Joint Development Agreement

EXHIBIT 10.23





Joint Development Agreement





AltiGen Communications, Inc.





Nitsuko Corporation





Sumisho Electronics Co., Ltd.































* Some material in this Exhibit has been omitted pursuant to a request for confidential treatment. Such material has been filed separately with the Securities and Exchange Commission.

Joint Development Agreement

---------------------------



This Joint Development Agreement ("this Agreement") is made and entered into as of the last day written below by and between AltiGen Communications Inc., a California corporation, with principal offices at 46635 Northport Loop East, Fremont, CA 94538 ("AltiGen") and Nitsuko Corporation, a Japanese corporation, with principal offices at 2-6-1 Kitamikata, Takatsu-ku, Kawasaki, 213 Japan ("Nitsuko") and Sumisho Electronics Co. Ltd., a Japanese corporation, with its principal office is located at 2-23 Shimomiyabi-cho, Shinjuku-ku, Tokyo, 162-8580 Japan ("Sumisho").



WHEREAS, AltiGen is the owner of certain proprietary hardware and software products that AltiGen distributes and sublicense; and



WHEREAS, Nitsuko as in business of design and manufacturing, marketing, distributing and supporting telephone and computer systems worldwide; and



WHEREAS, Sumisho has an extensive expertise and experience in marketing of hardware and software products in Japan, and



WHEREAS, AltiGen, Nitsuko and Sumisho wish to form a partnership of mutual cooperation to work together to develop, market and distribute a Japanese version of AltiServ for Nitsuko's telecom server platform in the Territory as defined below.



NOW, THEREFORE, the parties mutually agree as follows,



1. DEFINITIONS - --------------



1.1 "Effective Date" means the later of the dates this Agreement is accepted

---------------- and executed by a proper officer of each party.



1.2 "License" means the licenses granted pursuant to the Paragraphs 4 of this

--------- Agreement.



1.3 "Licensed Programs" means the proprietary computer software programs of

------------------- AltiGen and Nitsuko licensed under this Agreement as are from time to time specified in Exhibit D by mutual agreement of AltiGen and Nitsuko, consisting of a series instruction in object code form and source code form as amended or revised from time to time to add enhancements.



1.4 "Licensed Materials" means any user manuals, diagrams, listings, handbooks

-------------------- and other written materials, without limitation, the written materials of the Licensed Programs that are from time to time specified in Exhibit B by mutual agreement of AltiGen and Nitsuko for use in conjunction with the Licensed Programs.



1.5 "Licensed Products" means the Licensed Materials and the Licensed Programs.

-------------------



1.6 "End Hardware" means the proprietary hardware products of AltiGen and

-------------- Nitsuko that result from the development modification and adaptation by AltiGen and Nitsuko specified in Exhibit B.



1.7 "End Programs" means a computer software program that results from the

-------------- modification, adaptation and translation by Nitsuko of the Licensed Programs granted by AltiGen to Nitsuko pursuant to Paragraph 4. The End Programs are intended to be derivative works of the Licensed Programs.



1.8 "End Materials" means any user manuals, handbooks and other written

--------------- materials that result from the transition, modification and adoption by Nitsuko and are provided by Nitsuko to End Users as defined below for use in conjunction with the End Programs. The End Materials are intended to be derivative works of the Licensed Materials.



1.9 "End Products" consist of the End Hardware, the End Programs and the End

-------------- Materials.



1.10 "End Users" means any person or entity that is granted a license by Nitsuko

----------- pursuant to the authority granted under this Agreement, to use a sublicense.

1.11 "Dealers" means any person or entity that is granted a license by Nitsuko,

--------- pursuant to the authority granted under this Agreement, to resell the End Products.



1.12 "Design Defect" means a defect in the design of the Licensed Programs that

--------------- results in the Licensed Programs failing to perform substantially as described in the applicable documentation specified in Exhibit B for use in conjunction with the Licensed Programs.



1.13 "Enhancements" means an updated version of the Licensed Programs.

--------------



1.14 "Development Cost" means the costs by AltiGen incurred in development of

------------------ any item of derivative works of the Licensed Materials and the Licensed Programs including, without limitation, the End Materials and the End Programs, or any work-in-process created in connection with AltiGen's efforts to develop the Licensed Software.



1.15 "Phase I" means the development of the End Products specified in Exhibit A.

---------



1.16 "Phase II" means an enhancement of the End Products developed in Phase I.

----------



1.17 "Development Schedule" means the milestone of the development of Phase I

---------------------- which shall be mutually determined and agreed by both parties.



1.18 "Specifications" means the hardware specifications and the software

---------------- specifications of the Products to be developed an Phase I.



1.19 "Territory" means collectively 'the Primary Territory' and 'the Secondary

----------- Territory' as defined below.



1.20 "Primary Territory" means Japan.

-------------------



1.21 "Secondary Territory" means worldwide. Specific regions within the

--------------------- Secondary Territory shall be mutually determined by both parties.



1.22 "OEM Agreement" means a separate agreement to be signed by and between the

--------------- parties for the marketing and the distribution of the End Products In the Territory.



1.23 "Liaison" means strategic business partners that AltiGen and Nitsuko

--------- designate. Sumisho and its US representative, Sumitronics, Inc. with its principal office located at 2900 Patrick Henry Drive, Santa Clara, CA 95054 ("Sumitronics") shall act as a Liaison between the parties.



1.24 "System" means one (1) ISDN board, one (1) Quantum board and one (1) AltiWare OE.



2. DEVELOPMENT - --------------



2.1 AltiGen and Nitsuko agree to undertake and complete the development of the End Products.



2.2 AltiGen and Nitsuko will provide each other with consultative design assistance as required in a prompt and expeditious manner.



2.3 If either party proposes a change to Exhibit A, B and C, the other party will reasonably and in good faith consider and discuss with the proposing party the proposed change.



2.4 AltiGen agrees to negotiate in good faith on any future development efforts or requests from Nitsuko to enhance the design for future AltiServ based Nitsuko telecom server platforms.



3. OEM AGREEMENT - ----------------



3.1 AltiGen and Nitsuko shall formalize and sign the OEM Agreement by October 31, 1998.



3.2 Nitsuko shall license AltiGen's End Products through the auspices of the OEM Agreement.

3.3 Subject to the terms and conditions set forth in the OEM Agreement, AltiGen shall grant Nitsuko a non-exclusive, non-transferable right to (a) market and distribute the End Products solely to the Dealers and the End Users located in the Territory, or to specific vendors to be mutually agreed upon in writing, and (b) use the End Products for those purposes set forth in the Agreement.



3.4 Pricing of the End Product shall be determined in the OEM Agreement. The price of the End Products shall be reviewed every six (6) months after the OEM Agreement is executed. The price of the End Products as of The Effective Date shall be specified in Exhibit C.



3.5 A definitive Volume Commitment shall be provided by Nitsuko as specified in Exhibit C and shall be included in the OEM Agreement. An Initial open purchase order for the total dollar amount of the Volume Commitment shall be issued by Nitsuko to AltiGen three months prior to the official End Products release. Specific purchase orders and shipments may be placed at different intervals based on actual business requirements, however shipments for the total Volume Commitment must be made within the twelve (12) month period following the channel training period.



3.6 Payment terms for the Products shall be set forth in the OEM Agreement.



3.7 Nitsuko shall provide the first level of support AltiGen shall provide Nitsuko with second level support. (Interactions will be limited to working with Nitsuko rather than directly with the customer).



3.8 The warranty of the End Hardware shall be for a period of eighteen (18) months from the date of shipment from providing party.



3.9 AltiGen agrees that Sumisho shall serve as one of Nitsuko's designated Dealers of the End Product in the Primary Territory upon completion of Phase I.



4. LICENSE GRANTED - ------------------



4.1 Subject to all terms of this Agreement, AltiGen grants to Nitsuko rights (i) to use, reproduce, modify and adapt the software provided by AltiGen to Nitsuko internally and solely In conjunction with Nitsuko's development obligations pursuant to Paragraph 7 of this Agreement, (ii) to reproduce the Licensed Products for the purpose of the distribution, and (iii) to license the Licensed Product to end users within the Territory.



4.2 Subject to all terms of this Agreement, Nitsuko grants to AltiGen rights to use, reproduce, modify and adapt the software provided by Nitsuko to AltiGen internally and solely in conjunction with AltiGen's development obligations pursuant to Paragraph X of the Agreement.



4.3 Except as may specifically be provided herein, Nitsuko shall have no right to reproduce or distribute any product developed by AltiGen unless authorized by AltiGen in writing.



4.4 Notwithstanding anything in this Agreement or elsewhere to the contrary, (i) Nitsuko shall have no right to license, sublicense or otherwise distribute, in either object code form or source code form, the Licensed Products or the End Products for use outside of the Territory.



4.5 AltiGen hereby grants to Nitsuko a non-exclusive, non-transferable license to use the Licensed Materials and the End Materials and, in object code form only, the Licensed Programs and the End Programs solely for Nitsuko's use and solely within the Territory.



4.6 AltiGen hereby grants to Nitsuko, a non-exclusive, non-transferable license to translate the Licensed Materials and to modify and adapt the Licensed Materials to develop the End Product. Nitsuko's right to modify the Licensed Programs is Limited to such translation, modification and adaptation as may be required in connection with the translation of the user screens to Kanji and the adaptation of the Licensed Programs to operate on Japanese computer systems without any change in the functioning or the internal logic, structure or programming techniques of the Licensed program. Nitsuko shall have no authority to develop or distribute any modifications to the Licensed Program or the End programs other than as permitted under the preceding sentence.



4.7 AltiGen hereby grants to Nitsuko an exclusive in the Primary Territory, non-transferable license to sublicense the use of the Licensed Materials for resell purpose and, in object code form only, the Licensed programs solely to persons and entitles within the Primary Territory, provided that each such sublicense (i) is

pursuant to a written software license agreement in form and substance approved by AltiGen: (ii) use the Licensed Materials and, in object code form only, the Licensed Programs solely for Nitsuko's internal use in the Territory solely in connection with (a) the support of End Users and (b) the marketing and promotion of the Licensed Products to prospective End Users solely on a computer that is owned or leased and under the sole control of Nitsuko.



4.8 Nitsuko hereby grants to AltiGen a non-exclusive, non-transferable license to use the Licensed Materials and End Materials and, in object code form only, the Licensed Programs and the End Programs solely for Nitsuko's use and solely within the Territory.



4.9 Nitsuko hereby grants to AltiGen, a non-exclusive, non-transferable license to translate the Licensed Materials and to modify and adapt the Licensed Materials to develop the End Products. AltiGen's right to modify the Licensed Programs is limited to such translation, modification and adaptation as may be required in this Agreement.



4.10 Except as may specifically be provided herein, AltiGen shall have no right to reproduce or distribute any product developed by Nitsuko unless authorized by Nitsuko in writing.



5. DEVELOPMENT COST - -------------------



5.1 In consideration of the Product Development by AltiGen, Nitsuko agrees to pay to AltiGen a non-refundable development cost of [*] for the Phase I Development Cost as below.



a) Nitsuko agrees to pay AltiGen [*] of the Phase I Development Cost within

[*] of the Effective Date of this Agreement.



b) Nitsuko agrees to pay AltiGen the remaining [*] of the Phase I

Development Cost within [*] of the acceptance of the End Products to be

developed by AltiGen defined in Exhibit A.



5.2 Except as stated above there will be no additional charge for documentation, licenses or any royalties for the Phase I Development, services or rights to the End Products.



5.3 The development cost of Phase II shall be agreed and determined by AltiGen and Nitsuko after the completion of Phase I.



5.4 Nitsuko shall have the rights to sell the ISDN Board on a non-exclusive basis and the CSIU Board and the NIC Router Board on an exclusive basis in the Primary Territory. AltiGen shall have the right to freely sell the said boards in all other territories. AltiGen shall have the right to sell the ISDN Board in the Primary Territory provided that AltiGen and Nitsuko shall enter into a separate agreement which gives Nitsuko the right to sell the following analog boards in the Primary Territory. In such separate agreement, AltiGen shall assure that the analog boards work with the software jointly developed by AltiGen and Nitsuko in this Agreement. In the event that such agreement will not be agreed between the parties, Nitsuko's right to sell ISDN Board in the Primary Territory shall be exclusive and AltiGen shall have no right to sell the said board in the Primary Territory.



a) The J-Version Analog Board: Quantum Board Rev. D 408 [*]

b) The J-Version Analog Board: Quantum Board Rev. D 804 [*]



5.5 Nitsuko grants to AltiGen a non-exclusive right to distribute NIC Router Board an the Territories except the Primary Territory.



6. Responsibility and Obligation of AltiGen - -------------------------------------------



6.1 AltiGen shall supply Nitsuko with the followings:



a) one (1) copy in source code form of each Licensed Program listed in

Exhibit A and Exhibit B.



b) one (1) copy in object code form of each of the Licensed Programs listed

in Exhibit A and Exhibit B, and





[*] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.





c) one (1) machine readable copy of the Licensed Materials listed in

Exhibit A and Exhibit B provided that Licensed Materials which are not

available in machine readable form may be provided in hard copy form.



6.2 AltiGen shall safeguard and keep confidential all confidential information of Nitsuko and shall return all confidential information of Nitsuko within thirty (30) days of the termination of this agreement. AltiGen agrees to treat any such proprietary information received from Nitsuko with the same care with which Nitsuko treats its own proprietary information.



6.3 AltiGen will supply Nitsuko with one (1) demonstration copy of the Licensed Materials and one (1) demonstration copy of such other documentation and technical information as exists and as may be reasonably required by Nitsuko to provide End Users with the installation, maintenance and support services required by this Agreement. Such copies of the Licensed Materials and other documentation and technical information shall be delivered by AltiGen to Nitsuko within thirty (30) business days after the Effective Date of this Agreement. The Licensed Materials and other documentation and technical information shall be used by Nitsuko only in connection with the provision by Nitsuko of such installation, maintenance and support services and in connection with the marketing and promotion by Nitsuko of Licensed Products and the End Products to prospective End Users.



6.4 AltiGen may provide Nitsuko with a description of proposed enhancements and proposed licensed products, which description shall be provided by AltiGen to solicit Nitsuko's opinion of the marketability of such proposed enhancements and proposed licensed products.



6.5 AltiGen shall provide Nitsuko with assistance by telephone (only during AltiGen's normal business hours at its offices in Fremont, California) and/or facsimile and/or e-mail regarding the installation, use, maintenance and support of the Licensed Programs.



6.6 If Nitsuko provides AltiGen with prompt written notice of a Design Defect after receipt of notice from Nitsuko of such Design Defect, AltiGen shall, at its expense, use diligent good faith efforts to correct such Design Defect within [*] of receipt of notice thereof. AltiGen agrees (i) that it will begin ...