<PAGE>
EXHIBIT 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. 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.
695 Atlantic Ave.,
Boston, MA 02111
Attention: Joe Murphy
Dear Joe;
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.
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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 [] ([]) 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 taht for the Term of the LIcense
AGreement, for all subsequent orders received during the
initial [ ] year term (counting the [ ] ([ ]) Ports ordered in
the initial order), the following perport 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
[ ] from [ ] to [ ] by [ ].
In addition to the foregoing license fees, N2P agrees to pay
to SWI the following fees (the "Utilization Fees") for each
[ ] in connection with the [ ] (the "Facilities Services").
(1) [ ] percent ([ ]%) of any net revenue N2P derives
directly from [ ] or [ ] ("[ ]"); and
(2) [ ] percent ([ ]%) (net of the costs outlined in
Exhibit B; "Infrastructure Costs") for all revenue
derived from [ ] (or [ ]).
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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 [] terms
set forth below would apply:
1. [] into an [] that []; or
2. [] to [] a [] or [] or [] with [.]
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
[] or [("[]")]; and
(2) the lesser of (x) $[] per [ ] and (y) []% (net of the costs
outlined in "Infrastructure Costs") for all revenue derived from
[] (or []).
Each N2P customer-specific [] transaction would provide for [] ([]) years
of payments to SWI and such obligation may survive the expiration of the
[] ([ ]) year term of the License Agreement.
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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 []% of the voting shares.
Further, in the event that N2P owns an equity interest in a
third party which is []% 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 [] fees [] ([]") and (ii) the [] fees
[] and (2) [ ] to pay []; 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 [] fee [] 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 [] Thousand 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 [] 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.
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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 [] Thousand 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 [ ].
G. Joint Obligations. Each party agrees it may undertake the
following marketing and publicity activities in order to
promote the relationship:
o 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:
o 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)
o N2P and SpeechWorks will jointly participate in press and
analyst briefings regarding Net2Phone's equity investment in
SpeechWorks
o N2P will promote the "[]" program in relevant Marketing
promotions and collateral
o SpeechWorks will promote the N2P Voice ASP service in
relevant Marketing promotions and collateral
o N2P and SpeechWorks agree to work together for joint
promotion of the N2P Voice ASP commercial launch and
subsequent Voice ASP (post-GA) milestones
o N2P and SpeechWorks agree to make to cite each other in
relevant press releases and/or announcements. Specifically:
o SpeechWorks will cite N2P as an investor-partner,
ASP-provider and provider of yet-to-be-specified speech-
based services where commercially appropriate,
o N2P will cite SpeechWorks in announcements relating to
their speech-based initiatives where commercially
appropriate.
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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:
o Each company can use the other company's logo/name in any
web listings (i.e., customer/partner lists)
o N2P agrees to work with SpeechWorks to pursue cooperative
advertising with both parties contributing equally to the
associated costs.
o N2P agrees to SpeechWorks' usage of the N2P logo on demand-
generation vehicles (WSJ advertising, other advertising,
direct mail, etc.)
o N2P agrees to let SpeechWorks use the N2P name and logo in
IPO-related filings (eg: S-1)
o 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:
o VoiceXML and voice browsers
o SpeechLinks
o SpeechCookies
o Content and scripting tools
o 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.
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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/ Jon Fram
------------------------
Name: Jon Fram
Title: President
Acknowledged and agreed:
SPEECHWORKS INTERNATIONAL, INC.
By: /s/ Stuart R. Patterson
------------------------------
Stuart R. Patterson,
President and Chief Executive Officer
Date: June 29, 2000
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<PAGE>
EXHIBIT A
----------
Initial Order
<TABLE>
<CAPTION>
PRODUCT NAME PRODUCT DESCRIPTION RECOGNITION SYSTEM FEE/PORT OR LICENSE
PORTS SEATS SEAT FEES
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
[ ] Includes: [ ] N/A $[ ] $[ ]
o [ ]
o [ ] (see description above).
------------------------------------------------------------------------------------------------------------------
[ ] N/A
Includes: N/A 1
o [ ] ([ ])
o [ ] ([ ])
------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
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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.
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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.
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EXHIBIT B
INFRASTRUCTURE COSTS
GENERAL
N2P and SWI will [] generated by or through the facilities services. For
the License Agreement, [] will only comprise that generated from [] to []
by [ ] and [] in a [].
GROSS REVENUE
Gross Revenue is [] in [ ] that are [] on [ ]. This definition excludes
[] from [] that [] that are [], and do [] to []. Notwithstanding anything
contained in this Exhibit or the Letter to which it is attached, [] that []
and [] associated with the [] and [] and [] shall not [] to be []
hereunder.
IDENTIFICATION OF EXPENSES
For the purpose of this [ ] calculation, only [] with [] will be
considered. These [] will include:
Network Traffic Charges
-----------------------
This [] includes the [] with (a) [], (b) [], and (c) []. These []
are [] and can [] as the following: [], [], [], [], etc.
Recurring Provisioning and Leased-Line Costs
--------------------------------------------
This [] includes [] with [] a [ ] and [] or [] used []. [] include
the [] to [] as [] / [], [], and []. These [] typically [] and are
based on [], but they may also include []. [] include the [] (such
as []) that might be used to [].
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
[] is [] as [], as defined above.
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EXHIBIT C
Current Time and Materials Fees
<TABLE>
<CAPTION>
PER EIGHT-HOUR MINIMUM NUMBER OF
SERVICE DAY RATE DAYS
------------------------------------------------------------------------
<S> <C> <C>
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
------------------------------------------------------------------------
</TABLE>
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