*** Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4),
200.83 and 230.406
INVENTION PURCHASE AGREEMENT
THIS INVENTION PURCHASE AGREEMENT (the "Agreement") dated November 15,
1998 (the "Effective Date"), sets forth the terms by which DITECH CORPORATION
("Ditech"), a California corporation, with its principal place of business
located at 000 X. Xxxxxxxxxxx Xxxx, Xxxxxxxx Xxxx, Xxxxxxxxxx 00000 shall
obtain ownership and exclusive rights to an invention and associated
intellectual property owned by TELINNOVATION, a California General
Partnership, ("Telinnovation"), with its principal place of business located
at 000 Xxxxx Xxxxxx Xxxxx 000, Xxxxxxxx Xxxx, Xxxxxxxxxx 00000.
NOW, THEREFORE, in consideration of the premises and covenants contained
herein, the parties agree as follows:
1. DEFINITIONS.
(a) "INVENTION" means Telinnovation's Echo Cancellation invention as
described on Exhibit "A," attached hereto and incorporated herein by this
reference.
(b) "DOCUMENTATION" means electronically transferred manuals, source
code, executable code, instructions, explanations and the like, whether in
written or electronic form, that are necessary or useful for the use,
modification, revision, development or implementation of the Invention.
(c) "ENHANCEMENTS" means any enhancements, upgrades, revisions, error
corrections, additions, improvements and modifications to the Invention,
whenever made, if any.
(d) "TRAINING" means Telinnovation providing necessary training and
test procedures so that Ditech can fully utilize the Invention in its
products, which such Support/Training obligation shall terminate upon the
earlier to occur of five hundred (500) man hours, valued at [***] per hour,
or two (2) years from the Effective Date.
(e) "SOURCE CODE" means the human-readable source code version of any
implemented embodiment of the Invention that can be compiled into Executable
Code, together with all applicable build scripts, test scripts and
programmers' notes.
(f) "EXECUTABLE CODE" means the machine executable version of source
code.
(g) "INTELLECTUAL PROPERTY RIGHTS" means all patents, trademarks, trade
names, xxxx secrets, moral rights, contract rights, mask work rights,
know-how and other proprietary rights,
*CONFIDENTIAL TREATMENT REQUESTED
1.
whether registered or unregistered, now known or hereafter recognized in any
jurisdiction, with respect to the Invention as described on Exhibit "A."
(h) "IPO LIQUIDITY EVENT" means the first trading day following
Ditech's first firm commitment underwriting of a public offering or its
common stock registered under the Securities Act.
(i) "MERGER LIQUIDITY EVENT" means Ditech's merger with, or acquisition
by, another company, or any other transfer of ownership of Ditech to the
extent such transfer constitutes a thirty-five percent (35%) or more change
in ownership of Ditech.
(j) "PRODUCTS" means any products developed by or for Ditech that
incorporate or are derived from elements of the Invention or Enhancements
(including but not limited to derivative works).
2. INVENTION AND RELATED MATERIAL DELIVERY.
(a) DELIVERY. Telinnovation shall deliver to Ditech, as soon
thereafter as is practicable via electronic transfer, the items listed and
described in Exhibit "A" in accordance with the schedule set forth in Exhibit
"B," attached hereto and incorporated herein by this reference.
Telinnovation shall also deliver when available, as soon thereafter as is
practicable via electronic transfer, all Enhancements to the Invention, if
any.
(b) TRAINING. In order to facilitate the transfer of Invention and
embodiments, the parties agree that it is essential that Telinnovation train
certain Ditech personnel (to be specified by Ditech) in the application and
modification of the Invention to better enable Ditech to develop new value
added features and to continue to use Invention. Such training will be
provided in accordance with the terms set forth in Exhibit "B," and such
training obligations hereunder shall terminate upon the earlier to occur of
five hundred (500) man hours, or two (2) years from the Effective Date. The
parties agree that the consideration for Telinnovation's training obligations
hereunder shall be paid at $[***] per hour.
(c) MAINTENANCE. No less often than once each calendar quarter
following the Effective Date, Telinnovation shall provide to Ditech, via
electronic transfer, copies of all Enhancements that it creates, if any, at
no additional charge.
3. TRANSFER OF OWNERSHIP, PURCHASE OF INVENTION. In exchange for the
consideration required pursuant to Section 4, below, Telinnovation hereby
sells, assigns and transfers to Ditech all right, title and interest in and
to the Invention, including but not limited to all patent, patentable and all
related rights therein and to the deliverables described in Exhibit "A." The
parties agree that the rights sold, transferred and assigned hereunder
include all patents, trade secrets and other proprietary rights associated
with the Invention as specifically described in Exhibit "A," incorporated
herein by this reference. Telinnovation agrees to cooperate with Ditech or
its designee(s), both during and after the tram of this Agreement, in the
procurement and maintenance of Ditech's rights to the Invention, the
Documentation and the Enhancements and to execute, when requested, any other
documents deemed necessary by Ditech to carry out the purpose of this
Agreement.
* Confidential Treatment Requested
2.
4. PAYMENT.
(a) ROYALTIES. Ditech agrees to pay Telinnovation royalties on sales
of Products of [...***...] percent of gross revenues received by Ditech from
sales of Products, less returns, actual bad debt, taxes and freight. This
royalty obligation shall continue until the occurrence of an IPO Liquidity
Event or Merger Liquidity Event. Said royalties shall be paid to
Telinnovation no later than thirty (30) days after the close of each
immediately preceding calendar quarter. Ditech shall pay Telinnovation a
late payment charge equal to one percent (1%) per month on the amount of any
royalty payment due hereunder that is not received by Telinnovation within
five (5) days after the due date. Telinnovation shall have the right to
engage, at its own expense, an independent auditor reasonably acceptable to
Ditech, to examine Ditech's records from time to time, but no more often than
once per calendar year, during normal business hours and upon at least five
(5) days' advance written notice. Any such auditor shall enter into a
confidentiality agreement with Ditech reasonably acceptable to Ditech and
shall only be entitled to report to Telinnovation the amount of any
discrepancy in payment of the royalties due Telinnovation for the relevant
review period. If any such audit reveals an underpayment of more than ten
percent (10%) of the correct amount of royalties due hereunder, such audit
will be at the expense of Ditech. If any audit conducted on behalf of
Telinnovation shall show that Ditech underpaid the royalties due to
Telinnovation during to the period subject to the audit, then Ditech shall
immediately pay to Telinnovation any such deficiency with interest thereon at
a rate equal to the lower of one and a half percent per month or the highest
rate allowed by law from the date due until paid or at such lower rate as
shall be the maximum rate permitted by law.
(b) STOCK. Upon the Effective Date of this Agreement, Ditech shall
place into an escrow account Two Hundred and Fifty Thousand (250,000) shares
of Ditech common stock currently valued at One Dollar ($1.00) per share.
Ditech covenants that it will seek to amend the Ditech Registration Rights
Agreement to provide Telinnovation with the same registration rights as those
set forth therein for recipients of Ditech's stock, including but not limited
to Ditech investors, such as Summit Partners.
Following the Effective Date, Ditech will establish an escrow account
with a mutually acceptable third party escrow agent for purposes of
depositing the shares of Ditech Common Stock described above. The agreement
with the escrow agent will provide that the condition for release of the
escrowed shares will be a written notice provided by Ditech stating that
Telinnovation has transferred ownership to and delivered the Invention,
including without limitation all Enhancements, and performed all required
Training in a manner reasonably acceptable to Ditech. The shares shall be
subject to the "put option" described in Subsection 4.(d), below, and in
addition, the shares may be released from escrow in whole or in part for sale
in connection with Ditech's initial public offering or follow-on offering (an
IPO Liquidity Event, as defined herein), as long as fifteen percent (15%) of
the gross proceeds received from such sale is returned to escrow subject to
release from escrow thereafter only upon performance of the required
Training, as set forth herein. The parties currently anticipate that the IPO
Liquidity Event should occur, if at all, within twenty-four (24) months of
the Effective Date. Ditech agrees to pay the reasonable costs of retaining
such escrow account; PROVIDED, HOWEVER, that each
* OMITTED PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST AND FILED SEPARATELY
WITH THE COMMISSION
3.
party shall bear its own expenses in negotiating any agreement with the
escrow agent. Upon its execution, the agreement with the escrow agreement
will be attached hereto as Exhibit "C."
(c) PAYMENT ON IPO LIQUIDITY EVENT. Upon the occurrence of an IPO
Liquidity Event, Ditech agrees to pay Telinnovation as further consideration
for the sale, transfer and assignment of the Invention the sum of Two Million
Nine Hundred Sixty Thousand Dollars ($2,960,000.00). Said consideration
shall be due and payable to Telinnovation within fifteen (15) days following
the date of such IPO Liquidity Event, and such sum shall bear interest at the
rate of ten percent (10%) per annum simple interest, calculated on the basis
of a 360 day year, until paid, if not timely paid following the IPO Liquidity
Event.
(d) PAYMENT ON MERGER LIQUIDITY EVENT. Upon the occurrence of a Merger
Liquidity Event, Ditech agrees to pay Telinnovation as further consideration
for the sale, transfer and assignment of the Invention the sum of Two Million
Nine Hundred Sixty Thousand Dollars ($2,960,000.00). Said consideration
shall be due and payable to Telinnovation within fifteen (15) days following
the date of such Merger Liquidity Event, and such sum shall bear interest at
the rate of ten percent (10%) per annum simple interest, calculated on the
basis of a 360 day year, until paid, if not timely paid following the Merger
Liquidity Event. Ditech further agrees, at Telinnovation's option exercisable
upon a Merger Liquidity Event, to re-purchase the 250,000 shares of Ditech
stock referenced in subsection (b) of this Section at $6.00 per share.
(e) PAYMENT REQUIRED ONLY ON FIRST TO OCCUR OF IPO OR MERGER LIQUIDITY
EVENT. Ditech shall only be required to make the first to occur of the
payments specified in subsections (c) and (d) above, and upon any such
payment shall not be required to make further payment in the event another
Liquidity Event occurs.
(f) TERMINATION OF ROYALTY OBLIGATIONS UPON PAYMENT ON LIQUIDITY EVENT.
At such rime as Ditech makes either of the payments set forth in subsection
(c) or subsection (d) of this Section 4, above, its royalty obligations under
Section 4(a), above, will be completely fulfilled and it shall owe no further
payments to Telinnovation regarding the subject matter of this Agreement.
(g) CONSIDERATION FOR TRANSFER. Telinnovation acknowledges and agrees
that the consideration set forth in this Section 4 is Telinnovation's sole
and complete consideration for the transfer of ownership of the Invention and
associated deliverables and intellectual property rights.
5. REPRESENTATIONS AND WARRANTIES.
(a) INFRINGEMENT; OWNERSHIP. Telinnovation represents and warrants to
Ditech that (i) the Invention shall not infringe the patent, trade secret or
other proprietary rights of any third party, and (ii) Telinnovation has full
ownership rights to the Invention and has the unrestricted right and
authority to enter into this Agreement and to sell, transfer and convey to
Ditech the Invention hereunder.
(b) NO HARMFUL CODE. Telinnovation represents and warrants that the
Invention and all other deliverables, and any media used to distribute such,
contain no computer instructions, circuitry or other .technological means whose
purpose is to disrupt, damage or interfere with any
4.
use of Ditech's or Ditech's customers' hardware, networks or systems which
were caused by or attributable to Telinnovation ("Harmful Code"). For the
purposes of this warranty, Harmful Code shall include any instrumentality
that could cause code compiled from the Source Code or hardware used
therewith to be not operative as a result of use by more than the authorized
number of users, use beyond any data size or quantity limit, or use beyond
the termination or expiration date of this Agreement, which was included in
the Invention, Source Code, Enhancement or other deliverables by
Telinnovation.
6. INDEMNIFICATION. Telinnovation shall indemnify, defend and hold Ditech
and its officers, directors, agents, successors and assigns harmless from and
against any liability, loss, cost (including without limitation reasonable
attorneys' fees) or damages arising out of or in any way related to a breach
or alleged breach of the representations and warranties set forth herein.
Telinnovation shall not enter into any settlement that obligates Ditech.
7. OBLIGATION TO DEFEND RIGHTS AND INTERESTS. The Invention and other
deliverables sold, assigned and transferred to Ditech pursuant to this
Agreement are exclusively transferred to Ditech. Prior to the occurrence of
a Liquidity Event, Ditech agrees to use commercially reasonable efforts, at
its sole cost and expense, to enforce its intellectual property rights in the
Invention and Enhancements, if any, acquired under this Agreement against any
infringement by any third party.
8. ASSIGNMENT. Telinnovation and Ditech may assign their rights under the
terms of this Agreement with the written permission of the other party;
PROVIDED, HOWEVER, that either party may assign its interests to a successor
in interest without obtaining such permission upon the event of a merger,
acquisition, reorganization or sale of ail or substantially all of the assets
or stock of the assigning party. Any successor in interest shall be bound by
the terms and conditions of this Agreement. Any assignment in violation of
any of the foregoing shall be null and void and shall in no way effect the
rights and obligations of the parties hereto.
9. TERM; TERMINATION.
(a) TERM. This Agreement shall remain in full force and effect until
the latest of the following (i) for such period as Ditech is obligated to pay
royalties to Telinnovation as provided herein, (ii) until a Liquidity Event
occurs, (iii) until the Training obligation of Telinnovation has been
satisfied, or (iv) until this Agreement is earlier terminated pursuant to
subsection (b) below.
(b) TERMINATION. This Agreement may be terminated upon notice of a
material breach upon thirty (30) days' prior written notice to the breaching
party. Such termination will become effective upon the expiration of such
period if prior to expiration thereof the breaching party has not cured said
breach to the reasonable satisfaction of the terminating party. In addition,
Telinnovation may terminate this Agreement in the event Ditech liquidates,
dissolves or ceases to do business.
(c) EFFECT OF TERMINATION. Upon any such termination prior to receipt of
payment of the amounts described in Sections 4(c) or 4(d), above, based on an
uncured breach by Ditech, Telinnovation's Training obligations shall thereafter
cease, and Ditech shall immediately thereafter transfer and assign to
Telinnovation for no additional consideration all rights received
5.
hereunder to the Invention, Enhancements, if any, the Source Code and all
other deliverables transferred by Telinnovation to Ditech, PROVIDED, HOWEVER,
that Ditech shall own any derivative works and intellectual property rights
it may have as a result of creating any Improvements to the Invention or any
of the deliverables it has received. Further, upon termination by either
party, Telinnovation's support obligation under Section 2(c), above, shall
terminate and any license expressed or implied granted to Telinnovation for
such support shall terminate. Any Ditech payment obligations accrued prior
to termination shall be due and payable at the time of termination. In
addition, Sections 1, 4, 5, 6, 8, 9, 10, and 11 shall survive any termination
or expiration of this Agreement.
10. LIMITATION OF LIABILITY. Neither party shall be liable to the other
party or to any entity claiming through or under the other party for any loss
of profit or income, any lost data, any work stoppage, any equipment
downtime, or for any consequential, indirect, incidental, or special damages,
whether in an action for contract or tort or based on a warranty, in
connection with this agreement, even if such party has been advised of the
possibility of such damages. In no event shall either party's liability to
the other hereunder exceed the amounts paid hereunder. Each party
acknowledges and agrees that the foregoing limitations on liability are
essential elements of the basis of the bargain between the parties and that
in the absence of such limitations the material and economic terms of this
Agreement would be substantially different.
11. GENERAL. The parties hereto are independent contractors and no
employment, agency, or joint venture is created hereunder. This Agreement
shall for all purposes be governed by and interpreted in accordance with the
laws of the State of California, USA, as those laws are applied to contracts
entered into and to be performed entirely in California by California
residents and without regard to conflicts of laws principles, and the parties
submit to the exclusive jurisdiction of the courts of Santa Xxxxx County,
California for all disputes arising hereunder. All notices, requests and
other communications under this Agreement must be in writing, and must be
mailed by registered or certified mail, postage prepaid and return receipt
requested, or delivered by hand to the party to whom such notice is required
or permitted to be given. Time is of the essence in the performance of
obligations under this Agreement. If any provision of this Agreement is held
by a court of competent jurisdiction to be unenforceable for any reason, the
remaining provisions hereof shall be unaffected and remain in full force and
effect. This Agreement may only be modified by the mutual written agreement
of the parties and any waiver of a provision or of a breach of a provision of
this Agreement shall not constitute a waiver of any other provision of this
Agreement or of any other breach of any provision of this Agreement. The
provisions of this Agreement shall be binding upon and inure to the benefit
of the parties and their successors and assigns.
12. ENTIRETY. This Agreement and the Exhibits attached hereto and
incorporated herein constitute the entire agreement and understanding between
the parties with respect to the subject matter hereof.
6.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed in duplicate originals as of the Effective Date.
DITECH CORPORATION TELINNOVATION
By: /s/ Xxxxxxx Xxxxxxx By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx Xxxxxxx Name: Xxxxxxx X. Xxxxx
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Title: VP/CFO Title: General Partner
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Address: 000 X. Xxxxxxxxxxx Xx. Address: 000 Xxxxx Xxx. #000
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Xxxxxxxx Xxxx, XX Xxxxxxxx Xxxx, XX
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94043 94301
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7.
EXHIBIT A
DELIVERABLES
A. THE INVENTION: DUAL ECHO CANCELLER WITH MULTIPLE ADAPTATION METHODS
The Invention is a multiple channel echo cancellation system comprising:
1. Means to access the standard telephone carrier interfaces,
including T-l, E-I, DS3, OC3 and similar standard interfaces.
2. Primary cancellation means consisting of a tapped delay line
wherein portions of the tapped delay line generate an estimated echo which is
subtracted from the actual echo, hence producing estimated an echo free or
nearly echo free signal.
3. Several echo cancellation estimation and adaptation
mechanisms, which, in response to unsatisfactory performance by the primary
echo cancellation means, estimate and adapt a new solution.
4. Secondary cancellation means consisting of another tapped
delay line, wherein the results of several echo cancellation estimation and
adaptation mechanisms may be evaluated, by comparing cancellation performance
to the primary echo cancellation means:
B. C5x EMBODIMENT
Source code and design information for embodiment in Texas Instruments
TMS320C5x DSP processors.
C. C54x EMBODIMENT
Source code and design information for embodiment in Texas Instruments
TMS320C54x DSP processors.
D. TRAINING
Training as necessary to permit Ditech's utilization of the Invention
Training obligation shall terminate upon the earlier to occur of five hundred
(500) man hours, or two (2) years from the Effective Date, or upon
termination of the Agreement.
8.
EXHIBIT B
DELIVERY DATES
A. Invention - Upon contract execution.
B. C5x Embodiment - Upon contract execution
C. C54x Embodiment - Upon contract execution
Training - Documentation preparation and training of Ditech personnel.
Training obligation shall terminate upon the earlier to occur of five hundred
(500) man hours, or two (2) years from the Effective Date, or upon
termination of the Agreement.
9.
