Master Development & License

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REV G (3/18/97)



MASTER DEVELOPMENT, PURCHASE AND DISTRIBUTION LICENSE AGREEMENT







THIS AGREEMENT is between JETFAX INC., a Delaware corporation having its principal place of business at 1376 Willow Road, Menlo Park, Califor nia 94025 ("JetFax"), and HEWLETT-PACKARD COMPANY, a California corporation with offices at 3000 Hanover Street, Palo Alto, California 94304 ("HP"). This Agreement is effective as of January 31, 1997 (the "Effective Date").





1. DEFINITIONS.



1.1 A CCEPTANCE CRITERIA means mutually acceptable final performance criteria that the parties agree will be used to determine whether the JetFax Software and Hardware Design Package performs at a level acceptable for inclusion in the mass marketed HP Product.



1.2 DATE OF FIRST COMMERCIAL SHIPMENT means the date HP first ships a Royalty Generating Unit.



1.3 DATE OF FIRST MASS PRODUCTION means the date of the first production run of the HP Product whereby the result of such run is intended to be Royalty Generating Units.



1.4 DEVELOPMENT PROJECT means JetFax's efforts to modify its existing JetFax Software and JetFax Formatter along with JetFax's development of the HP Exclusive Features all of which is more fully described in EXHIBIT A ("HP Pro duct Technical System Specification") and scheduled per EXHIBIT B ("Development Schedule") such that they can be integrated for use in the HP Product.



1.5 DEVELOPMENT SCHEDULE means the list of JetFax milestones and targeted delivery dates set forth in EXHIBIT B ("Development Schedule").



1.6 ERROR(S) means a defect in the JetFax Firmware, the [*] or the JetFax Formatter which causes such JetFax Firmware, [*] or JetFax Formatter not to operate substantially in accordance with the applicable Acceptance Criteria.

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1.7 HARDWARE DESIGN PACKAGE means the schematics, bill of materials and associated documentation for the JetFax Formatter (however, the Hardware Design Package shall not include the design schematics for the JetFax ASICs). Any modified version of a Hardware Design Package shall be handled in accordance with the terms and conditions of this Agreement which apply to the Hardware Design Package.



1.8 HP EXCLUSIVE FE ATURE(S) shall mean those feature(s) identified as exclusive to HP and listed in EXHIBIT A ("HP Product Technical System Specifications") that are developed by JetFax at the request of HP and that the parties have agreed will be exclusively licensed to HP while such feature(s) continue to qualify as "HP Exclusive Feature(s)."



1.9 HP PRODUCT means the HP developed hardware product for which JetFax undertakes the Development Project and that uses the JetFax Formatter technology, JetFax ASICs, JetFax F irmware, [*] along with HP Exclusive Features as described in EXHIBIT A ("HP Product Technical System Specification").



1.10 HP TRADEMARKS means (a) the HP-supplied trademarks, stylistic marks and distinctive logotypes set forth in EXHIBIT E ("Tradem arks") and (b) other mutually agreed upon marks and logotypes as HP may from time to time designate in writing during the term of this Agreement.



1.11 JETFAX ASICS means the Application Specific Integrated Circuits designed by JetFax and made available to HP pursuant to this Agreement.



1.12 JETFAX DELIVERABLES means those items described in the Software description section listed in EXHIBIT A ("HP Product Technical System Specifications") that JetFax shall deliver to HP pursuant to this Agreeme nt, including but not limited to, the Hardware Design Package, the HP Exclusive Features, the JetFax Formatter, the JetFax ASICs, and the JetFax Software and Updates.



1.13 JETFAX DOCUMENTATION means the JetFax supplied online user manual for the JetFax Software and JetFax ASICs.



1.14 JETFAX FORMATTER means the JetFax formatter (exclusive of the JetFax ASICs), or any modified version thereof, which executes or operates with the JetFax Firmware.



1.15 JETFAX SOFTWARE means (a) the JetFax Firmware, (b) [*] and (c) any changes to the above listed software which JetFax may supply to HP.





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1.15.1 JETFAX FIRMWARE means (a) all or any portion of the JetFax controller computer programs, compilations thereof, and all associated documentation which functionality is described in EXHIBIT A ("HP Product Technical System Specification"), ported by JetFax to the HP Product, and provided by JetFax to HP pursuant to this Agreement and ( b) any changes to such firmware which JetFax may supply to HP.



1.15.2 [*] means (a) all or any portion of JetFax's computer programs and all associated end user documentation commonly known as [*] listed and described in the Software section of EXHIBIT A ("HP Product Technical System Specification") provided by JetFax to HP and (b) any changes to such software which JetFax may supply to HP.



1.16 JETFAX TRADEMARKS means (a) the JetFax-supplied trademarks, stylistic marks and distinctive lo gotypes set forth in EXHIBIT E ("Trademarks") and (b) other mutually agreed upon marks and logotypes as JetFax may from time to time designate in writing during the term of this Agreement.



1.17 ROYALTY GENERATING UNIT means [*]



1.18 TESTING CRITERIA means mutually acceptable working test plans and procedures that the parties agree will be used to determine the acceptability of the interim JetFax Deliverables upon delivery pursuant to the Development Schedule.



1.19 UPDATES means updated ve rsions of JetFax Software which include all changes, alterations, corrections and enhancements to such JetFax Software which JetFax makes generally available to its licensees and that are not provided to any particular JetFax OEM customer as a feature exc lusive to such OEM.



2. LICENSE GRANTS.



2.1 MANUFACTURE AND DISTRIBUTION OF JETFAX FORMATTER. Subject to HP's compliance with the terms of this Agreement and effective upon HP's final acceptance of the JetFax Deliverables, JetFax hereby grants to HP a worldwide, non-exclusive, non-transferable license to (i) manufacture (and have manufactured), and (ii) market, use, sell and otherwise distribute the JetFax Formatter, directly and indirectly through HP's usual distribution channels. The licenses gr anted above are only for use in connection with the HP Product specified herein, for the purpose of interfacing the JetFax Firmware to the HP Product, and to use the Hardware Design Package in connection with such



activities. HP agrees that it shall keep the Hardware Design Package confidential and shall ensure that the same degree of care is used to prevent the unauthorized use, dissemination or publication of the Hardware Design Package as HP would use to protect similar information owned by HP.



2.2 PURCHASE AND DISTRIBUTION OF JETFAX ASICs.



2.2.1 THIRD-PARTY MANUFACTURER. JetFax shall enter into agreements with certain HP-qualified ASIC manufacturers authorizing such manufacturers to manufacture and sell JetFax ASICs directly to HP, a nd upon HP's request provide documentation of such authorization. In addition, in connection with such agreements, JetFax shall provide engineering support and documentation to such HP-qualified ASIC manufacturers as reasonably required to enable such man u facturers to meet their delivery requirements with HP. HP may purchase JetFax ASICs only from such authorized HP-qualified ASIC manufacturers, and any such purchases made by HP shall be subject to the terms and conditions agreed upon by HP and such autho rized HP-qualified ASIC manufacturer.



2.2.2 DISTRIBUTION. Subject to HP's compliance with the terms of this Agreement, JetFax hereby grants HP the right to distribute the JetFax ASICs as part of the HP Product described herein and to distribute the JetFax ASICs as spare or replacement parts for the HP Product described herein. HP shall not distribute JetFax ASICs in any other manner without JetFax's prior written approval for such distribution.



2.2.3 ENGINEERING CHANGES. Subsequent to the acceptance of final mask for first production, JetFax will not make changes to the ASICs without the prior written consent of HP. In the event that circumstances beyond reasonable control of the parties require changes after the acceptance date o f final mask for first production, the parties will promptly meet and determine, in good faith, the appropriate changes and timing of such changes.



2.3 REPRODUCTION AND DISTRIBUTION OF JETFAX FIRMWARE. Subject to HP's compliance with the terms of th is Agreement, JetFax hereby grants to HP a worldwide, non-exclusive, non-transferable license to use, reproduce and distribute directly and indirectly, through HP's usual distribution channels, the object code version of the JetFax Firmware and JetFax Fir mware Updates as a part of the HP Product or for repair and maintenance of such product.



2.4 REPRODUCTION AND DISTRIBUTION OF JETFAX DOCUMENTATION. Subject to HP's compliance with the terms of this Agreement, JetFax hereby grants to HP a worldwide, non-exclusive, non-transferable license to use, modify, reproduce and distribute directly and indirectly, through HP's usual distribution channels, the JetFax Documentation as a part of the HP Product or in conjunction with such product.





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2.5 DISTRIBUTION OF HP EXCLUSIVE FEATURES. Subject to HP's compliance with the terms of this Agreement, JetFax hereby grants to HP, for a period of one (1) year following the Date of First Commercial Sh ipment, a worldwide, exclusive, non-transferable license to use, reproduce and distribute directly and indirectly, through HP's usual distribution channels, the object code version of the HP Exclusive Features. Notwithstanding the exclusive license grante d above, JetFax shall, at all times, have the right to include or license the HP Exclusive Features in products that have a street price [*]. Notwithstanding the aforesaid distribution rights, JetFax will not obtain any rights to HP drivers, help screens, driver menus, icons, etc. by virtue of this agreement. Furthermore, nothing contained in this Agreement shall be construed to grant JetFax any right, title or interest in or to any HP trade secrets, copyrights, patents or trademarks.]



2.6 REPRODUCTIO N AND DISTRIBUTION OF [*] Subject to HP's compliance with the terms of this Agreement, JetFax hereby grants to HP a worldwide, non- exclusive, non-transferable license to, (a) use, reproduce and distribute, directly and indirectly, through HP's usual di stribution channels, the object code version of the [*] and the [*] only as part of, or bundled with the HP Product; and (b) sublicense the [*] to end users for installation with an already installed HP Product.



2.7 END USER LICENSES. JetFax is resp onsible for embedding the HP Standard Software License Terms as an essential step in the installation of the Software to ensure end user receipt of the HP Standard Software License, such license to include terms and conditions substantially equivalent to those set forth in EXHIBIT F ("HP Software License Terms") to this Agreement. The terms of such license will be drafted so as to apply to the JetFax Software.



3. DEVELOPMENT. Subject to the terms of this Agreement and the timely receipt of all associat ed HP deliverables, JetFax will, in a timely and professional manner, initiate the Development Project, staff the Development Project as required, and use reasonable efforts to achieve the milestones listed in the Development Schedule on or before the dat es associated with each such milestone. HP agrees to designate a technically qualified person to respond to information requests by JetFax who, when so requested by JetFax, shall use his or her best efforts to respond.



4. DELIVERY, TESTING AND ACCEPTANCE.



4.1 HP DELIVERABLES. HP shall promptly provide JetFax with an appropriate number of development HP Products, and any additional software, equipment and documentation, if any, as necessary for JetFax to complete the Development Project and for tes ting and support of the JetFax Firmware in accordance with Section 4.3 ("Testing")





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below. All equipment loaned by HP to JetFax shall remain the property of HP and shall be fully insured by JetFax. HP recognizes that an equipment failure could result in a delay in the D evelopment Schedule and, while such equipment is in the possession of JetFax, HP shall assist in maintaining the same in good working order. At JetFax's request during the term of JetFax's warranty and continuing support activities hereunder, HP will cont inue to ensure that at least one unit on loan to JetFax is the then current production unit of the HP Product which HP is actually shipping.



4.2 JETFAX DELIVERABLES. JetFax will use commercially reasonable efforts to provide HP with the JetFax Deliv erables as described in EXHIBIT A ( "HP Product Technical System Specification") in accordance with the Development Schedule as detailed in EXHIBIT B ("Development Schedule"). At JetFax's option, the JetFax Deliverables will be delivered telephonically f r om JetFax's place of business to an HP server in California, provided that JetFax bears the costs of such telephonic transmission to such server. For purposes of tax documentation, coincident with the telephonic transmission of such deliverable items Jet F ax may send to HP a certificate containing the date of transmission, the time of such transmission, the name(s) of JetFax personnel who made the transmission, the signature(s) of such personnel and a general description of the nature of the item(s) transm i tted sufficient to distinguish the transmission from other transmissions. Within fifteen (15) days of receipt of the certificate, HP shall return such certificate to JetFax, identifying the HP personnel who received such transmission and, if the informat ion on such certificate is true and accurate, supply the signature of such receiving personnel verifying the occurrence of the transmission.



4.3 TESTING.



4.3.1 DEVELOPMENT OF TEST PLAN. The parties will work in good faith to develop the Testing Criteria. HP or its manufacturing partner will be responsible for most of the hardware tests and design issues related to very high-volume production, and for testing the mechanical performance of the HP Product. In addition, HP or its manufactu ring partner will also test environmental and reliability standards of the HP Product.



4.3.2 INTERIM PERFORMANCE TESTING. Upon JetFax's delivery of each interim JetFax Deliverable listed in the Development Schedule, HP [*] in accordance with th e applicable Testing Criteria, for conformity with the applicable Acceptance Criteria and the Testing Criteria. HP shall inform JetFax of the results of such testing and, if HP is unable to accept the interim JetFax Deliverables, the basis for a finding of nonconformity or failure of such interim JetFax Deliverables to conform to the Testing Criteria. JetFax shall use reasonable efforts to promptly correct nonconformities and resubmit the same for





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retesting by HP. This process shall continue until HP accepts such interim JetFax Deliverable, or terminates under section 12.2.2.



4.4 FINAL ACCEPTANCE. The JetFax Deliverables shall conform to specifications in EXHIBIT A ( "HP Product Technical System Specifications") and meet the Acceptance Criteria. HP shall have [*]



4.5 COMPLIANCE AND CERTIFICATION. HP shall be responsible for all compliance testing and certification, in the U.S. and internationally, for safety, emissions, ESD and other required standards, including but not limited to "Public Telephone and T elegraph" (PTT) testing and approvals. Notwithstanding the above, JetFax shall be responsible for [*] JetFax and HP will work together to take corrective actions required for problems found in such testing and JetFax shall make reasonable changes to its designs and software as required. All costs for compliance testing and certifications, including





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travel and other reasonable expenses of JetFax personnel requested by HP to participate in such testing or certification, shall be paid by HP.



5. PAYMENTS.



5.1 NON-RECURRING ENGINEERING FEES. As and upon HP's acceptance of each deliverable in accordance with the milestones listed in EXHIBIT B ("Development Schedule"), HP shall pay JetFax a non-recurring engineering fee equal to the amount associated with each such milestone. Notwithstanding the failure of JetFax to meet such individual milestones, HP shall nonetheless be obligated to pay to JetFax the associated non-recurring engineering m ilestone payments on the targeted date of completion if JetFax's failure to complete the milestone by the listed date is due to a failure by HP or its designated suppliers, to provide material support, data and deliverables in a timely manner and HP has r eceived prompt written notice from JetFax upon JetFax's discovery that such failure by HP would, in fact, result in JetFax's inability to complete the milestone by the listed date.



5.2 ROYALTIES.



5.2.1 PREPAID ROYALTIES. HP shall pay to JetFax the following refundable prepaid royalties in advance of actual sales of the HP Product according to the following schedule:







Payment Targete d Date Royalty Number Milestone of Completion Amount - ------ --------- ------------- ------ [*] [*] [*] [*]



TOTAL PREPAID ROYALTIES [*]



[*]





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[*]



The prepaid royalties shall be recovered by HP at the rate of [*]



5.2.2 ROYALTY RATE. HP shall pay JetFax a royalty of (i) [*]



5.2.3 WHEN ROYALTIES EARNED. Each royalty due hereunder shall be earned on the date the Royalty Generating Unit is shipped.



5.3 TAXES. License fees and prices to HP do not include taxes of any nature. HP will pay ordinary sales and pr operty taxes where applicable when invoiced by JetFax or will supply appropriate tax exemption certificates in a form satisfactory to JetFax. Under no circumstances will either party be responsible for the other parties' income tax, franchise tax or othe r similar tax liability.



5.4 PAYMENT TERMS. All payments hereunder shall be in U.S. dollars and shall be paid by HP's U.S. corporate entity. HP shall make payments required hereunder, without deduction of any tax, duty, fee or commissions. All NRE payments and prepaid royalties due in accordance with the terms of the Agreement shall be paid [*] after the completion of the applicable milestone. All royalties due in accordance with the terms of the Agreement shall be paid within [*] after the end of each HP fiscal quarter in which they occur. With each royalty payment HP shall include a written summary of the records described in Section 6.1 ("Records") below, broken out by month of sale. [*] Such oral communication shall be subject to final adjustm ent by HP at the end of each accounting period.





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6. RECORDS AND AUDIT.



6.1 RECORDS. HP shall maintain a complete, clear and accurate record of the number of Royalty Bearing Units shipped during the fiscal quarter, and any other information which may be required to determine whether HP is paying the correct royalty amount hereunder.



6.2 RIGHT OF AUDIT. To ensure compliance with the terms of this Agreement, JetFax shall have the right to have an inspection and audit of all the relevant accounting and sales bo oks and records of HP conducted by an independent audit firm reasonably acceptable to both parties whose fee is paid by JetFax, and shall be conducted during regular business hours at HP's offices and in such a manner as not to interfere with HP's normal b usiness activities. In no event shall audits be made hereunder more frequently than every twelve (12) months. If such inspections should disclose any underreporting, HP shall promptly pay JetFax such underpayment amount, and if such inspections should dis close any overreporting, JetFax shall promptly pay HP such overpayment amount. In the event such auditor's inspection shows a five percent (5%) or greater underreporting, HP shall pay such auditor's fees and expenses for such audit.



7. TRAINING AND SUPPORT.



7.1 TRAINING AND SUPPORT. JetFax agrees to provide the training, technical assistance and manufacturing support described in EXHIBIT C ("Training and Support").



7.2 SUPPORT OF JETFAX FIRMWARE AND [*] HP shall be free, without addition al payments to JetFax, to distribute to existing customers using the HP Product only, revisions to the [*] through its distribution channels, via its websites or its other normal distribution methods. Following the expiration of the relevant Warranty Per i od (as defined in Section 13.1 ("Performance Warranty"), for up to [*] following the Date of First Commercial Shipment, JetFax will provide to HP those Updates to the JetFax Software that HP requests in accordance with the continuing support terms attache d hereto as EXHIBIT C ("Training and Support"). HP agrees that all contact regarding continuing support services shall be handled through up to three designated HP contacts to be specified by HP.



7.3 END USER SUPPORT. HP will have the sole responsi bility for supporting its end users and will provide end users with reasonable end user documentation, warranty service, and telephone support for the use of HP Product consistent with HP's practice for supporting its other products.



8. MARKETING OBLIGATIONS.





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8.1 PUBLICITY. Within [*] following the date HP first announces the HP Product, the parties shall issue a press release, the terms of which are mutually acceptable to both HP and JetFax.



8.2 JETFAX AFTER MARKET PRODUCTS. HP shall, in good faith, assist JetFax in marketing certain JetFax after market products through [*]to end users of the HP Product.



9. PROPRIETARY RIGHTS.



9.1 OWNERSHIP. The parties acknowledge that the other party and its suppliers have and retain exclusive ownership of all their respective trademarks, logos and product names, and all rights, title and interest, including all trademarks, copyrights, patents, mask work rights, trade names, trade secrets and other intellectual property rights to all of the documentation an d computer-recorded data comprising or included in the JetFax Deliverables with respect to JetFax ownership and the HP Product other than the JetFax Deliverables with respect to HP ownership. All related ideas, developments, concepts, techniques, know-how , trade secrets and inventions which are conceived or reduced to practice during the course of this Agreement shall belong exclusively to the developing party. Except for the rights expressly enumerated herein, HP is not granted any rights to patents, mask work rights, copyrights, trade secrets, trade names, trademarks, or any other rights, franchises or licenses with respect to the JetFax Deliverables. In the event that HP obtains the source code versions of the JetFax Deliverables and related materials p u rsuant to Section 10 ("Escrow"), HP agrees that such source code and related materials will be protected as JetFax Deliverables hereunder and that it will not publish, disclose or otherwise divulge such source code and related materials to any person, exc e pt officers, employees and independent contractors of HP who have entered into non-disclosure agreements at least as protective of JetFax's proprietary rights as set forth herein and need access to such source code or related materials to perform their du ties, at any time, either during the term or after the termination of this Agreement.



9.2 NO SOURCE CODE. HP specifically acknowledges that no rights, other than those contained in Section 10 ("Escrow"), to the human readable, source code versions o f the JetFax Software are granted to it (except resource source files and message string source files for both host based software and device firmware for translation purposes only). HP agrees that it will not attempt to reverse engineer, reverse compile, disassemble or otherwise attempt to create source code which is derived from the JetFax Software provided to HP solely in object code form during the term of t ...