SPEECHWORKS INTERNATIONAL INC
S-1/A, EX-10.1, 2000-07-11
PREPACKAGED SOFTWARE
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<PAGE>

                                                                    Exhibit 10.1

SpeechWorks International, Inc. has omitted from this Exhibit 10.1 portions of
the Agreement for which SpeechWorks International, Inc. has requested
confidential treatment from the Securities and Exchange Commission. The portions
of the Agreement for which confidential treatment has been requested have been
filed separately with the Securities and Exchange Commission.


                     MASSACHUSETTS INSTITUTE OF TECHNOLOGY

                         APPLIED LANGUAGE TECHNOLOGIES

                                LICENSE AGREEMENT

                     (NONEXCLUSIVE FOR UNPATENTED SOFTWARE)

                                 August 3, 1994


                                       -i-

<PAGE>

                                TABLE OF CONTENTS

WITNESSETH ................................................................... 1
DEFINITIONS .................................................................. 2
GRANT ........................................................................ 3
DUE DILIGENCE ................................................................ 3
ROYALTIES .................................................................... 4
REPORTS AND RECORDS .......................................................... 4
COPYRIGHT .................................................................... 5
DELIVERY OF MATERIALS ........................................................ 6
INFRINGEMENT ................................................................. 6
PRODUCT LIABILITY ............................................................ 6
EXPORT CONTROLS .............................................................. 7
NON-USE OF NAMES ............................................................. 8
ASSIGNMENT ................................................................... 8
DISPUTE RESOLUTION ........................................................... 8
TERMINATION .................................................................. 9
PAYMENTS, NOTICES AND COMMUNICATIONS .........................................10
MISCELLANEOUS PROVISIONS .....................................................10
APPENDIX A ...................................................................12


                                      -ii-

<PAGE>

                      MASSACHUSETTS INSTITUTE OF TECHNOLOGY

                          APPLIED LANGUAGE TECHNOLOGIES

                                    AGREEMENT

      This Agreement is made and entered into this 4th day of August , 1994 (the
"Effective Date") by and between MASSACHUSETTS INSTITUTE OF TECHNOLOGY, a
corporation duly organized and existing under the laws of the Commonwealth of
Massachusetts and having its principal office at 77 Massachusetts Avenue,
Cambridge, Massachusetts 02139, U.S.A. (hereinafter referred to as "M.I.T."),
and APPLIED LANGUAGE TECHNOLOGIES, a corporation duly organized under the laws
of Massachusetts and having its principal office at One Kendall Square, Suite
2200 Cambridge, Massachusetts 02139 (hereinafter referred to as "LICENSEE").

                                   WITNESSETH

      WHEREAS, M.I.T. is the owner of certain right, title and interest in the
PROGRAM (as later defined herein) subject only to a royalty-free, nonexclusive
license rights of the United States Government pursuant to Title 35 United
States Code Sections 200 through 204 and has the right to grant licenses
thereunder;

      WHEREAS, M.I.T. desires to have the PROGRAM developed and commercialized
to benefit the public and is willing to grant a license thereunder;

      WHEREAS, LICENSEE has represented to M.I.T. that LICENSEE shall commit
itself to a thorough, vigorous and diligent program of exploiting the PROGRAM so
that public utilization shall result therefrom; and

      WHEREAS, LICENSEE desires to obtain a license under the PROGRAM upon the
terms and conditions hereinafter set forth.

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:


                                      -1-
<PAGE>

                                 1 - DEFINITIONS

      For the purposes of this Agreement, the following words and phrases shall
have the following meanings:

      1.1 "LICENSEE" shall include a related company of Applied Language
Technologies.

      1.2 "PROGRAM" shall mean the computer software and related documentation
as described in Appendix A.

      1.3 "DERIVATIVE" shall mean LICENSEE-created computer software which
includes, or is based in whole or in part on, the PROGRAM, including, but not
limited to, translations of the PROGRAM to other foreign or computer languages,
adaptation of the PROGRAM to other hardware platforms, abridgments,
condensations, revisions, and software incorporating all or any part of the
PROGRAM which may also include LICENSEE-created modification, enhancements or
other software. LICENSEE shall be entitled to establish all proprietary rights
for itself in the intellectual property represented by DERIVATIVES, whether in
the nature of trade secrets, copyrights, patents or other rights, subject to
COPYRIGHT(s); provided, however, LICENSEE shall promptly notify M.I.T. of
LICENSEE-originated bug fixes to the PROGRAM, which shall be owned by M.I.T. Any
copyright registration by LICENSEE for DERIVATIVES shall give full attribution
to M.I.T.'s COPYRIGHT(s).

      1.4 "LICENSED PRODUCT" shall mean the PROGRAM and/or any and all
DERIVATIVES.

      1.5 "END-USER" shall mean a customer authorized to use a single copy or
multiple copies of the LICENSED PRODUCT for internal purposes only and not for
further distribution.

      1.6 "COPYRIGHT(s)" shall mean M.I.T.'s copyrights in the PROGRAM.

      1.7 "INTELLECTUAL PROPERTY RIGHTS" shall mean the COPYRIGHT(s).

      1.8 "NET SALES" shall mean LICENSEE's and its SUBLICENSEES' billings for
LICENSED PRODUCTS produced hereunder, including license maintenance fees and
leases, but excluding any billings associated with funded development or
consulting contracts, less the sum of the following:

            a.    sales, tariff duties and/or use taxes directly imposed and
                  with reference to particular sales;

            b.    outbound transportation prepaid or allowed;

            c.    amounts allowed or credited on returns;

            d.    commissions; and


                                      -2-
<PAGE>

            e.    uncollectible amounts

      LICENSED PRODUCTS shall be considered "sold" when billed out or invoiced.

      1.9 "TERRITORY" shall mean worldwide.

      1.10 "FIELD OF USE" shall mean all fields.

                                    2 - GRANT

      2.1 M.I.T. hereby grants to LICENSEE the following rights and licenses in
the TERRITORY for the FIELD OF USE:

            a.    to use and reproduce the PROGRAM;

            b.    to create DERIVATIVES; and

            c.    to lease and sublicense LICENSED PRODUCTS to END-USERS through
                  the normal channels of distribution.

      2.2 The license granted hereunder shall be nonexclusive and shall extend
to the end of the term for which the COPYRIGHT(s) are issued, unless sooner
terminated as hereinafter provided.

      2.3 LICENSEE agrees that LICENSED PRODUCTS leased or sold in the United
States shall be manufactured substantially in the United States.

      2.4 The license granted hereunder shall not be construed to confer any
rights upon LICENSEE by implications estoppel or otherwise as to any
intellectual property not specifically licensed herein.

                                3 - DUE DILIGENCE

      3.1 LICENSEE shall use its best efforts to bring one or more LICENSED
PRODUCT(S) to market through thorough, vigorous and diligent efforts and to
continue active, diligent marketing efforts for one or more LICENSED PRODUCT(S)
throughout the life of this Agreement.

      3.2 In addition, LICENSEE shall adhere to the following milestones:

            a.    LICENSEE shall deliver to M.I.T., on or before September 1,
                  1994, a business plan showing the amount of money, number and
                  kind of personnel and time budgeted and planned for each phase
                  of development of the LICENSED PRODUCTS and shall provide
                  similar reports to M.I.T. on or before January 31 of each
                  year.

            b.    LICENSEE shall make a first commercial sale of a LICENSED
                  PRODUCT on or before [                ].

            c.    LICENSEE shall make NET SALES according to the following
                  schedule:

                  [    ]                               $[       ]


                                      -3-
<PAGE>

                  [       ]                           $[         ];

                  [       ]                           $[         ].

      3.3 LICENSEE's failure to perform in accordance with Articles 3.1 and 3.2
above shall be grounds for M.I.T. to terminate this Agreement pursuant to
Article 14.3 hereof.

                                  4 - ROYALTIES

      4.1 For the rights, privileges and license granted hereunder, LICENSEE
shall pay royalties to M.I.T. in the manner hereinafter provided to the end of
the term of the COPYRIGHT(s) or until this Agreement shall be terminated:

            a.    Running Royalties in an amount equal to [ ] Percent ([  ]%) of
                  the first $[ ] of NET SALES, [ ] Percent ([  ]%) of the next
                  $[ ] of NET SALES, One Percent ([ ]%) of the next $[     ]
                  of NET SALES, and [                ] Percent ([   ]%) of all
                  NET SALES in excess of $[     ] If LICENSED PRODUCTS shall
                  be distributed for a discounted price substantially lower than
                  customary in the trade or distributed at no cost to affiliates
                  or otherwise, other than demonstration, evaluation or "Not for
                  Resale" software units, the royalty due shall be based on the
                  customary amount billed for such LICENSED PRODUCTS.

      4.2 All payments due hereunder shall be paid in full, without deduction of
taxes or other fees which may be imposed by any government and which shall be
paid by LICENSEE.

      4.3 Royalty payments shall be paid in United States dollars in Cambridge,
Massachusetts, or at such other place as M.I.T. may reasonably designate
consistent with the laws and regulations controlling in any foreign country. If
any currency conversion shall be required in connection with the payment of
royalties hereunder, such conversion shall be made by using the exchange rate
prevailing at the Chase Manhattan Bank (N.A.) on the last business day of the
calendar quarterly reporting period to which such royalty payments relate.

                             5 - REPORTS AND RECORDS

      5.1 LICENSEE shall keep full, true and accurate books of account
containing all particulars that may be necessary for the purpose of showing the
amounts payable to M.I.T. hereunder. Said books of account shall be kept at
LICENSEE's principal place of business or the principal place of business of the
appropriate division of LICENSEE to which this Agreement relates. Said books and
the supporting data shall be open at all reasonable times for three (3) years
following the end of the calendar year to which they pertain, to the inspection
of M.I.T. or its agents for the purpose of verifying LICENSEE's royalty
statement or compliance in other respects with this Agreement. Should such
inspection lead to the discovery of a greater than ten percent


                                      -4-
<PAGE>

(10%) discrepancy in reporting to M.I.T.'s detriment, LICENSEE agrees to pay the
full cost of such inspection.

      5.2 Before the first commercial sale of a LICENSED PRODUCT, LICENSEE shall
submit the reports due under Article 3.2(a) on January 31 of each year. After
the first commercial sale of a LICENSED PRODUCT, LICENSEE, within sixty (60)
days after March 31, June 30, September 30 and December 31, of each year, shall
deliver to M.I.T. true and accurate reports, giving such particulars of the
business conducted by LICENSEE and its SUBLICENSEES during the preceding
three-month period under this Agreement as shall be pertinent to a royalty
accounting hereunder. These shall include at least the following:

            a.    descriptions of LICENSED PRODUCTS and current price lists for
                  such;

            b.    number of LICENSED PRODUCTS distributed, leased and/or
                  sublicensed by or for LICENSEE;

            c.    total billings for LICENSED PRODUCTS distributed by LICENSEE;

            d.    accounting for NET SALES, noting the deductions applicable as
                  provided in Article 1.8;

            e.    Running Royalties due under Article 4.1(a); and

            f.    total royalties due.

      5.3 With each such report submitted, LICENSEE shall pay to M.I.T. the
royalties due and payable under this Agreement. If no royalties shall be due,
LICENSEE shall so report.

      5.4 On or before the ninetieth (90th) day following the close of
LICENSEE's fiscal year, LICENSEE shall provide M.I.T. with LICENSEE's certified
financial statements for the preceding fiscal year including, at a minimum, a
Balance Sheet and an Operating Statement.

      5.5 The royalty payments set forth in this Agreement shall, if overdue,
bear interest until payment at a per annum rate two percent (2%) above the prime
rate in effect at the Chase Manhattan Bank (N.A.) on the due date. The payment
of such interest shall not foreclose M.I.T. from exercising any other rights it
may have as a consequence of the lateness of any payment.

                                  6 - COPYRIGHT

      LICENSEE acknowledges that title to the INTELLECTUAL PROPERTY RIGHTS shall
remain with M.I.T. and that any copies of the LICENSED PRODUCTS and related
documentation, or portions thereof, made by LICENSEE hereunder, shall include an
M.I.T. copyright notice thereon in either of the following forms: "Copyright
199__, Massachusetts Institute of Technology. All rights Reserved." or
"(C)199__, M.I.T. All Rights Reserved." The notice shall be affixed to all
copies or portions thereof in such manner and location as to give


                                      -5-
<PAGE>

reasonable notice of M.I.T.'s claim of copyright. LICENSEE shall at all times
hereafter protect the INTELLECTUAL PROPERTY RIGHTS, and all related technical
information, data and materials supplied by M.I.T., from transfer using measures
at least as strong as those used by LICENSEE in protecting its own proprietary
software.

                            7 - DELIVERY OF MATERIALS

      7.1 Upon execution of this Agreement, M.I.T. shall deliver to LICENSEE one
(1) copy of the PROGRAM and related documentation, if any.

      7.2 LICENSEE accepts the above materials on an "as is" basis. Accordingly,
M.I.T. shall not be required to load the PROGRAM onto LICENSEE's machines; test
for proper operation, perform any debugging; make any corrections; provide
maintenance; provide any updates, enhanced capabilities, or new features; or
assist in the understanding or use of the PROGRAM at any time. M.I.T. may, in
its sole discretion, at the request of LICENSEE provide on-site installation
assistance so long as LICENSEE shall bear the cost of all M.I.T.'s related
expenses.

                                8 - INFRINGEMENT

      8.1 LICENSEE shall inform M.I.T. promptly in writing of any alleged
infringement of the INTELLECTUAL PROPERTY RIGHTS by a third party and of any
available evidence thereof.

      8.2 During the term of this Agreement, M.I.T. shall have the right, but
shall not be obligated, to prosecute at its own expense all infringements of the
INTELLECTUAL PROPERTY RIGHTS and, in furtherance of such right, LICENSEE hereby
agrees that M.I.T. may include LICENSEE as a party plaintiff in any such suit,
without expense to LICENSEE. The total cost of any such infringement action
commenced or defended solely by M.I.T. shall be borne by M.I.T. and M.I.T. shall
keep any recovery or damages for past infringement derived therefrom.

                              9 - PRODUCT LIABILITY

      9.1 LICENSEE shall at all times during the term of this Agreement and
thereafter, indemnify, defend and hold M.I.T., its trustees, directors,
officers, employees and affiliates, harmless against all claims, proceedings,
demands and liabilities of any kind whatsoever, including legal expenses and
reasonable attorneys' fees, arising out of the death of or injury to any person
or persons or out of any damage to property, or resulting from the productions
manufacture, sale, use, lease, consumption or advertisement of the LICENSED
PRODUCT(s) or arising from any obligation of LICENSEE hereunder, excepting only
claims that the INTELLECTUAL PROPERTY RIGHTS infringe third party intellectual
property.


                                      -6-
<PAGE>

      9.2 Prior to the first commercial sale of LICENSED PRODUCT, LICENSEE shall
obtain and carry in full force and effect commercial, general liability
insurance which shall protect LICENSEE and M.I.T. with respect to events covered
by Article 9.1 above. Such insurance shall be written by a reputable insurance
company authorized to do business in the Commonwealth of Massachusetts, shall
list M.I.T. as an additional named insured thereunder, shall be endorsed to
include product liability coverage and shall require thirty (30) days written
notice to be given to M.I.T. prior to any cancellation or material change
thereof. The limits of such insurance shall not be less than One Million Dollars
($1,000,000) per occurrence with an aggregate of Three Million Dollars
($3,000,000) for personal injury or death, and One Million Dollars ($1,000,000)
per occurrence with an aggregate of Three Million Dollars ($3,000,000) for
property damage. LICENSEE shall provide M.I.T. with Certificates of Insurance
evidencing the same.

      9.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, M.I.T., ITS
TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES MAKE NO REPRESENTATIONS
AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT
NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
VALIDITY OF INTELLECTUAL PROPERTY RIGHTS, ISSUED OR PENDING, AND THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. NOTHING IN THIS AGREEMENT
SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY M.I.T. THAT THE
PRACTICE BY LICENSEE OF THE LICENSE GRANTED HEREUNDER SHALL NOT INFRINGE THE
PATENT RIGHTS OF ANY THIRD PARTY. IN NO EVENT SHALL M.I.T., ITS TRUSTEES,
DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES BE LIABLE FOR INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGE OR INJURY TO
PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER M.I.T. SHALL BE ADVISED, SHALL
HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY.
FURTHERMORE, M.I.T. EXTENDS NO WARRANTIES OF ANY KIND AS TO PROGRAM CONFORMITY
WITH WHATEVER USER MANUALS OR OTHER LITERATURE MAY BE ISSUED FROM TIME TO TIME.

                              10 - EXPORT CONTROLS

      It is understood that M.I.T. is subject to United States laws and
regulations controlling the export of technical data, computer software,
laboratory prototypes and other commodities (including the Arms Export Control
Act, as amended and the Export Administration Act of 1979), and that its
obligations hereunder are contingent on compliance with applicable United


                                      -7-
<PAGE>

States export laws and regulations. The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by LICENSEE that LICENSEE shall not export
data or commodities to certain foreign countries without prior approval of such
agency. M.I.T. neither represents that a license shall not be required nor that,
if required, it shall be issued.

                              11 - NON-USE OF NAMES

      LICENSEE shall not use the names or trademarks of the Massachusetts
Institute of Technology or Lincoln Laboratory, nor any adaptation thereof, nor
the names of any of their employees, in any advertising, promotional or sales
literature without prior written consent obtained from M.I.T., or said employee,
in each case, except that LICENSEE may state that it is licensed by M.I.T. under
the INTELLECTUAL PROPERTY RIGHTS.

                                 12 - ASSIGNMENT

      This Agreement may not be assigned, except in the case of sale or transfer
of a substantial portion of the business of LICENSEE, to which this Agreement
relates. Such exception must include the prior written consent of M.I.T., which
shall not be unreasonably withheld, and the assignee or transferee must agree in
writing to M.I.T. to be bound by the terms and conditions hereof prior to such
assignment and transfer.

                             13 - DISPUTE RESOLUTION

      13.1 Except for the right of either party to apply to a court of competent
jurisdiction for a temporary restraining order, a preliminary injunction, or
other equitable relief to preserve the status quo or prevent irreparable harm,
any and all claims, disputes or controversies arising under, out of, or in
connection with the Agreement, including any dispute relating to INTELLECTUAL
PROPERTY infringement, which the parties shall be unable to resolve within sixty
(60) days shall be mediated in good faith. The party raising such dispute shall
promptly advise the other party of such claim, dispute or controversy in a
writing which describes in reasonable detail the nature of such dispute. By not
later than five (5) business days after the recipient has received such notice
of dispute, each party shall have selected for itself a representative who shall
have the authority to bind such party, and shall additionally have advised the
other party in writing of the name and title of such representative. By not
later than ten (10) business days after the date of such notice of dispute, the
party against whom the dispute shall be raised shall select a mediation firm in
the Boston area, and such representatives shall schedule a date with such firm
for a mediation hearing. The parties shall enter into good faith mediation and
shall share the costs equally. If the representatives of the parties have not
been able to resolve the dispute within fifteen (15) business


                                      -8-
<PAGE>

days after such mediation hearing, the parties shall have the right to pursue
any other remedies legally available to resolve such dispute in either the
Courts of the Commonwealth of Massachusetts or in the United States District
Court for the District of Massachusetts, to whose jurisdiction for such purposes
M.I.T. and LICENSEE each hereby irrevocably consents and submits.

      13.2 Notwithstanding the foregoing, nothing in this Article shall be
construed to waive any rights or timely performance of any obligations existing
under this Agreement.

                                14 - TERMINATION

      14.1 If LICENSEE shall cease to carry on its business with respect to the
rights granted in this Agreement, this Agreement shall terminate upon notice by
M.I.T.

      14.2 Should LICENSEE fail to make any payment whatsoever due and payable
to M.I.T. hereunder, M.I.T. shall have the right to terminate this Agreement
effective on sixty (60) days' notice, unless LICENSEE shall make all such
payments to M.I.T. within said sixty (60) day period. Upon the expiration of the
sixty (60) day period, if LICENSEE shall not have made all such payments to
M.I.T., the rights, privileges and license granted hereunder shall automatically
terminate.

      14.3 Upon any material breach or default of this Agreement by LICENSEE
(including, but not limited to, breach or default under Article 3.3), other than
those occurrences set out in Articles 14.1 and 14.2 hereinabove, which shall
always take precedence in that order over any material breach or default
referred to in this Article 14.3, M.I.T. shall have the right to terminate this
Agreement and the rights, privileges and license granted hereunder effective on
ninety (90) days' notice to LICENSEE. Such termination shall become
automatically effective unless LICENSEE shall have cured any such material
breach or default prior to the expiration of the ninety (90) day period.

      14.4 LICENSEE shall have the right to terminate this Agreement at any time
on six (6) months' notice to M.I.T., and upon payment of all amounts due M.I.T.
through the effective date of the termination.

      14.5 Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that matured
prior to the effective date of such termination; and Articles 1, 6, 9, 10, 11,
14.5, 14.6 and 16 shall survive any such termination. LICENSEE thereof may,
however, after the effective date of such termination, sell all LICENSED
PRODUCTS in inventory, provided that LICENSEE shall pay to M.I.T. the Running
Royalties thereon as required by Article 4 of this Agreement and shall submit
the reports required by Article 5 hereof.

      14.6 Upon termination of this Agreement for any reason:


                                      -9-
<PAGE>

of the law, such invalidity or unenforceability shall not in any way affect the
validity or enforceability of the remaining provisions hereof.

      16.4 The failure of either party to assert a right hereunder or to insist
upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.

      IN WITNESS WHEREOF, the parties have duly executed this Agreement the day
and year set forth below.

MASSACHUSETTS INSTITUTE OF                     APPLIED LANGUAGE
TECHNOLOGY                                     TECHNOLOGIES

By /s/ Lita L. Nelsen                          By /s/ Michael S. Phillips
  -----------------------------------------      -------------------------

Name LITA L. NELSEN                            Name Michael S. Phillips
    ---------------------------------------        -----------------------

Title DIRECTOR, TECHNOLOGY LICENSING OFFICE    Title VP of Engineering
     --------------------------------------         ----------------------

Date Aug. 8, 1994                              Date August 4, 1994
    ---------------------------------------        -----------------------


                                      -11-
<PAGE>

                                   APPENDIX A

                             DESCRIPTION OF PROGRAM

ITEM 1

M.I.T. Case No. [     ]
Title: [     ]
By:    [     ]

      As described in the paper presented at the [     ].

      As described in the paper presented at the [     ].

      As described in the paper presented at the [     ].

      As described in the paper presented at the [     ].

ITEM 2

M.I.T. Case No. [     ]
Title  [     ]
By     [     ]

As described in the paper presented at the [     ].

As described in the paper published in Computational Linguistics, Vol. 18, No.
1, pages 61-86, March 1992, "TINA: A Natural Language System for Spoken Language
Applications" by S. Seneff.


                                      -12-
<PAGE>

As described in the paper presented at the [     ].

ITEM 3

Title: [     ]

As described in the paper presented at the [     ].

As described in the paper presented at the [     ].

As described in the paper presented at the [     ].

As described in the paper presented at the [     ].


                                      -13-
<PAGE>

                     FIRST AMENDMENT TO LICENSING AGREEMENT

This First Amendment to Licensing Agreement ("Amendment") is entered into this
11th day of August, 1995 by and between MASSACHUSETTS INSTITUTE OF TECHNOLOGY, a
corporation duly organized and existing under the laws of the Commonwealth of
Massachusetts and having its principal office at 77 Massachusetts Avenue,
Cambridge, Massachusetts 02139, U.S.A. (hereinafter referred to as "M.I.T."),
and Applied Language Technologies, Inc., a corporation duly organized and
existing under the laws of Massachusetts and having its principal office at 215
First St., Cambridge, MA 02142 (hereinafter referred to as "ALTech"), and
Applied Language Technologies, Inc.. a wholly owned subsidiary of ALTech and a
corporation duly organized under the laws of Delaware (hereinafter referred to
as "ALTech Delaware").

                                  WITNESSETH

WHEREAS, the parties have previously entered into a Licensing Agreement dated
August 3, 1994 (the "Agreement") pursuant to which M.I.T. licensed certain
rights to ALTech and ALTech agreed to pay certain royalties;

WHEREAS, ALTech desires to merge itself into ALTech Delaware for the purposes of
securing financing;

WHEREAS, ALTech and M.I.T. desire to amend the Agreement in order to assign the
Agreement to ALTech Delaware and make certain other changes to facilitate
consummation of ALTech's financing;

NOW, THEREFORE, the parties hereto agree as follows:

FIRST: M.I.T. hereby consents to allow ALTech to assign, and ALTech hereby
assigns, all of ALTech's rights, title and interests under the Agreement to
ALTech Delaware.

SECOND: ALTech Delaware hereby accepts such assignment and undertakes all of
ALTech's obligations under the Agreement.

THIRD: Article 3.2 of the Agreement shall be amended in its entirety to read as
follows:

            3.2. In addition. LICENSEE shall adhere to the following milestones:

            a. LICENSEE shall make NET SALES according to the following
            schedule:

                    [     ]                           [     ]

                    [     ]                           [     ]

                    [     ]                           [     ]
<PAGE>

FOURTH: Article 3.3 of the Agreement shall be amended in its entirety to read as
follows:
      3.3 LICENSEE's failure to perform in accordance with Article 3.2 above
      shall be grounds for M.I.T. to terminate this Agreement pursuant to
      Article 14.3 hereof; provided, however, that in any year in which LICENSEE
      has not met its minimum NET SALES requirements, as stated in Article 3.2,
      M.I.T. may not terminate this Agreement if LICENSEE shall have paid to
      M.I.T. for such year a [     ] equal to the [     ], calculated in
      accordance with Article 4.1, which would have been payable had LICENSEE
      achieved such minimum NET SALES (i.e. $[    ] in [    ], $[    ] in
      [     ], $[     ] in [     ], etc.). The following shall be credited
      against the [     ] for a year:
            (a) all [     ] actually paid with respect to such year,
            plus,
            (b) the amount of any. [     ] paid for previous years
            which exceeded the [     ] payable with respect to the
            minimum [     ] milestones set forth in Article 3.2 for such
            previous year(s) and which were not previously credited against the
            [     ] for a previous year, plus
            (c) any cash "makeup" payments made by LICENSEE to M.I.T. with
            respect to such year's [     ].
      The [     ] shall have been paid to MIT on or before sixty (60)
      days after December 31 of the year for which it is being determined.

FIFTH: Article 12 of the Agreement shall be amended in its entirety to read as
follows:
      This Agreement may not be assigned without the prior, written permission
      of M.I.T., except in the case of sale, merger, or other transfer of a
      substantial portion of the business of LICENSEE, to which this Agreement
      relates, or except in the case of a merger or other transaction in which
      the shareholders who owned at least 50% of LICENSEE prior to such merger
      or other transaction, own at least 50% of the surviving entity immediately
      following such merger or other transaction. Any assignee or transferee
      must agree in writing to M.I.T. to be bound by the terms and conditions
      hereof prior to such assignment and transfer.
<PAGE>

IN WITNESS WHEREOF, the parties have duly executed this Amendment on the day and
year set forth below.

MASSACHUSETTS INSTITUTE OF                     ALTech
TECHNOLOGY

By /s/ John T. Preston                         By /s/ William O. Farrell
  -----------------------------------------      -------------------------

Name JOHN T. PRESTON                           Name WM. O. FARRELL
    ---------------------------------------        -----------------------

Title DIRECTOR OF TECHNOLOGY DEVELOPMENT       Title Pres.
     --------------------------------------         ----------------------

Date 8-15-95                                   Date 8/15/95
    ---------------------------------------        -----------------------


                                               ALTech Delaware


                                               By /s/ William O. Farrell
                                                 -------------------------

                                               Name WM. O. FARRELL
                                                   -----------------------

                                               Title Pres.
                                                    ----------------------

                                               Date 8/15/95
                                                   -----------------------
<PAGE>

                                SECOND AMENDMENT

      This Amendment is entered into this 15th day of July, 1996 by and between
the MASSACHUSETTS INSTITUTE OF TECHNOLOGY, having its principal office at 77
Massachusetts Avenue, Cambridge, Massachusetts 02139, U.S.A. (hereinafter
referred to as "M.I.T.") and Applied Language Technologies, Inc. having its
principal office at 215 First St., Cambridge MA 02142 U.S.A. (hereinafter
referred to as "LICENSEE").

WHEREAS M.I.T. and LICENSEE entered into a Licensing Agreement dated August 3,
1994 ("the Agreements"), and the Agreement was amended August 12, 1995; and

WHEREAS M.I.T. and LICENSEE wish to change the terms of the Agreement to reflect
the present business conditions.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:

            Article 3.2 (as amended by the First Amendment) of the Agreement
            shall be amended in its entirety to read as follows:

            3.2. In addition, LICENSEE shall adhere to the following milestones:

            a. LICENSEE shall make NET SALES according to the following
            schedule:

            [     ]                              $[     ]

            [     ]                              $[     ]

            [     ]                              $[     ]

            [     ]                              $[     ]

            [     ]                              $[     ]
<PAGE>

      IN WITNESS WHEREOF, the parties have duly executed this Amendment on the
day and year set forth below.


MASSACHUSETTS INSTITUTE OF           Applied Language Technologies, Inc.
TECHNOLOGY

By /s/ Lita Nelsen                   By /s/ William O. Farrell
  -------------------------------      -------------------------

Name                                 Name William O. Farrell
    -----------------------------        -----------------------

Title                                Title CEO
     ----------------------------         ----------------------

Date 8/1/96                          Date 8/6/96
    -----------------------------        -----------------------


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