereafter [ ] and [ ] and [ ] to be [ ].
D. Roll Over Rights
SWI hereby agrees that the covenant set forth in Section C above with
respect to license fees shall be extended to all entities of which N2P
owns (or acquires such interest in during the Term), at the relevant
time, more than 50% of the voting shares. Further, in the event that
N2P owns an equity interest in a third party which is 50% or less,
then:
(i) in the event that such third party is already a customer of SWI,
then SWI agrees that it shall allow (1) such third party to pay
to SWI the difference between (x) the license fees which said
third party had previously agreed to pay (such other fee to be
known herein as the "Original Fee") and (ii) the license fees
applicable to N2P and (2) N2P to pay the balance of the Original
Fee; and
(ii) in the event that such third party is not already a customer of
SWI, then SWI may in its discretion enter in to a license
agreement with such third party and in the event that such third
party and SWI agree on the applicable license fees, then N2P
shall have the opportunity to supplement such license fee
payments as contemplated by clause (i) above .
The parties agree that the revenue share provisions set forth above shall
apply to any party described in this Section D which is licensing SWI
software or using the Facilities Services.
E. Professional Services.
(1) Retainer. In order to secure the commitment of SWI Ito provide certain
professional services, N2P hereby agrees to pay to SWI an amount equal to
[ ] US Dollars ($[ ]) under the PSA ("Retainer"). Unless otherwise agreed
upon by the parties in the PSA or an applicable SOW, this amount is subject
to the terms of Paragraph F below, shall be due and owing to SWI no later
than June 28, 2001 regardless of whether N2P accrues services fees in such
amount prior to such date.
(2) Work Authorization. Upon execution of this Letter, N2P shall be deemed to
have authorized SWI to commence certain professional services activities as
directed by N2P related to the initial project, and N2P agrees to pay SWI
for services rendered in accordance with its current fee schedule up to an
amount not to exceed the Retainer described above. Any amounts accrued
under this interim Work Authorization section will be applied against the
fees agreed to in the applicable SOW. Additionally, any travel expenses
accrued may be billed for the amount incurred, assuming that any required
travel is approved in advance by N2P. In the event N2P and SpeechWorks
execute a mutually acceptable PSA, such PSA will fully supersede, and make
null void, this paragraph (2). N2P acknowledges and agrees that any
deliverable developed in connection with the services rendered hereunder
shall not be delivered to N2P until such time as a PSA has been executed.
Page 4
F. Unused Services Fees Allowance. In the event that the aggregate fees
accrued for the project(s) covered under an initial SOW, if any, equal an
amount less than [ ] US Dollars ($[ ]), SWI shall allow N2P to apply the
balance thereof to the purchase of additional licenses under the terms of
the License Agreement; such application, if any, shall occur no later than
June 28, 2001.
G. Joint Obligations. Each party agrees it may undertake the following
marketing and publicity activities in order to promote the relationship:
. CUSTOMERS - Each company agrees to explore the use of their existing
customers to identify interested implementers of the Voice ASP service.
1. CO-MARKETING - N2P and SWI will work together, in good faith, to use
commercially reasonable efforts to perform the following:
. N2P and SpeechWorks will work together to issue a formal, joint press
release on the equity investment, and N2P will also supply a quotation to
be used in the Open Speech Web announcement (to be complete Wednesday, June
28th)
. N2P and SpeechWorks will jointly participate in press and analyst briefings
regarding Net2Phone's equity investment in SpeechWorks
. N2P will promote the "SpeechworksHere" program in relevant Marketing
promotions and collateral
. SpeechWorks will promote the N2P Voice ASP service in relevant Marketing
promotions and collateral
. N2P and SpeechWorks agree to work together for joint promotion of the N2P
Voice ASP commercial launch and subsequent Voice ASP (post-GA) milestones
. N2P and SpeechWorks agree to make to cite each other in relevant press
releases and/or announcements. Specifically:
. SpeechWorks will cite N2P as an investor-partner, ASP-provider and
provider of yet-to-be-specified speech-based services where
commercially appropriate,
. N2P will cite SpeechWorks in announcements relating to their speech-
based initiatives where commercially appropriate.
Page 5
Part II. NON-BINDING TERMS. The following terms are agreed by the parties to be
non-binding and shall only express the intent of the parties as to activities
which shall only be agreed upon in a definitive License Agreement, PSA and
Applicable SoWs.
1. CROSS-MEDIA PROMOTIONS & ATTRIBUTION: Subject to prior written approval,
not to unreasonably withheld or delayed:
. Each company can use the other company's logo/name in any web listings
(i.e., customer/partner lists)
. N2P agrees to work with SpeechWorks to pursue cooperative advertising
with both parties contributing equally to the associated costs.
. N2P agrees to SpeechWorks' usage of the N2P logo on demand-generation
vehicles (WSJ advertising, other advertising, direct mail, etc.)
. N2P agrees to let SpeechWorks use the N2P name and logo in IPO-related
filings (eg: S-1)
. N2P agrees to participate in the SpeechWorks Conversations User/Partner
conference in Laguna Niguel, CA, as a speaker
2. REFERENCABILITY: Pending N2P satisfaction with SpeechWorks performance
against measurable success criteria and N2P internal policies, N2P agrees
to be a reference for i.) other SpeechWorks prospects,. Additionally, at
N2P's sole discretion N2P may participate in a Case Study
3. STANDARDS SETTING: N2P and SpeechWorks agree to work together jointly
develop, market, and offer as De Facto Standards to the market:
. VoiceXML and voice browsers
. SpeechLinks
. SpeechCookies
. Content and scripting tools
. SpeechSpot U.I. spec and implementation
The parties agree that the following terms would provide the basis for an
initial SOW:
A. PLATFORM INTEGRATION SERVICES: SWI shall perform the following with the
reasonable cooperation of N2P:
1. Convert Audio Driver to use N2P protocol and convert IP packets into u-
law PCM. This would essentially be re-writing of Prompt DLL and Record DLL
2. Switch the TTS API to use SWI implementation of Lucent TTS. Done through
SAPI.
3. Provide an operational VXML browser. SWI will ship voice browser source
code to N2P
4. Provide training on any SWI implementation of VXML, in classroom setting
5. Provide tools to convert applications to VXML operation. SWI will make
available to N2P all internal tools that are currently used as well as any
commercially sold tools when they are general release.
6. Provide SpeechWorks licensed software and the VMXL browser software on
SCO Unixware 7.
7. Support SpeechLinks as a platform capability for Net2Phone speech
services
SWI agrees that any costs associated with SWI's performance obligations, shall
be at SWI's sole expense.
Page 6
B. APPLICATION DEVELOPMENT
1. Provide interface documentation and assistance with the implementation
of the namedialer module (database, grammar generation and storing and
again the TTS interface) in order to enable N2P personal voice dialing
application. This will be delivered from SWI solutions group and
follow the SADL process as with all application development projects.
This will need to have a SCOPE OF WORK defined in order to accurately
describe exact costs and time estimates for delivery.
2. Provide Speech Site for internal use
3. Speech Web Directory - provide infrastructure for N2P to run the
application to enable any organization to register their site in Open
Speech Web Directory.
Part II of this Letter is non-binding and is intended to facilitate
negotiation and preparation of the License Agreement and PSA that will embody
the final understanding between the parties. Except as otherwise specifically
provided for herein, the obligations of the parties to consummate the
transaction contemplated by this Letter shall be subject in all respects to the
negotiation, execution and delivery of a definitive License Agreement and PSA .
Notwithstanding the foregoing, the $[ ] License Fee payment obligation of
N2P set forth in Paragraphs 1A of Part I is agreed to be binding
Please indicate your acceptance of the terms hereof by signing the enclosed
copy of this Letter on the line provided and returning it to the undersigned.
Net2Phone, Inc.
By: /s/ Xxx Xxxx
Name: Xxx Xxxx
Title: President
Acknowledged and agreed:
SPEECHWORKS INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx,
President and Chief Executive Officer
Date: June 29, 2000
Page 7
EXHIBIT A
----------
Initial Order
------------------------------------------------------------------------------------------------------------------
PRODUCT NAME PRODUCT DESCRIPTION RECOGNITION SYSTEM FEE/PORT OR LICENSE
PORTS SEATS SEAT FEES
------------------------------------------------------------------------------------------------------------------
SpeechWorks Includes: [ ] N/A [ ] $[ ]
v. 6.1 with . SpeechWorks Recognition Engine
DialogModule . DialogModules (see description
above).
------------------------------------------------------------------------------------------------------------------
SpeechWorks Includes: N/A 1 N/A
SDK . Vocabulary Editor (allows
developers to generate and maintain
large vocabulary lists)
. Grammar Specification and Tuning
Tools (allows developers to build
custom applications and tune their
performance)
------------------------------------------------------------------------------------------------------------------
TOTAL LICENSE FEES: $[ ]
The term "Recognition Port" shall mean the number of telephone channels enabled
with the software included in SpeechWorks DialogModule Bundle B that is capable
of either recognizing spoken words or performing "barge-in" for a discrete
period of time. SWI acknowledges that telephone lines or ports can be configured
with or without speech recognition dynamically, and as such, charges are based
on the maximum number of simultaneous speech recognition ports currently
configured in the total system. The term "system seats" shall mean the number
of end-users permitted to concurrently access and use, at the same time, the
SpeechWorks Tools and Grammar Libraries.
PAYMENT SCHEDULE:
The License Fee to be paid by N2P under the License Agreement shall be due and
payable within thirty (30) days from the date appearing on an applicable invoice
prepared and delivered by SWI to N2P following the execution of the License
Agreement between the parties. If mutually agreed upon in the License Agreement
SWI may impose a late fee of 1.5% per month on any amounts which remain unpaid
thirty (30) days after they are due.
Page 8
Exhibit A-1
DESCRIPTION OF LICENSED SOFTWARE
SpeechWorks(R) is a solution for speech-enabling transactional applications over
the telephone. packaged as six functional components:
1. SpeechWorks SMARTRecognizer(TM) recognizes words or phrases from
individual vocabularies in the call flow and provides processing of phrases
and sentences. This engine supports a range of hardware platforms and
scales to thousands of phone lines. Its features include:
2. SPEECHWORKS DIALOGMODULES(TM) are high-level building blocks
representing frequently used caller interactions that developers can
assemble and integrate into applications. Each DialolgModule encapsulates a
particular task such as capturing a "yes" or "no" response or creating a
voice menu. The DialogModules are made available in three bundles/packages.
A. BASE: Includes recognition kernel, reporting tools, and the
following DialogModules:
AlphaNumeric String - Collects a string of connected (pauses are not
required) numbers and letters. Patterns or a list of valid strings can
be specified.
Continuous Digits - Recognizes a string of connected digits only.
Constraints such as string length or the allowed values can be specified.
Item List - Lets callers speak words or phrases from a list (up to 250
words), e.g. "Please say the name of the person you are calling?" or
"What stock would you like to buy?"
VoiceMenu - Lets callers choose a word or phrase from a list (maximum of
20). Menus are similar to ItemLists, but shorter so that the prompt can
read each item to the caller.
YesNo - Performs the essential function of identifying affirmative and
negative responses from callers.
B. EXTENDED: Includes Base DialogModules, recognition kernel, reporting
tools, and the following DialogModules:
CreditCardNumber - Collects a credit card number. Can understand the
major credit cards and many private label cards from retailers
CCExpDate - Collects the expiration date for a credit card, usually month
and year. It recognizes the last day of a given month as well.
Currency - Lets callers speak a monetary value in a natural way, e.g.,
"One hundred twenty-five dollars and thirty two cents. Non US dollars
can be customized.
Date - Collects dates in several formats, e.g., June Fourth or 6/4/70,
nicknames can be mapped, e.g., Christmas or today, allowing callers to
speak a date in a natural way
ItemList - Up to 2,500 words
NaturalNumbers - Collects whole numerical amounts; callers can say "fifty
four hundred". Vocabulary for units can also be added, as in "a thousand
boxes".
SocialSecurityNumber - Collects a 9-digit US Social Security number.
Illegal numbers, such as those beginning with three zeroes, are screened
out
Spelling - Recognizes individual letters so that callers may choose to
spell out a request.
Page 9
TimeOfDay - Collects a naturally spoken time of day. Callers can use 12-
hour or 24-hour times, as well as prefix words such as "about" and
"around"
TelephoneNumber - Collects a phone number in the "North American
Numbering Plan" consisting of ten, seven or three digits. It allows
common phrases such as "area code" and "one eight hundred".
ZipCode - Recognizes a five and/or nine digit United States ZIP code
C. PROFESSIONAL NL (NATURAL LANGUAGE): Includes Extended DialogModules,
recognition kernel, reporting tools, and the following DialogModules:
ItemList - Greater than 2,500 words or phrases
CustomContext - Provides the ability to run the results of custom
modules created with the Software Development Kit.
The Professional NL will typically require some level of SpeechWorks
custom development services or development support.
Name - Available with Release 6.0 making it easier to collect a person's
first, last or first and last names where the names are completely
unknown. Speech Attendant apps should continue using the ItemList
DialogModules
3. SPEECHWORKS REPORTING AND ANALYSIS TOOL is bundled with each of the
DialogModule packages. The tool generates text diagnostic reports about
applications based on call logging data. The reports included are:
Call-Start - displays a percentage breakdown by one hour time period of
when calls are initiated helping to identify peaks in system usage.
Call-Length - displays a percentage breakdown of calls by duration
tracking the efficiency of user interface improvements that result in the
reduction of call length.
Module Transaction Results - summarizes execution results for each
DialogModule presenting an overall success rate. Success rates lower
than 90% indicate problem areas.
Module Callflow Results - summarizes results of each attempt to collect
the primary DialogModule data from the caller. High values for denied
confirmation and rejection indicate that recognition is not performing
well.
Context Results - summarizes the result of each recognition event. This
report illustrates a complete picture of the caller experience at the
transaction level.
Module Vocabulary Results - summarizes results classified by the answer
returned by the recognizer via a DialogModule. This report can be used
to give an indication of a) how effective the system recognized a
caller's utterance and b) how easily callers were able to clarify/confirm
what was said.
Context Stats - summarizes various additional statistics for each
recognition context. This report allows quick identification of problem
contexts indicating that improvements are required
4. SPEECHWORKS SOFTWARE DEVELOPMENT KIT (SDK) includes the following suite
of editors and utilities for configuring DialogModules, providing service
management functions, and supporting ongoing tuning and maintenance:
Vocabulary Editor (VED), Grammar Development Tools and Application Tuning
Tools. Included with the SDK are Four (4) Professional NL Run Time Port
licenses, for development purposes only.
5. SPEECHWORKS VOCABULARY LIBRARIES supply pre-packaged and continuously
maintained language contexts for spoken words/phrases. The User Interface
for the application using these libraries is not included. The following
libraries are currently available: (i) Stock Names & Symbols Vocabulary and
(ii) Mutual Fund Names & Symbols Vocabulary.
Page 10
EXHIBIT B
INFRASTRUCTURE COSTS
GENERAL
N2P and SWI will share net revenue generated by or through the facilities
services. For the License Agreement, revenue will only comprise that
generated from joint offerings brought to market by SWI and N2P in a joint
endeavour.
GROSS REVENUE
Gross Revenue is defined as revenue received by N2P in providing services
that are based on SWI's products. This definition excludes revenue
generated from other features that might be offered by N2P that are
separate from SWI's product, and do not involve access to any of SWI's
services. Notwithstanding anything contained in this Exhibit or the Letter
to which it is attached, N2P agrees that all hardware and software costs
associated with the platform and all other fixed costs and expenses shall
not be deemed to be Infrastructure Costs hereunder.
IDENTIFICATION OF EXPENSES
For the purpose of this revenue share calculation, only expenses associated
with revenue generation will be considered. These expenses will include:
Network Traffic Charges
This expense category includes the per-call charges associated with
(a) originating, (b) carrying, and (c) terminating the telephone
call. These costs are incurred by N2P and can include such items as
the following: Payphone surcharges, toll-free costs charged to N2P,
cost to carry the IP traffic, cost to terminate the telephone call,
etc.
Recurring Provisioning and Leased-Line Costs
This expense category includes charges associated with providing the
subscriber a telephone access method and leasing telephone or data
access lines used to link facilities. Provisioning charges include
the per-number fees paid by N2P to provide such services as Call
Forward on Busy / No-Answer, Toll-free numbers, and Local Numbers.
These provisioning costs typically recur monthly and are based on
DID quantity, but they may also include one-time installation
charges for DIDs. Leased line costs include the costs of leasing
lines (such as T1 lines) that might be used to link site facilities.
Fraud and Charge-backs
Net2Phone will recapture any fraudulent generated refunds or bad
debts. Net2Phone will use reasonable care and practices to minimize
such occurrences.
Taxes
To the extent Taxes are not charged to the customer, Net2Phone will
pay such charges directly.
NET REVENUE AVAILABLE FOR SHARE BY NET2PHONE AND SWI
Net Revenue is defined as gross revenue less expenses, as defined above.
Page 11
EXHIBIT C
Current Time and Materials Fees
PER EIGHT-HOUR MINIMUM NUMBER OF
SERVICE DAY RATE DAYS
------------------------------------------------------------------------
Project Management $2,500 5 days
------------------------------------------------------------------------
Application Consulting $2,000 5 days
------------------------------------------------------------------------
Speech Scientist $2,000 5 days
------------------------------------------------------------------------
Speech User Interface Design $1,500 5 days
------------------------------------------------------------------------
Application Development $1,500 5 days
------------------------------------------------------------------------
Systems Integration $1,500 5 days
------------------------------------------------------------------------
Operations Support $1,000 20 days
------------------------------------------------------------------------
Installation Services $1,000 5 days
------------------------------------------------------------------------
Page 12
